The relationship between the EU Charter of Fundamental Rights and Directives in horizontal situations

L.S. Rossi, Judge of the Court of Justice of the European Union

The Kücükdeveci ambiguity: “derivative” horizontal direct effects for directives?

According to Article 6(1) TEU, the Charter of Fundamental Rights of the European Union (hereinafter, the “Charter” or “CFR”) has the same legal value as the Treaty. After the entry into force of Treaty of Lisbon, the question therefore arises as to whether the ECJ case-law on the direct effects of EU primary law provisions, dating back to Van Gend en Loos, may be extended also to the rights contained in the Charter.

According to a well-established jurisprudence of the Court, which has recently been reaffirmed by the ECJ in its Hein ruling (paras 48-52), the precondition for such direct effects to arise is the existence of an actual conflict of EU and national norms. In other words, direct effects may come into play only when it is impossible to interpret national legislation at issue in a manner consistent with the Charter. In this case, the direct effects of (some of) the Charter’s rights could be inferred from a contrario interpretation of Article 52(5) CFR, as opposed to those provisions of the Charter containing principles, which (according to Article 52(5)) may only be invoked in relations with the implementing European Union or national legislation.

Indeed, the Court already clarified that some provisions of the Charter that have a prescriptive content should in principle have direct effect in vertical situations (ie against State organs). This is, for example, the case of the principles of equal treatment and non-discrimination under Articles 20 and 21 CFR (cf. Glatzel C-356/12 para 43 and Milkova C-406/15, paras 55 and 64).

However, the question of whether the Charter’s rights could also have horizontal direct effects (ie against private parties) has, until recently, remained unresolved. An argument in favour of such effects could, after all, be drawn from the preamble of the Charter, which states that the enjoyment of the rights reaffirmed by the CFR “entails responsibilities and duties with regard to other persons, to the human community and to future generations”.

The ECJ seemed initially to acknowledge a sort of “derivative” horizontal direct effect to some provisions of the Charter, mediated by the directives which give them concrete effect, and anchored to the general principles of EU law or to the constitutional traditions common to the Member States (see, for instance, as for the principle of non-discrimination on grounds of age, Dansk Industri, C‑441/14, paras 22 and 27, reaffirming Mangold, C-144/04, paras 75-78 and Kücükdeveci, C‑555/07, paras 50-51).

As AG Bot has pointed out in his Opinion in Bauer (C‑569/16 and C‑570/16, para 75), this has resulted in an ambiguity, in that the Kücükdeveci case-law could have been construed as recognising to directives giving concrete expression to a general principle codified by the Charter the capacity to be invoked in disputes between private parties. This was in open contradiction with the settled ECJ case-law according to which even a clear, precise and unconditional provision of a directive conferring rights or imposing obligations on individuals, while giving rise to an obligation of consistent interpretation on the part of the national court, cannot of itself be relied upon in disputes between private parties, including for the purpose of setting aside conflicting national legislation (see Faccini Dori, C-91/92, paras 20 and 26, Pfeiffer, C-397/01 to C-403/01, para 109 and Dominguez, C‑282/10, para 42).

From AMS to Max-Planck: the horizontal direct effects of the Charter

It was only very recently that the ECJ case-law shed some light on the unclear legal relationship between the rights contained in the Charter and the directives on which those rights are based and by which they are given concrete expression when invoked in horizontal disputes.

The starting point of the Court’s line of reasoning is represented by the Association de mediation sociale (C‑176/12, paras 45-49). The Court ruled out the possibility to infer from the wording of Article 27 of the Charter, alone and in conjunction with directive 2002/14, a directly applicable rule of law capable of being invoked in a dispute in order to disapply a conflicting national provision. That conclusion was reached on the ground that it was “clear from the wording of Article 27 of the Charter” – which subordinates the workers’ right to information and consultation within the undertaking to the cases and the conditions provided for by EU law and national laws and practice – “that, for this article to be fully effective, it must be given more specific expression in European Union or national law”. In so doing, the ECJ also made clear that it is only the primary law provision and not the directive concretizing it which may have horizontal direct effect, so that the latter “cannot confer on [the former] the qualities needed for it to be relied on directly in a dispute between individuals” (cf. AG Bot in Bauer, point 74).

Nevertheless, AMS left open the question of the possible direct effects of other provisions of the Charter that, unlike Article 27 CFR, make no reference to the respect of “the conditions provided for by national laws and practices”.

In a series of judgments inaugurated by Egenberger in April 2018 (C-414/16, paras 76-79) and followed by IR (C-68/17, paras 69-70), Hein (C-385/17, paras 76-78) and Cresco Investigation (C-193/17, paras 76 and 77), the ECJ has then admitted the possibility of relying on certain rights conferred by the Charter in dispute between private parties. The provisions of the Charter concerned were, precisely, the prohibition of all discrimination on grounds of religion or belief under Article 21(1) CFR, as well as the right to effective judicial protection under Article 47 TFEU. These provisions were deemed to be “mandatory as a general principle of EU law” in the same way as the “the various provisions of the founding Treaties prohibiting discrimination on various grounds”, “ and “sufficient in itself to concern on individuals a rights which they may rely on as such in disputes between them in a field covered by EU law”.

A final and decisive step forward has been marked by the Bauer (C-569/16 and C-570/16, paras 84-86) and Max-Planck (C-684/16, paras 73-75) rulings of November 2018, in which the Court has drawn the same conclusions with respect to the right to a period of paid annual leave affirmed by Article 31(2) CFR, which is not only a social right contained in title IV of the Charter on ‘solidarity’ but is also considered by the Court itself as an “essential principle of EU social law”.

In particular, the Court held that “by providing, in mandatory terms, that ‘every worker’ has ‘the right’ ‘to an annual period of paid leave’ without referring in particular in that regard — like, for example, Article 27 of the Charter […] — to the ‘cases’ and ‘conditions provided for by Union law and national laws and practices’, Article 31(2) of the Charter, reflects the essential principle of EU social law from which there may be derogations only in compliance with the strict conditions laid down in Article 52(1) of the Charter and, in particular, the fundamental right to paid annual leave”. This right “is thus, as regards its very existence, both mandatory and unconditional in nature, the unconditional nature not needing to be given concrete expression by the provisions of EU or national law, which are only required to specify the exact duration of annual leave and, where appropriate, certain conditions for the exercise of that right. It follows that that provision is sufficient in itself to confer on workers a right that they may actually rely on in disputes between them and their employer in a field covered by EU law and therefore falling within the scope of the Charter”.

These judgments appear to have developed a general test to be applied to all the rights protected by the Charter, a test similar – albeit with a different wordings – to that initially set out by the same Court for determining the direct effects of the provision of the Treaty (van Gend en Loos, 26/62, p. 13) and then of directives (van Duyn, 41/74, paras 12-13). This test is based on a twofold condition, according to which the provisions of the Charter are liable to have – not only vertical, but also horizontal – direct effects where they are both (i) unconditional in nature, and (ii) mandatory.

The first condition requires the provisions of the Charter to be “self-sufficient” (cf. AG Bot in Bauer, point 80 and Lenaerts), in that they must not need “to be given concrete expression by the provisions of EU or national law”. The Court has nonetheless stated that the secondary law may specify certain characteristics of the right concerned, such as its duration, and lay down “certain conditions for the exercise of that right” (see Max-Planck, para 74 and Bauer, para 85).

It follows that the numerous provisions of the Charter which refer to rights “as provided for in national laws and practice” are, in principle, deprived of such horizontal direct effect, as the Court has made it clear in AMS (paras 44-45) and confirmed in Max-Planck (para 73) and Bauer (para 84). Although the ECJ has made no explicit reference to it, this can be viewed as an expression of Article 52(6) CFR, according to which “full account shall be taken of national laws and practices as specified in this Charter” (as to the “horizontal reservations” of the Charter, cf. my article in GLJ).

Reference to national laws and practices is made not only by a series of provisions of the Charter concerning social rights, including articles 27 (workers' right to information and consultation within the undertaking), 28 (right of collective bargaining and action), 30 (protection in the event of unjustified dismissal), 34 (entitlement to social security and social assistance), 35 (right of access to preventive health care and the right to benefit from medical treatment), 36 (access to services of general economic interest), but also by articles 9 (right to marry and right to found a family), 10(2) (right to conscientious objection), 14 (freedom to found educational establishments) and 16 (freedom to conduct a business).

The first condition of the Max-Planck test a fortiori rules out also those Charters’ provisions which, by laying down principles to be implemented by legislative and executive acts taken by EU institutions and Member States, are judicially cognisable only in the interpretation of such acts and in the ruling on their legality, pursuant to Article 52(5) CFR. According to the Explanations relating to the Charter, this is, in particular, the case of Articles 25, 26 and 37, while other provisions of the Charter, such as Articles 23, 33 and 34, “may contain both elements of a right and of a principle”.

As regards the second condition – the mandatory nature of the provisions of the Charter – it appears not only to refer to the absolute nature of the right at issue, from which there can be no derogation, but also to incorporate the traditional criteria of clarity and precision required for having direct effects (see Garlsson, paras 65-66 and cited case-law, with regards to the (vertical) direct effect of Article 50 CFR). In so doing, the Court could have implicitly ruled out the horizontal direct effects of those “rights recognised by this Charter for which provision is made in the Treaties” which, in light of Article 52(2) CFR, “shall be exercised under the conditions and within the limits defined by those Treaties.”

Finally, the fact that certain Charter’s provisions may be capable of having horizontal direct effects should not overlook the existence of general constraints to legal effect of the Charter, flowing from the ECJ case-law and the rules governing the interpretation and application of the Charter laid down by Articles 51 and 52 CFR.

The Directives as “pull factor” allowing (horizontal) direct effects of the Charter under Article 51 CFR

As far as Article 51 CFR is concerned, it should first be noted that in its latest case-law the Court has addressed the issue of whether, by limiting the applicability of the Charter to EU institutions and the Member States, the first paragraph of this article could preclude the Charter from being invoked in disputes between private parties.

In Max-Planck (paras 76-79) and Bauer (para 87-90) the Court has held that “although Article 51(1) of the Charter states that the provisions thereof are addressed to the institutions, bodies, offices and agencies of the European Union with due regard for the principle of subsidiarity and to the Member States only when they are implementing EU law, Article 51(1) does not, however, address the question whether those individuals may, where appropriate, be directly required to comply with certain provisions of the Charter and cannot, accordingly, be interpreted as meaning that it would systematically preclude such a possibility”. Based on Egenberger, the Court has acknowledged that “the fact that certain provisions of primary law are addressed principally to the Member States does not preclude their application to relations between individuals”. Moreover, as regards, more specifically, Article 31(2) CFR, the Court emphasised that “the right of every worker to paid annual leave entails, by its very nature, a corresponding obligation on the employer”.

Secondly, the Court has acknowledged in Max-Planck that, although Article 51(1) CFR does not “systematically preclude” that private individuals may be directly required to comply with certain provisions of the Charter, this is without prejudice to the precondition for invoking such a horizontal direct effect, that is, that the legal situation shall fall within the scope of the Charter. According to the same Article 51 CFR as interpreted by the settled ECJ case-law, this is the case when the relevant legal situations are governed by EU law and the national legislation falls within the scope of Union law (see Åkerberg Fransson, C‑617/10, paras 19-21 and AGET Iraklis, C‑201/15, paras 62-64), which cannot be extended by the Charter itself.

The recent ECJ case-law shows how directives and the Charter, notably in horizontal situations, mutually benefit from the respective legal effects in this respect.

When certain rights contained in the Charter are based on and materialised by directives, it is by means of the same directives that the specific legal situation falls within the scope of application of EU law and therefore enters into the orbit of the Charter.

The Charter’s rights, in turn, – insofar as they are applicable and fulfil the relevant conditions laid down by the ECJ case-law – may be invoked in disputes between private parties concerning national provisions implementing or derogating from the corresponding secondary law. This applies also to those rights which were founded on international instruments and in the constitutional traditions common to the Member States and are now enshrined in provisions of the Charter which are ultimately based on directives, even if the latter cannot of itself enjoy such direct effect.

In other words, the Charter cannot confer horizontal direct effects to directives, since the latter, by their very nature, are unable to have such effects. But, as was the case in Max-Planck, the existence of a directive can attract a horizontal situation in the scope of the Charter.

In the synergic functioning of Charter and directives, special attention should be paid not to go beyond their respective scope of application.

Indeed, while the fact that directives and the Charter reinforce each other should be welcomed, there is an inherent risk that this two-way legal relationship may lead to a circular reasoning. This risk could materialise in two situations.

Firstly, as evidenced by the Explanations relating to the Charter, certain rights contained therein are “based” or draws on directives, which in turn concretise these rights. This is notably the case of articles 8 (protection of personal data), 11(2) (freedom of expression and information), 23(1) (equality between women and men), 31 (fair and just working conditions), 32 (protection of child labour and protection of young people at work), 33(2) (family and professional life), but also of article 27 (workers’ right to information and consultation within the undertaking), referring to directives 2002/14/EC, 98/59/EC, 2001/23/EC and 94/45/EC among the “considerable Union acquis in the field” and article 30 (protection in the event of unjustified dismissal), which in addition to the European Social Charter also refers to directives 2001/23/EC and 80/987/EEC.

It is therefore clear that while directives can be assessed, interpreted and applied in the light of the Charter, the latter could not extend the scope of the former, in particular where its own scope is defined by those directives.

Secondly, a risk of circular reasoning may occur when the situations in which fundamental rights protected by the Charter are not covered in their entirety by the relevant directives and could therefore fall (partly) outside the scope of EU law. This holds true especially for minimum harmonization directives, where the higher standards of protection granted by the Charter cannot be invoked against conflicting national legislation which goes beyond the scope of application of the relevant directives.

In such cases, it should not be possible to extend the reach of the relevant directives beyond their scope in order to ensure the effectiveness of the fundamental right granted by the Charter (cf., along this line, Opinion of AG Pitruzzella in CCOO, points 36, 39, 51 and 95-96). In fact, applying by analogy the latter to situations which fall outside the scope of the former, could lead to circumvent Article 51(1) CFR. In order to avoid such a circular reasoning, it would seem appropriate to emphasised that the Charter can only apply (and therefore have horizontal direct effect) to situations which fall within the scope of EU law.

It is to be noted, however, that the Court has already pointed out in Milkova (C‑406/15, paras 52-54) that, when Member States are not required by a Directive to maintain or adopt a given measure but have discretion in that regard, the national legislation that may have been adopted falls within the scope of EU law, resulting in the Charter being applicable. The Court will be able to clarify this point in the cases C-609/17, TSN and C-610/17, AKT, currently pending before it.

Article 52(1) CFR: striking the balance between conflicting rights in horizontal situations

With regard to Article 52 CFR, its first paragraph enables Member States to introduce legislative limitations on the exercise of the rights recognised by the Charter, insofar as they respect the essence of those rights (see Bauer, para 84 and Max-Planck, para 73). According to the same provision, when evaluating these limitations in light of the principle of proportionality, national judges are called to assess whether they “are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others”.

Protecting the rights of other parties is even more a delicate issue in cases where the Charter is deemed to be applied in horizontal situation, and national judges are therefore called on to strike a balance between competing individual rights accordingly (cf. Egenberger, para 80). The question therefore arises as to which court should be competent to strike such a balance, which, in light of Article 52(1) CFR, could also result in possible limitations of the rights protected by the Charter.

When the different rights or interests at the stake are both covered by the Charter, the ECJ can be regarded as the best placed to balance them (see, among others, Sky Österreich, C‑283/11, paras 46-66 and AGET Iraklis, paras 70-104). In any other cases, it can be argued that it is the national court which is called to apply the allegedly directly effective right who is primarily responsible to strike this balance in concreto, after referring a preliminary question to the Court, where appropriate.

The intervention of the ECJ would be necessary not only to verify whether and to what extent the specific provisions of the Charter may have horizontal direct effects and to determine the obligations stemming from the Charter in the specific circumstances, but also to clarify what balance has been struck by the legislature between the competing interests involved in the directive(s) which gives concrete expression to the provision of the Charter at issue (see, in this sense, Egenberger, para 81).

The latest ECJ judgments in Hein and Cresco Investigation, however, indicate the Court’s intention to steer this balancing exercise itself.

In Hein (paras 51 and 61-62), the ECJ recalled that, in order to interpret national legislation in accordance with the Charter’s rights and before eventually disapplying it, national courts are under an “obligation to change established case-law, where necessary, if it is based on an interpretation of national law that is incompatible with the objectives of a directive”. National courts are also prohibited from protecting the legitimate expectation of the losing private party that the case-law of the highest national courts confirming the lawfulness of the contested national provisions will continue to apply, so as to avoid indirectly limiting the temporal effects of the ECJ interpretation.

As for Cresco Investigation (paras 79-86), in order to clarify the scope of the national courts’ obligation to guarantee individuals the legal protection afforded to employees under Article 21 CFR, the Court held that the referring court must not only set aside any discriminatory national legislation, but also apply to members of the disadvantaged group the same advantages as those enjoyed by persons within the favoured category. Furthermore, until measures reinstating equal treatment have been adopted by the national legislature, employers are under an obligation to ensure equal treatment among their employees and notably to recognize to those employees who are not members of any churches entitlement to a public holiday on Good Friday or the corresponding pay.

In cases like these, it seems likely that the national constitutional courts will enter into a debate with the domestic courts concerning the protection of the different rights at stake as well as the outcome of the balancing exercise, assessing the conflicting rights in light of the respective national Constitution: in the new scenario opened by the Max-Planck ruling, new questions of constitutional nature and value will emerge.

Barnard & Peers: chapter 6, chapter 9, chapter 20

Photo credit: The Dugger Law Firm, PLLC

You can teach a new court Mangold tricks – the horizontal effect of the Charter right to paid annual leave

Filippo Fontanelli, Senior Lecturer in International Economic Law, University of Edinburgh

On 6 November 2018, the Court of Justice of the European Union (the Court) delivered three judgments relating to paid annual leave. Some of its remarks transcend the specific topic, and touch on constitutional matters: the impact of the EU Charter of Fundamental Rights on private parties, the allocation of competences between the EU and the Member States, and the application of EU secondary law.

These cases teach a couple of lessons, and raise a wider point. The lessons are useful: first, alongside the right to non-discrimination and effective judicial protection, the right to annual paid leave in the Charter has direct effect not only in vertical disputes (ie disputes between the individual and the State), but also in horizontal disputes (ie disputes between individuals), even though EU Directives dealing with the same issue still do not in themselves have such horizontal direct effect.  Second, the Charter sometimes binds State acts in a decisive manner. This occurs rarely and, curiously, so far exclusively in disputes between individuals, when the domestic law transposing a directive is not in good order.

The wider point concerns the Charter’s application to domestic measures. In these cases, EU secondary law could not displace domestic measures, because Germany had not transposed a directive correctly. The directive’s mere existence, however, warranted the Charter’s application, and in turn enabled domestic courts to disregard German law and enforce the right to annual paid leave.

The now familiar combo “unimplemented directive plus Charter right” seems a Munchhausen trick. To justify the practice, one should go back to the Mangold case (in which the CJEU ruled that, prior to the Charter having binding force, the general principles of EU law meant that the right to non-discrimination could apply between private parties even if a Member State had not implemented a Directive), and perhaps look deeper into the difference between direct applicability and direct effect, or between a norm’s application and its scope of application. After looking back and looking in-depth, it is still difficult to see precisely how the Charter applied.

The judgments

In cases C-619/16 and C-684/16 Kreuziger and Max Planck, the facts were comparable. Messrs Kreuziger and Shimizu, respectively employed by the Land of Berlin and the Max Planck Institute, had failed to take the entire period of paid annual leave to which they were entitled. After their employment ended, the former employers denied their request to receive payment in lieu of leave. German law appeared to authorise the employers’ position that a failure to request paid annual leave automatically entailed its lapse upon termination.

The Court disposed of the Kreuziger case quickly, due to the dispute’s vertical nature (the employer was a German Land). Article 7 of Directive 2003/88 (the working time Directive) clearly confers the right to paid annual leave and, accordingly, payment in lieu for the leave not taken; the Court recently ruled on this issue in Bollacke. The Court dusted off the direct effect spiel. Since “provisions of a directive that are unconditional and sufficiently precise may be relied upon by individuals, in particular against a Member State and all the organs of its administration” [21], individuals can invoke the Directive and the judges must set aside domestic law if need be. The automatic lapse of this right upon termination of employment, without any safeguard to make sure that the employee could exercise it beforehand, violated EU law.

The reasoning of the Max Planck ruling extended further, since the main proceedings concerned a dispute between private parties. The reasoning of Kreuziger was copy-pasted: Article 7 of the Directive precludes an automatic lapse of the right to paid leave triggered by a mere failure to exercise it [40]. National courts must arrive, to the extent possible, at an interpretation of domestic law consistent with the Directive.

Failing all attempts at consistent interpretation, Mr Shimizu could not rely on the Directive alone, since “Max Planck had to be considered an individual” [65], and directives normally lack horizontal direct effect [68]. The Court thus turned to Article 31(2) of the Charter on the right to annual paid leave, noting that it entailed a clear, enforceable right, withstanding only derogations in compliance with Article 52(1) of the Charter [73]. Article 31(2) of the Charter needing no implementing act to operate, it could warrant disapplication of contrary domestic law:

74           The right to a period of paid annual leave, affirmed for every worker by Article 31(2) of the Charter, is thus, as regards its very existence, both mandatory and unconditional in nature, the unconditional nature not needing to be given concrete expression by the provisions of EU or national law, which are only required to specify the exact duration of annual leave and, where appropriate, certain conditions for the exercise of that right. It follows that that provision is sufficient in itself to confer on workers a right that they may actually rely on in disputes between them and their employer in a field covered by EU law and therefore falling within the scope of the Charter.

75           Article 31(2) of the Charter therefore entails, in particular, as regards the situations falling within the scope thereof, that the national court must disapply national legislation negating the principle [that the right to paid leave and/or payment in lieu cannot lapse automatically].

The last hurdle for the direct invocability of Article 31(2) of the Charter in German courts was the dispute’s horizontal nature. The Court recycled from its own case-law the bold suggestion that Article 51(1) of the Charter, which sets out who is bound by the Charter, is ambiguous in this respect and does not preclude individuals from relying on the Charter against each other:

76           … although Article 51(1) of the Charter states that the provisions thereof are addressed to the institutions, bodies, offices and agencies of the European Union … and to the Member States only when they are implementing EU law, Article 51(1) does not, however, address the question whether those individuals may, where appropriate, be directly required to comply with certain provisions of the Charter and cannot, accordingly, be interpreted as meaning that it would systematically preclude such a possibility.

Notably, the Court distinguishes Article 27 of the Charter on workers’ consultation (at issue in AMS) from Article 31(2) on annual leave, because the former Charter Article refers to national and EU law limits and the latter Charter Article does not. If this is the test for whether Charter provisions can have horizontal direct effect, it should be noted that most of the Charter provisions on social rights refer to national and EU limits – but most of the other provisions of the Charter do not.

73      By providing, in mandatory terms, that ‘every worker’ has ‘the right’ ‘to an annual period of paid leave’ — like, for example, Article 27 of the Charter which led to the judgment of 15 January 2014, Association de médiation sociale (C‑176/12, EU:C:2014:2) — without referring in particular in that regard to the ‘cases’ and ‘conditions provided for by Union law and national laws and practices’, Article 31(2) of the Charter, reflects the essential principle of EU social law from which there may be derogations only in compliance with the strict conditions laid down in Article 52(1) of the Charter and, in particular, the fundamental right to paid annual leave.

The Joined Cases C-596/16 and C-570/16 (Wuppertal v Bauer; Willmeroth v Broßonn) largely replicated the reasoning of the Max Planck and Kreuziger cases. Only, in the underlying disputes, it was rather the employees’ heirs seeking payment in lieu, on behalf of the deceased workers. According to the referring judge, German law provided that the right to unpaid annual leave, necessarily turned into payment in lieu upon the workers’ death, would not become part of their estates.

Building on prior case law (discussed here), the Court, besides noting the importance of the right under Article 7 of the Directive, stated that it should accrue, after the death, to the worker’s estate:

48      … from a financial perspective, the right to paid annual leave acquired by a worker is purely pecuniary in nature and, as such, is therefore intended to become part of the relevant person’s assets, as a result of which the latter’s death cannot retrospectively deprive his estate and, accordingly, those to whom it is to be transferred by way of inheritance, from the effective enjoyment of the financial aspect of the right to paid annual leave.

With respect to horizontal disputes (like the Willmeroth v Broßonn controversy, whereas Bauer was a public employee), the reasoning of the Court was identical to that used in the Max Planck case [87-91]. Article 31(2) of the Charter can be invoked in disputes between individuals, possibly leading to the setting aside of domestic norms like those at issue in the main proceedings.

The Charter’s effect on domestic measures

The Charter has many functions. It guides the interpretation of EU law and serves as standard of legality of EU acts. It does not enlarge the competences of the EU at the expense of the member states, but binds their action when they act as agents of the EU. In this residual scenario, delimited by the sibylline “implement[ation of] EU law” notion of Article 51(1) of the Charter, the Charter should serve as standard of EU-legality of national measures. In other words, the Charter can preclude some national measures.

The Charter applying to state measures falling “within the scope of EU law,” (a formula sanctified in Fransson [21], and unsurpassably frustrating), the following circumstances can arise:

a)      EU law does not apply to the matter, so neither does the Charter;

b)      EU law applies to the matter, and precludes the domestic measure. The Charter applies too: it might also preclude the domestic measure (“double preclusion”) or not;

c)       EU law applies to the domestic measure, but does not preclude it. The Charter applies too, and likewise does not preclude it;

d)      EU law applies to the domestic measure, without precluding it. The Charter, which also applies, precludes the domestic measure.

In the scenarios a), b) and c), the Charter is irrelevant to the ultimate determination of EU-legality.

Only in scenario d) does the Charter show its teeth, doing its standard of review job fully. Exclusively in this scenario, an otherwise EU law-compliant measure can breach the Charter and, accordingly, might be set aside by domestic judges. To this day, scenario d) has never occurred in its garden variety. Never has been the case that, for instance, a national measure that justifiably restricts one fundamental freedom (and falls therefore under the scope of Treaty law, without being precluded thereby) was found to breach the Charter. This unlikely coincidence warrants a deeper analysis (but not here), because it suggests that the Court is discreetly keeping the Charter in a locked drawer, lest member states react like the German Constitutional Court reacted after Fransson. A low-profile use of the Charter – one that essentially emptied it of its post-Lisbon potential – is what the Court’s record shows in the last 9 full years.

However, there is a hybrid category of cases, halfway between scenarios b) (double preclusion) and d) above. The paid annual leave rulings of 6 November 2018 belong in this atypical group, insofar as they relate to horizontal disputes. As far as their bearing on vertical disputes, they are squarely b)-type rulings: the measures are precluded by the Directive, and the breach of the Charter is just redundant.

The discussion below, instead, focuses only on the horizontal dimension of these rulings.

Did the Directive apply?

That the Directive applied must be assumed – otherwise the Charter would not have applied at all. Yet, the Directive could not apply to determine the outcome of the underlying dispute, for lack of horizontal direct effect. Can it be said that the Directive applied, and precluded the national measures, but was ineffective? The (ineffective) application of the Directive to the underlying scenario would then warrant the (very effective) application of the Charter. The Charter alone would warrant the disapplication of the German norms that breached both the ineffective Directive and the effective Charter.

The easier construction – that the Directive, lacking horizontal direct effect, could not apply – is untenable. Admitting that the Directive did not apply contradicts the notion that the German law fell within the “scope” of EU law, and would rule out the relevance of the Charter tout court. Some finer reasoning must support the Court’s decision. I suggest a couple of unnoticed distinctions that might help.

Direct application is not the same as direct effect: This is an all-time favourite for mid-term exams, so why not give this distinction a day in Court? Perhaps, the Directive did apply somehow (direct applicability), but could not be relied upon in domestic proceedings (lack of horizontal direct effect). This would explain the triggering of Article 51(1) of the Charter, but also the impossibility to use the Directive to solve the disputes between Mr Shimizu and Mrs Broßonn and their employers. Certainly the Directive applied, somehow. As soon as the transposition period expired, it deployed its legal obligatory effects and, even regarding horizontal disputes, triggered immediately Germany’s responsibility for failure to transpose correctly, which individuals can invoke to seek compensation without recourse to any implementing measure.

On the lack of direct effect, there is no real mystery: Article 7 of the Directive creates a precise and unconditional right, capable of invocation in domestic proceedings, so the direct effect checklist is in order. However, it can only work in vertical disputes. This distinction between direct applicability and direct effect could justify the Court’s truncated use of the Directive (sort-of applying to bring the Charter in under Article 51(1) of the Charter; not-really applying in its own right).

Scope of application is not the same as application: This is a contrived distinction, but it might operate in the background of these rulings. The Directive effectively cannot apply in domestic proceedings. However, the German law falls under the “scope” of the Directive, in a somewhat more abstract sense, as if applicable and applied were distinguishable. To accept that EU law reaches further than the circumstances to which it can actually apply is a head-scratcher. Yet, that is what the Court prescribed: domestic law must be set aside for intruding in an area that the Directive could not operate (the direct regulation of duties between private parties) but it nevertheless occupied – somehow. In the wake of Kücükdeveci (an earlier judgment on discrimination in employment), I noted the risk:

… it is necessary to evaluate the implications of Kücükdeveci: if the general principle of non-discrimination has a wider scope than the measures codifying it (the Directive), it follows that it can be invoked in a series of disputes that, despite concerning EU-regulated matters, fall outside the scope of the Directive.

Putting lipstick on Mangold

The distinctions above are nowhere mentioned in the rulings. So, if the Directive could not operate in domestic proceedings, how did the Court justify German law falling under the scope of EU law? This week’s rulings proffer only minimal reasons, but summon precedents to convey the idea that this apparent misalignment is nothing to worry about. From Bauer:

53           Since the national legislation at issue in the main proceedings is an implementation of Directive 2003/88, it follows that Article 31(2) of the Charter is intended to apply to the cases in the main proceedings (see, by analogy, judgment of 15 January 2014, Association de médiation sociale, C‑176/12, EU:C:2014:2, paragraph 43).

If one goes down the rabbit hole of cross-citations, however, Mangold awaits on the bottom. In terms of legal reasoning, it does not get any more controversial than Mangold. The judgment exasperated the former president of the German Constitutional Court and drafter of the Charter, who penned an op-ed wishing the Court of Justice to “Stop.” Ultimately, Mangold was criticised for encroaching into the Member States’ competence.

There are, in fact, a series of cases in which the Court prescribed the horizontal direct effect of a fundamental right, using a directive as a trampoline. Mangold was the first case, and Kücükdeveci followed. Dansk Industri (discussed here), also on discrimination on grounds of age, pulled the same trick, this time using the Charter rather than a general principle of law. AMS (discussed here) replicated the reasoning with respect to the workers’ right to consultation and information in the Charter, accepted its applicability but concluded that the Charter’s norm was not self-executing and stopped short of confirming its horizontal direct effect.

Egenberger (discussed here), very recently, asserted the horizontal effect of the right to non-discrimination on grounds of religion and the right of effective access to justice. In IR (discussed here), the Court consolidated Egenberger, and wisely recalled that non-discrimination is essentially a general principle: if the AMS explanation why the Charter applies to individuals were not compelling, the unwritten source might apply more liberally and come to the rescue just like in the good Mangold days:

69           Before the entry into force of the Treaty of Lisbon, which conferred on the Charter the same legal status as the treaties, that principle derived from the common constitutional traditions of the Member States. The prohibition of all discrimination on grounds of religion or belief, now enshrined in Article 21 of the Charter, is therefore a mandatory general principle of EU law and is sufficient in itself to confer on individuals a right that they may actually rely on in disputes between them in a field covered by EU law.

Conclusion

In all the cases mentioned, individuals could not rely on the directives in domestic proceedings. Yet, each directive somewhat marked the “scope” or “cover[age]” of EU law and let the fundamental right finish the work (unless some ingrained deficiency made it non self-executing, as in AMS). The simple annotation that the German law “is an implementation of [the] Directive” sanded over the uncomfortable truth: if the Directive was insufficient to set aside the norms of German law, perhaps these norms of German law lay outside the scope of EU law, and the Charter should not have found its way in the proceedings.

A sceptical reader might wonder what “a field covered by EU law” means, and wonder whether the Charter spilled over from the EU-law scope comfort zone. An optimist one can celebrate the expansive force of social rights. Horizontal application of fundamental rights translates into the creation of EU-based fundamental duties, and lets us catch a glimpse of solidarity in the making.

Barnard & Peers: chapter 9, chapter 20, chapter 6

Photo credit: PureTravel

Daddy’s gonna pay for your crashed car? The ECJ clarifies the vertical direct effect of Directives

Albert Sánchez Graells, Reader in Economic Law, University of Bristol*

One of the great complications of EU law is that EU Directives – unlike Regulations – do not have ‘direct effect’ horizontally, meaning that a private party cannot rely on them as such against another private party. However, there are other means of enforcing Directives, and in any event they do apply vertically, ie an individual can invoke a Directive against the State. This distinction between vertical and horizontal direct effect means that it is necessary to define exactly what is the ‘State’ for this purpose, given that there are many types of complex public-private relationships in each EU country.

More precisely, EU case law has indicated how to determine if a particular legal body is an ‘emanation of the State’, which is therefore covered by the principle of vertical direct effect. The key authority on this issue is the case of Foster and Others v British Gas, C-188/89, EU:C:1990:313. While some later judgments have touched on this definition, the Court of Justice of the European Union (CJEU) today clarified the position more thoroughly in its judgment in Farrell, C-413/15, EU:C:2017:745, broadly following the Opinion of AG Sharpston (here) – just in time for the start of many law students’ study of EU law.

The test for defining an ‘emanation of the State’, as applied in Foster, was formulated in the following terms: 

... a body, whatever its legal form, which has been made responsible, pursuant to a measure adopted by the State, for providing a public service under the control of the State and has for that purpose special powers beyond those which result from the normal rules applicable in relations between individuals is included in any event among the bodies against which the provisions of a directive capable of having direct effect may be relied upon (C-188/89 at [20], emphasis added).

However, also in Foster, the CJEU had offered a broader formulation of the test, indicating that:

a directive [capable of direct effect] could be relied on against organisations or bodies which were subject to the authority or control of the State or had special powers beyond those which result from the normal rules applicable to relations between individuals (C-188/89 at [18], emphasis added).

The interpretation of the Foster-test has been a relatively contentious issue in EU scholarship since its formulation in 1990. In particular, there have been opposing views on whether the conditions in which the test breaks down are cumulative (ie, a body needs to satisfy both criteria to be an emanation of the State) or not and, in case they are cumulative, whether they include three conditions (entrustment of public service, State control and special powers), or only two (thus suppressing the requirement to provide a public service) [cfr eg M Bobek, 'The effects of EU law in the national legal systems', in C Barnard & S Peers (eds), European Union Law, 2^nd edition (Oxford, OUP, 2017) 154 (two conditions, non-cumulative), TC Hartley, The Foundations of European Union Law, 7th edn (Oxford, OUP, 2010) 232 (identifying four conditions, cumulative, but indicating that the test is non-exhaustive), K Lenaerts & P Van Nuffel, European Union Law, 3rd edn (London, Sweet & Maxwell, 2011) 903-04 (two conditions, including public service provision, cumulative), or R Schütze, European Union Law (Cambridge, CUP, 2015) 100 (equally, two conditions, including public service provision, cumulative)].

Uncertainty about the exact limits and implications of the Foster-test have remained for a surprisingly long time, and the CJEU had so far only provided limited and piecemeal clarifications--most recently, in its Judgment of 12 December 2013 in Portgás, C-425/12, EU:C:2013:829, where the CJEU still referred in less than clear-cut terms to 'bodies which, under the control of [the] authorities [of a Member State], have been given responsibility for a public-interest service and which have, for that purpose, special powers' (at [34], for discussion, see here).

In Farrell, concerning who was liable for failure to implement an EU motor insurance Directive properly following a car accident, the CJEU has clarified that the conditions set out in the so-called Foster-test are not cumulative (ie, a body does not need to satisfy both criteria to be an emanation of the State) and, in any event, that it suffices for an entity (even a private law one, not necessarily subjected to State control) to have been delegated the performance of a task in the public interest by the Member State and to possess for that purpose special powers.

According to the CJEU, in Foster, 'the Court was not attempting to formulate a general test designed to cover all situations in which a body might be one against which the provisions of a directive capable of having direct effect might be relied upon' (at [26]) and, consequently, that '[p]aragraph 20 of [Foster] must be read in the light of paragraph 18 of the same judgment, where the Court stated that such provisions can be relied on by an individual against organisations or bodies which are subject to the authority or control of the State or have special powers beyond those which result from the normal rules applicable to relations between individuals' (at [27]). Ultimately, then, the CJEU has clarified that the Foster-test is actually formulated at [18] (see also Farrell at [33]) and, consequently, that

... the conditions that the organisation concerned must, respectively, be subject to the authority or control of the State, and must possess special powers beyond those which result from the normal rules applicable to relations between individuals cannot be conjunctive (C-413/15 at [28], emphasis added).

Adding some further clarity, the CJEU explained that the 'emanations of the State' that are relevant for the purposes of ensuring direct effect of EU Directives after the expiry of their transposition period

... can be distinguished from individuals and must be treated as comparable to the State, either because they are legal persons governed by public law that are part of the State in the broad sense, or because they are subject to the authority or control of a public body, or because they have been required, by such a body, to perform a task in the public interest and have been given, for that purpose, such special powers.

Accordingly, a body or an organisation, even one governed by private law, to which a Member State has delegated the performance of a task in the public interest and which possesses for that purpose special powers beyond those which result from the normal rules applicable to relations between individuals is one against which the provisions of a directive that have direct effect may be relied upon (C-413/15 at [34]-[35], emphasis added).

In my view, this is a welcome clarification and one that can potentially catalyse a higher level of effectiveness of secondary EU law. It comes to clearly establish three prongs for the test of whether an entity is an emanation of the State (shall we re-label it the Farrell-test, for clarity?), which the entity will be if either (1) it is governed by public law, (2) it is subject to the authority or control of a public body, or (3) it performs a public interest task on the basis of special powers. This can have interesting implications in areas other than general EU law (eg in State aid law, to the effect of reducing the scope of the Judgment of 30 May 2013 in Doux Élevages and Coopérative agricole UKL-AREE, C-677/11, EU:C:2013:348--as criticised here) and, more generally, follows a welcome functional approach.

I envisage that the next potential frontier for litigation will concern what should be considered special powers, and whether they have to be substantial for an entity carrying out tasks in the public interest by delegation of the State to be considered 'emanations of the State' for these purposes. In Farrell, the special powers consisted in statutory powers 'to require [private entities] to become members of [the entity considered an emanation of the State] and to contribute funds for the performance of the task conferred on it by the [the Member] State' (C-413/15 at [40]). This seemed like a clear instance. However, there may be more difficulties in drawing clear lines where the powers are exercised in the context of a situation of a relationship of special dependence from the State, where the special powers form part of the task delegated to the entity. This can be particularly relevant in the context of contracted-out public services in sectors such as care, corrections or education, where the existence or not of special powers (eg to discipline) will trigger complex issues in the future.

On the whole, however, it seems to me that Farrell resolves one of the important areas of uncertainty in the area of the effectiveness of EU secondary legislation. It should thus be welcome.

Barnard & Peers: chapter 6

Photo credit: Yahoo.com

*Reblogged from the ‘How to Crack a Nut’ blog