First decision by the European Court of Human Rights on suspicion of reverse discrimination in tax matters

 

 

Dr Samira-Asmaa Allioui, Research fellow, Centre d'études internationales et européennes, Université de Strasbourg

Photo credit : Chabe10, via Wikimedia Commons

The applicants in the European Court of Human Rights judgment in Deforrey and others v France are three French nationals who allege reverse discrimination (ie, treating issues subject to EU law more favourably than issues subject to national law) in tax matters. Relying on Article 14 (right to non-discrimination) taken in conjunction with Article 1 of Protocol No. 1 to the Convention (right to property), the applicants complain about the methods used to calculate their income tax. They denounce reverse discrimination, arguing that they would have benefited from more favorable tax treatment if the capital gains on which they were taxed had been part of transactions falling within the scope of EU Directive 2009/133/EC of 19 October 2009, which concerns the taxation of mergers of companies between different Member States.

With regard to this directive, the Court of Justice of the European Union (CJEU), consulted by the French Conseil d’Etat decided that the relevant articles of this directive must be interpreted as meaning that, in the context of a securities exchange transaction, they require that the same tax treatment be applied to the capital gain relating to the securities exchanged and placed in tax deferral, as well as to the capital gain arising from the sale of the securities received in exchange, with regard to the tax rate and the application of a tax allowance to take into account the length of time the securities were held, as that which would have been applied to the capital gain that would have been realized upon the sale of the securities existing before the exchange transaction, had it not taken place.

But what if the same transaction as regards companies in the same Member State is treated worse for tax purposes? The three applicants denounce the discriminatory nature of the methods used to calculate their income tax base, claiming they are treated less favorably than taxpayers who have carried out a securities exchange transaction governed by European Union law. They maintain that their situation is comparable to that of taxpayers who have carried out a cross-border securities exchange transaction within the European Union internal market and complain of direct discrimination based on the location of the securities exchanged during the restructuring transactions and the national origin of the securities, arguing that this difference in treatment did not pursue a legitimate aim and was devoid of objective and reasonable justification.

In the present case, the Human Rights Court considers that it has been established that the alleged difference in treatment is correlated with an identifiable characteristic, drawn from the nature of the transactions carried out by the taxpayer, and more specifically, whether he carried out a cross-border exchange of securities within the European Union internal market.

The Court recalls that a State is ordinarily granted broad latitude when it comes to defining general measures in economic or social matters. Thanks to their direct knowledge of their society and its needs, national authorities are, in principle, better placed than international courts to determine what is in the public interest in economic or social matters, and the Court generally respects the State's understanding of the imperatives of public interest, unless its judgment proves to be "manifestly lacking a reasonable basis." Similarly, the Court tends to recognize a wide margin of appreciation when the situation is partly the result of individual choice. Conversely, only very compelling considerations can justify a difference in treatment based exclusively on nationality.

In this case, the Court notes, first, that the difference in treatment at issue is not based on the taxpayers' nationality, but on certain characteristics of the transactions they carried out. Second, it notes that the taxed gains result from transactions freely entered into, the taxpayers having chosen to dispose of their securities with full knowledge of the facts. Third, it observes that the difference in treatment at issue falls within the realm of taxation, this area being part of the core prerogatives of public authorities.

Regarding the existence of a “rapport raisonnable de proportionnalité” (reasonable relationship of proportionality) between the means employed and the aim sought to be achieved, the Court has already acknowledged that accession to the European Union and the specific nature of the European Union legal order could justify a difference in treatment between nationals of Member States and other categories of foreign nationals. However, it has never been called upon to rule on a situation of reverse discrimination, in which the rules of a domestic legal order are less favourable than those applicable to situations covered by European Union law. In this regard, the Court reiterates that it is not its task to replace the competent national authorities in determining what is in the public interest in economic or social matters or in assessing whether – and to what extent – ​​differences between situations that are similar in other respects justify differences in treatment. It is solely for it to determine whether any difference in treatment implemented exceeds the margin of appreciation granted to the Contracting States.

In this case, the Court notes, like the French Constitutional Council and the Council of State (Conseil d’Etat), that the domestic legal system also includes rules with similar effect. The tax deferral regimes applicable to capital gains from the exchange of securities are intended to guarantee a degree of tax neutrality for these transactions by preventing the taxpayer from being forced to sell their securities to pay the tax. Only the degree of tax neutrality of the exchange of securities transaction varies, being reinforced for situations falling within the scope of Directive 2009/133.

The Court further notes that the deduction for holding period provided for in Article 150-0 D of the French General Tax Code is intended to apply to all capital gains on securities when the conditions set out in that article are met. This text does not, in principle, exclude capital gains realized in purely domestic situations from its scope. While this allowance does not apply to capital gains carried forward prior to January 1, 2013, this is primarily an effect of the transitional provisions attached to the tax reform implemented by the Finance Acts for 2013 and 2014.

However, the Court has already observed that the implementation of economic or social reforms intended for a broad public requires determining their temporal scope, which implies excluding certain beneficiaries according to criteria that may appear arbitrary to the persons concerned; the resulting differences in treatment are the inevitable consequence of the introduction of new rules. In the Court's view, these transitional provisions do not appear arbitrary.

The Court considers that the difference in treatment at issue was based on an objective justification and was not manifestly lacking a reasonable basis. In view of all these considerations, the Court considers that the respondent State did not exceed the wide margin of appreciation available to it in this matter. Accordingly, there has been no violation of Article 14 of the Convention.

One of the four components of discrimination is that the rule at issue must establish a distinction based on a prohibited criterion. In CJEU case law, criteria are prohibited when they establish a distinction based on a cross-border element, such as the fact that the services are obtained from a provider established in another Member State. This is a preliminary question to be examined before the Court assesses comparability and the existence of a disadvantage. If the rule at issue does not establish a distinction based on a prohibited criterion, there can be no discrimination.

Despite the lack of clear guidelines on how to resolve specific cases, one thing is clear: unlike the CJEU, which consistently demonstrates concern for the functioning of the common market and the promotion of free movement in its tax discrimination cases, this is not the case for the Human Rights Court. The CJEU frequently concludes that tax policies are discriminatory because they "discourage" or "deter" cross-border economic activity. This interpretation makes sense considering that one of the explicit objectives of the EU's creation was to integrate the economies of previously independent states by removing barriers to cross-border economic activity and preventing states from erecting new ones that would prevent taxpayers from operating across borders. The problem with tax discrimination decisions, however, is that they provide little guidance on when tax policies "discourage" or "deter" the type of cross-border economic activity in question.

Tax discrimination cases raise complex questions with no readily available answers. For example, what impact do differential tax rates have on determining whether discrimination exists? These questions attract much commentary, but neither the judicial decisions themselves nor the academic commentaries on them provide answers to these fundamental questions.

Anti-discrimination and labour rights: CJEU confirms protection from discrimination (including on grounds of sexual orientation) covers self-employed workers

 

Chiara De Capitani, linguist agent at the European Commission and PhD candidate and honorary fellow in European law at the University of Naples “L'Orientale”. The information and views set out in this article are those of the author and do not necessarily reflect the official opinion of the European Commission.

Photo credit: Silar, via Wikimedia Commons

 

Introduction

In TP « (Monteur audiovisuel pour la télévision publique)», Case C-356/21 (the present case) the EU Court of Justice (ECJ) analyses a case dealing with the protection of self-employed individuals providing goods and services, discrimination on the basis of sexual orientation and its balancing with the right to freedom of contract.

Building on the previous HK v Danmark and HK/Privat case (Case C-587/20), this landmark ruling has been celebrated (Covington & Burling LLP; Countouris, Freedland and Stefano; Lasek-Markey) for its progressive interpretation of the protection provided by EU anti-discrimination law but, most of all, for its broad definition of which ‘workers’ are protected by it, “making labour law fit for all those who labour” (Countouris, Freedland and Stefano). Indeed, this case covers the situation of self-employed workers (whose rights lack clarity at EU level) but also of workers that may not fall into that category but ‘provide goods and services’.

Facts of the case

From 2010 to 2017, J.K. (the applicant) entered into a series of consecutive short-term contracts with TP, a public television channel in Poland, as a self-employed individual. During this time, J.K. worked on editing material for trailers and features that were later used in TP's promotional materials. He worked under the supervision of W.S. He worked two one-week shifts per month with another journalist, as assigned by W.S.

In August 2017, TP was planning to reorganize its structure and transfer J.K.'s tasks to a new unit. Two new employees were appointed to handle the reorganization and to assess the associates who would be transferred.

At meetings in October and November of that year, J.K. received a positive evaluation and was listed among the associates who passed the assessment. On November 20th, J.K. and TP entered into a one-month work contract. On November 29th, J.K. received his work schedule for December, which included two weeks of service.

However, on December 4th, J.K. and his partner published a Christmas music video promoting tolerance towards same-sex couples on their YouTube channel. Two days later, on December 6th, TP cancelled J.K.'s first week of service, and on December 20th, J.K. was informed that he would not be required for the second week as well. As a result, J.K. did not perform any service in December and was not paid for it. Subsequently no new contract for specific work was established between him and TP, and the decision to end the work collaboration was made by the employee(s) responsible for carrying out the reorganization.

J.K. filed a case at the District Court for the Capital City of Warsaw (the referring Court) seeking compensation, claiming that he was the victim of direct discrimination by TP due to his sexual orientation. He alleges that the probable reason for the cancellation of his work periods and the termination of his employment with TP was the publication of the previously mentioned Christmas music video on YouTube. TP argues that the case should be dismissed, as there is no guarantee of contract renewal in its practice or law.

The referring Court is uncertain to which extent self-employed workers are covered by the scope of the ‘Equality Framework’ Directive and has doubts about the compatibility of Polish Equality Law with the directive.

Analysis

Absence of analysis as to whether there was discrimination

Recital (15) of the ‘Equality Framework’ Directive states that:

The appreciation of the facts from which it may be inferred that there has been direct or indirect discrimination is a matter for national judicial or other competent bodies, in accordance with rules of national law or practice […].

Following this and since the referring court based its request for a preliminary ruling on the premise that J.K.'s sexual orientation was the reason behind the refusal by TP to conclude the contract, neither the opinion of Advocate General Tamara Ćapeta (the AG) nor the ECJ analyse whether the applicant has actually been discriminated against or not.

This is regrettable as the case itself raised several interesting elements previously not addressed by the ECJ.

For one, the fact that the applicant’s shift was cancelled (and subsequently his contract not renewed) merely two days after his publication of a video aimed at promoting tolerance towards same-sex couples is quite suspicious and bears some resemblance with the Hakelbracht ruling (Case C‑404/18). In that ruling, the ECJ clarified that the protection against retaliation afforded by the ‘Gender Equality Directive’ applies to all employees who have informally supported a person who has been discriminated against. In that case, a company had dismissed an employee only eight months after she had objected to their refusal to hire a woman based on the latter’s pregnancy, a fact that the referring court in that case presumed to be retaliatory behaviour and that the ECJ duly noted in its ruling (para 24).

This presumption is all the more legitimate as J.K had worked regularly for seven years for the public television channel, TP.

Additionally, the decision to end the work collaboration was made by the newly recruited employee(s) responsible for carrying out the reorganization of the television channels’ structure only a couple of months after the applicant had received a positive evaluation and was listed among the associates who passed the assessment for said reorganization.

Furthermore, in its request for a preliminary ruling, the referring court notes that one or two days after the publication of the Christmas video a meeting took place which was attended by – among others – the applicant’s immediate supervisor W.S. and the employees responsible for carrying out the reorganization. While the meeting focused on the creation of content for Christmas to be broadcasted, one of the employees responsible for carrying out the reorganization made a sarcastic joke about the fact that “(Channel 1) already had a spot and its own Santas”. After the meeting, one of the employees responsible for carrying out the reorganization (possibly the same who made the sarcastic joke) gave instructions to W.S. to suspend the applicant and assign his shifts to another person.

The joke during a meeting expressly referring to the applicant’s video promoting tolerance towards same-sex couples (where a man dressed as Santa kisses another man) and following request to suspend him might hint to a correlation between the suspension (and following non-renewal) of the applicant’s contract and his sexual orientation.

So far the ECJ currently has ruled on three cases (Feryn, Case C-54/07; Asociaţia Accept, Case C‑507/18, Associazione Avvocatura per i diritti LGBTI, Case C-507/18 – which I discussed here)  where an employer or a person perceived as being capable of exerting a decisive influence on the recruitment policy of an employer stated that they would not hire a person from a protected category. In these three cases, these statements were always public. In this specific case, it would have been interesting for the referring Court to ask the ECJ clarifications as how to assess situations where statements made privately implying prejudice are followed by a termination decision.

Finally, the referring court reported that the employees and associates of the editorial office where the applicant performed his tasks within the defendant’s organisation were aware of the applicant’s sexual orientation and that the defendant (TP) has argued that “the applicant’s sexual orientation was common knowledge”. This argument resonates in part with the Lee v. the United Kingdom European Court of Human Rights ruling (Application no. 18860/19) where the defendants (a bakery) had argued that they had employed and served gay people in the past and that their refusal to provide a good was not based on the applicant’s sexual orientation but on their refusal to put a pro-same sex marriage slogan on a cake. In the author’s opinion, this could have led to interesting reflections not only as to the discrimination of the present cases’ applicant on matters of employment, but also its implications as a possible retaliation to his right to freedom of expression in producing a video aiming at tolerance towards same-sex couples.

Scope of the protection afforded against discrimination in relation to access to employment

The first question the ECJ and the AG try to answer is whether Article 3 (1)(a) of the ‘Equality Framework’ Directive covers situations such as the one in the present case. According to said provision, the directive applies to ‘conditions for access to employment, to self-employment or to occupation’. Both the ECJ and AG proceed with examining what ‘conditions for access to employment, self-employment or to occupation’ entail: since the directive does not refer to national law to define this concept, it must be given an autonomous and uniform interpretation across the European Union.

The Court starts by noting, following its previous reasoning in HK v Danmark and HK/Privat, that the usual meaning in everyday language of ‘employment’, ‘self-employment’ and ‘occupation’ must be construed broadly and “cover conditions for access to any occupational activity, whatever the nature and characteristics of such activity” (para 36). In HK v Danmark and HK/Privat the Court had found that the post of sector convector of an organisation of workers constituted a real and genuine professional activity (para 35). Therefore, the applicant in that case was protected by the ‘Equality Framework’ Directive against discrimination on grounds of her age, even though her post was a political post (decided with elections by the members of that organisation) (paras 36–39).

The Court reaches a similar conclusion in the present case, noting that it was not the intention of the EU legislature to restrict the application of the ‘Equality Framework’ Directive solely to positions held by individuals classified as ‘workers’ according to Article 45 of the Treaty on the Functioning of the European Union (TFEU). As a matter of fact, whereas the ‘Equality Framework’ Directive was adopted on the basis of the (current) Article 19 (1) TFEU conferring the EU the power to combat discrimination, Article 45 TFEU only protects workers “as the weaker party in an employment relationship” (HK v Danmark and HK/Privat para 34, present case paras 40-43). In fact, the Court reiterates, the ‘Equality Framework’ Directive applies to “all persons […] whatever the branch of the activity and at all levels of the professional hierarchy” and was adopted to eliminate all discriminatory obstacles in the field of employment” (HK v Danmark and HK/Privat paras 29, 34, present case paras 38, 43).

What constitutes ‘work’ and its intersection with ‘provision of goods and services’

The Court, while noting that a wide range of occupational activities are protected by the ‘Equality Framework’ Directive, proceeds to highlight activities falling out of the scope of that directive which are “the mere provision of goods and services to one or more recipients” (para 44).

Furthermore, the Court adds that, to fall under the scope of the directive, occupational activities must:

be genuine,

be pursued in the context of a legal relationship that is

characterised by a degree of stability (para 45).

The Court does not further define these three requirements but applies them to the present case (while leaving it for the referring court to decide whether the applicant satisfies these criteria): J.K prepared personally specific work for the public television, depended on the assignment of his shifts and had received a positive evaluation (para 46). In other words, the Court finds, J.K pursued a genuine and effective occupational activity on a personal and regular basis for the same recipient, which enabled him to earn (at least in part) his livelihood (para 47).

The fact that the three criteria above seem to apply to the present case creates a situation where his ‘occupational activity’ with the company does not even need to be classified as ‘employment’ or ‘self-employment’ to fall under the scope of the directive (para 47).

This broad interpretation of the scope of the directive is highly welcome and will likely protect a lot of self-employed individuals and providers of goods and services that are currently left out in an overly de-regularised and flexible labour market. The shift of focus from the AG and the Court from the conditions of employment decided by an employer to, rather, the personal aspects of the work provided by the worker have been greeted favourably by academics (Countouris, Freedland and Stefano).

Nevertheless, the exclusion by the court of “the mere provision of goods and services” from the scope of the directive is not very clear and seems to rebut its previous finding that “any occupational activity, whatever the nature and characteristics of such activity” is covered by the scope of the directive. Coupled with the requirements that an occupational activity “be genuine”, “pursued in the context of a legal relationship” and that said relationship must be “characterised by a degree of stability” seem to exclude from the scope of the directive several occupational activities whereas currently, as the AG finds, “non-standard forms of work have increased, causing fragmentation in the labour market” (para 63).

Firstly, the definition of ‘services’ in Article 57 TFEU provides that they “shall be considered to be “services” within the meaning of the Treaties where they are normally provided for remuneration”. This creates – for the author – a presumption that the payment of these services implies the existence of an occupational activity. The AG underlines in her opinion that a person may be simultaneously self-employed and a provider of goods and services since “as recipients of their goods or services, we ‘buy’ their work and the end product of that work at the same time” (para 41).

Secondly, the Court does not further define in particular what constitutes a “genuine” occupational activity and while the author agrees that the existence of a legal relationship and its level of stability do create a presumption of an existing occupational activity, it is unclear why the lack thereof should be excluded from its scope. With regards to the “level of stability” required of the legal relationship, it is interesting to note that the AG believes that in the present situation the “continuity of work” of the applicant (who had worked for seven years for TP) does not make any difference: “previous working relationships are unrelated to applying for a job and succeeding in concluding a contract” (paras 95-97).

Conversely, the AG opinion provided a far-reaching definition of what may constitutes “work”. She argues that the ‘Equality Framework’ Directive aims at protecting access to work from discrimination “in all the different forms in which work can be offered” (para 61). For her, work refers both to the activity and the result of that activity and the way in which someone approaches the same occupational task vary widely:

A person can earn his or her living by working for only one or for multiple ‘employers’; for longer or shorter periods of time; part-time or only seasonally; at one place, or at different places; using his or her own tools or somebody else’s. Likewise, work can be agreed on the –basis of time (for example, 20 hours per month), or on the basis of the tasks to be performed (for example, painting six walls white) (para 64).

Therefore, she adds, different legal frameworks should not be relevant for the application of the directive as long as the person engages in “personal work” (para 66). She further adds that whether a potential employer ‘buys’ the work or the ‘goods and services’ provided by a person, a company’s refusal to conclude a contract because of a discrimination ground unrelated to the worker’s capacity to perform the work prevents their access to that particular job and, therefore, limits their access to work (paras 79-80):

There is no problem accepting that such discrimination should not be allowed if [the person providing the work was] seeking traditional employment. Why should the same not apply in all other situations where [that person] was offering [his/her] work on the basis of contracts for goods or services concluded with [them] as a person, or on the basis of contracts for goods or services concluded with [their] company, but promising [their] personal work? (para 81)

Finally, she highlights that exempting the personal provision of goods and services from the purview of the ‘Equality Framework’ Directive could create a loophole that would allow companies or individuals to bypass anti-discrimination laws by opting to purchase goods or services instead of employing a service provider (para 85). This would be contrary to the useful effect of that directive, she finds.

Both the Court and the AG come to the conclusion that the ability to enter into a contract for specific work may be an essential factor for someone like the applicant to effectively pursue their professional activities and that, thus, such ability may fall under the scope of ‘conditions for access’ to self-employment (present case para 50, AG opinion paras 80, 88).

Termination

The Court and AG proceed to examine whether Article 3 (1)(c) applying the protection conferred by the ‘Equality Framework’ Directive to “employment and working conditions, including dismissals” applies to the present case.

That provision does not explicitly mention ‘self-employment’ but the AG and the Court’s findings described above on Article 3 (1)(a) apply here as well (present case paras 53,54, AG opinion para 101): since the ‘Equality Framework’ Directive was adopted to remove all discriminatory obstacles, its terms must be construed broadly:

It follows that the protection conferred by [the directive] cannot depend on the formal categorisation of an employment relationship under national law or on the choice made at the time of the appointment of the person concerned between one type of contract and another (present case para 55).

While the Court recognises that the concept of ‘dismissal’ is usually applied to the termination of an employment contract it agrees with the AG that Article 3 (1)(c) also covers the unilateral termination of any activity covered by Article (1)(a) of that directive (present case paras 60-62, AG opinion para 102).

Exceptions on grounds of public security, public order, prevention of criminal offences and protection of the health and rights and freedoms of others

Article 2 (5) of the ‘Equality Framework’ Directive lays down exceptions to the application of the directive which “must be interpreted strictly” (present case para 71, AG opinion para 105): where national measures are necessary for public security, for the maintenance of public order and the prevention of criminal offences, for the protection of health and for the protection of the rights and freedoms of others.

Furthermore, while the Directive mandates that discrimination on the grounds of sexual orientation in employment is prohibited, Poland's transposition of the directive only extends this prohibition to sex, race, ethnic origin, and nationality with respect to freedom of contract.

The AG and the Court proceed to balance the rights enshrined in the ‘Equality Framework’ Directive with the freedom of contract granted by the Polish domestic law and Article 16 of the Charter of Fundamental Rights of the European Union (‘Freedom to conduct a business’). An analysis of the aims of said Polish law (protection against discrimination) coupled with the fact that freedom of contract is not an absolute right leads the Court and AG to the conclusion that freedom of contract has not been disproportionately limited by the ‘Equality Framework’ Directive.

Conclusions

This landmark ruling will likely have a significant impact on EU equality and labour law alike.

Firstly, all grounds of discrimination currently recognised by secondary EU law will benefit from this ruling. Indeed, the scope of application of all EU Equality Directives that have similar wording to that of the ‘Equality Framework’ Directive will be impacted (Countouris, Freedland and Stefano) by the Court’s definitions of ‘conditions for access to employment, to self-employment or to occupation’, ‘self-employment’ and ‘occupational activity’.

With regards to LGBTIQ+ rights specifically, while the ruling will have a clear-cut impact on bisexual and homosexual individuals, it is not clear what its impact could be as regards other members of the LGBTIQ+ community. Indeed, existing EU gender equality legal framework anchors transgender and intersex equality within the binary concept of sex, likely excluding non-binary persons (European Commission, Directorate-General for Justice and Consumers, Brink, M., Timmer, A., Dunne, P., et al., pp. 53-54). Furthermore, existing provisions on gender identity have covered only individuals who intend to undergo or have undergone gender reassignment surgery (European Union Agency for Fundamental Rights, p.46).

It also remains to be seen whether categories of individuals that are protected by Article 21 of the Charter of Fundamental Rights of the European Union but not by the scope of the directive (discriminations based on social origin, genetic features, language, political or any other opinion, property, birth) can be considered to be afforded the same protection.

Secondly, with regards to labour law, the focus on the person doing the work and the ‘personal’ work they provide instead of the contract the employer has negotiated with them will hopefully be further analysed by the AG and the Court in future rulings.

Furthermore, as noted by the Court, the protection afforded by the directive “extends to the professional relationship concerned in its entirety”. While the present case concerned the conditions for pursuing and terminating an activity, the author believes it safe to assume it affords protection to workers also while performing their ‘occupational activities’ under the scope of the directive. For instance, other sections of Article 3 (1), may afford protection against discriminatory retaliation with regards to promotions, vocational guidance and training and pay.

No more fluttering/fleeting line between discrimination in employment and the right to freedom of expression: the CJEU judgment in NH v Associazione Avvocatura per i diritti LGBTI — Rete Lenford

Chiara De Capitani, Ph.D. Researcher in International Studies at the University of Naples "L'Orientale"

Introduction

Case C‑507/18 NH v Associazione Avvocatura per i diritti LGBTI — Rete Lenford (the present case), can be best summarized through the aviary metaphors used by Advocate General Eleanor Sharpston in her opinion (AG’s Opinion): the ruling balances freedom of expression with the “volatility” of discriminatory statements and analyses which roles members of associations can play in the fight against discrimination, whether they have beaks, wings and feathers or not (see more infra).

This Court of Justice of the European Union (CJEU) case raises many interesting issues and builds on the previous rulings of 2008 – C-54/07 Centrum voor Gelijkheid van Kansen en voor Racismebestrijding v Firma Feryn NV (Feryn) – and 2013 – C-81/12 Asociaţia Accept v Consiliul Naţional pentru Combaterea Discriminării (Asociaţia Accept) rulings.

In all three cases, an employer (Feryn) or a person perceived as being capable of exerting a decisive influence on the recruitment policy of an employer (Asociatia Accept, present case) publicly stated that they would not hire a person from a protected category (ethnic minorities for Feryn, LGBTI* individuals for Asociaţia Accept and present case).

All three cases were brought forward by associations, with no identifiable complainant and, in the case of Asociatia Accept and the present case, the statements were released to the public while the employer had no ongoing or planned recruitment procedures.

Therefore, the Court tries to answer the following questions:

Can discriminatory statements fall under the scope of the directive when no recruitment procedures are ongoing? If so, following which criteria?

How can national Courts assess the balance between the right to freedom of expression and combating discrimination in employment and occupation?

Where no identifiable complainant can be found, can an association bring legal proceedings and ask to obtain pecuniary damages in circumstances that are capable of constituting discrimination?

Facts of the case

During an interview in a radio programme a lawyer (NH) stated that he would never hire a homosexual person to work in his law firm nor wish to use the services of such persons. At the time when he made those remarks, there was no current recruitment procedure open at NH’s law firm.

Having considered that NH had made remarks constituting discrimination on the ground of sexual orientation, the Associazione Avvocatura per i diritti LGBTI — Rete Lenford (the Associazione), brought proceedings against him, asking that he be ordered – among other sanctions – to pay damages to the Associazione for non-material loss.

The action was successful at first instance and upheld on appeal, therefore NH appealed once more in cassation before the Supreme Court of Cassation, Italy (the referring court).

The referring court expresses doubts as to whether the Associazione has standing to bring proceedings against NH and ask for pecuniary damages, since the case has no identifiable complainant. The referring court also asks whether NH’s statements – in light in particular of the absence of an open recruitment position – fall within the scope of Directive 2000/78 (the Anti-Discrimination Employment Directive) on the basis that they concern ‘access to employment’, or whether they should be regarded as mere expressions of opinion.

Analysis

Past, present, and possible future discrimination

NH believes that since there was no current or planned recruitment procedure at his law firm at the time he was interviewed, his statements should not be considered to have been made in a professional context and thus would fall outside of the scope of the Anti-Discrimination Employment Directive.

However, Article 3 (1) (a) of that Directive aims at protecting all persons, as regards both the public and private sectors: “in relation to conditions for access to employment”. Since the Directive is “a specific expression, in the areas that it covers, of the general prohibition of discrimination” laid down in Article 21 of the Charter of Fundamental Rights of the European Union (the Charter) and because of its objectives and the nature of the rights it seeks to safeguard, the Court notes that its scope, defined in Article 3, “cannot be defined restrictively”.

The Court has already found in the rulings Feryn and Asociaţia Accept that discriminatory statements can hinder the “access to employment” of a protected category. Indeed, as stated by Advocate General Maduro and recalled by both the Court and AG Sharpston in the present case: “in any recruitment process, the greatest ‘selection’ takes place between those who apply, and those who do not. Nobody can reasonably be expected to apply for a position if they know in advance that, because of their racial or ethnic origin, they stand no chance of being hired. Therefore, a public statement from an employer that persons of a certain racial or ethnic origin need not apply has an effect that is anything but hypothetical”.

Furthermore, discriminatory statements have a lasting effect in time.

In the Feryn ruling, the Court, interpreting Article 8 of Directive 2000/43 (The Race Equality Directive) - identical to Article 10 of the Anti-Discrimination Employment Directive - established that past statements create “presumption of a discriminatory recruitment policy” which the employer can rebut in Court.

The Court in the present judgment seems to confirm the duration in time, in the past, present but also possibly in the future, as it recognizes – in its answer to the first question – that statements made “outwith any current or planned procedure” can amount to discrimination as long they fulfil a number of non-hypothetical criteria (para 58), which we’ll examine now.

The interpretation of ‘access to employment’

Both the AG and the Court proceed by highlighting a list of criteria National Courts have to follow to establish when discriminatory statements present a sufficient link with ‘access to employment’ to fall under the scope of the Anti-Discrimination Employment Directive.

First, the status of the person making the statements and the capacity in which they made them, which must establish either that they are a potential employer or are, in law or in fact, capable of exerting a decisive influence on the recruitment policy or a recruitment decision of a potential employer, or, at the very least, may be perceived by the public or the social groups concerned as being capable of exerting such influence, even if they do not have the legal capacity to define the recruitment policy of the employer concerned or to bind or represent that employer in recruitment matters.

The latter point is particularly interesting given that both in Asociaţia Accept and in the present case both authors of the discriminatory statements, during their respective interviews, claimed and acted as if they played an important role and a very influential part in the recruitment process of their company (para 35, Asociaţia Accept; para 20, AG opinion), and were perceived as such by the public. However, ironically, their exact status within the company was either unclear (present case, para 43) or was becoming less important than what they were telling and presenting the public (Asociaţia Accept, para 32).

Furthermore, National Courts, following the Asociaţia Accept ruling, should consider as part of their assessment of this criteria whether the actual employer did or did not clearly distance itself from the statements concerned (para 41, present case).

The second criterion to consider is the nature and content of the statements concerned. They must relate to the conditions for access to employment or to occupation with the employer concerned and establish the employer’s intention to discriminate on the basis of one of the criteria laid down by the Anti-Discrimination Employment Directive. This has clearly been the case for all three rulings where three individuals publicly stated they would not hire ethnic minorities (Feryn) or LGBTI individuals (Asociaţia Accept, present case) within “their” company.

It’s interesting to note that in her opinion, the AG adds to these criteria that the statements must also “be of such a nature as to dissuade persons belonging to the protected group from applying if and when a vacancy with that potential employer becomes available” (para 55 of opinion). The Court does not add this element to the list of criteria but will consider it when assessing the interference of the Directive’s application with the right to freedom of speech (see infra).

Finally, the third criteria National Courts have to consider is the context in which the statements at issue were made “—in particular, their public or private character, or the fact that they were broadcast to the public, whether via traditional media or social networks — must be taken into consideration”.

Unfortunately, neither the Court nor the AG elaborate on why they believe this distinction between private and public statements is of such relevance. We can assume, given the AG’s beautiful paragraph at the beginning of her opinion, that public statements “have wings” and “travel fast and spread quickly”, meaning they are “disseminated rapidly and have consequences”. The likelihood that NH’s statements on the radio reached, hurt and affected many members of the LGBTI* community because of their publicity and fluttering in newspapers and social media is without question. However, as the AG herself notes “one can easily imagine the chilling effect of homophobic ‘jokes’ made by a potential employer in the presence of LGBTI applicants” (in a private setting, presumably). Since Feryn, Asociaţia Accept and the present case all concern public statements, hopefully the Court will elaborate on this aspect of “statements” made in a private setting at another time.

The interference with freedom of expression

The AG notes in her opinion that the referring court “expresses doubts as to whether NH’s statements fall within the scope of (the Anti-Discrimination Employment Directive) on the basis that they concern ‘employment’, or whether they should be regarded as mere expressions of opinion, unrelated to any discriminatory recruitment procedure” (para 25). Furthermore, she notes (para 37) that at the hearing the Italian Government emphasised that the statements were not made during a “serious broadcast with the participation of employers and news journalists” but during an “irony-filled programme of political satire”.

Both the AG and the Court proceed thus to examine why the above interpretation of the Anti-Discrimination Employment Directive is not affected by the possible limitation to the exercise of freedom of expression using the parameters provided by Article 52 (1) of the Charter which, as Professor Peers puts it, “deals with the arrangements for the limitation of rights”. Unsurprisingly, he notes: “the greatest volume of [EU] case law concerning the grounds for interference with rights relates to Article 10 ECHR on Freedom of expression”.

Indeed, the present case has sparked controversy also among some academics (Miller, Tanzarella) which believe the AG and the Court have failed to truly assess the proportionality between protection against discrimination and its interference with the right to freedom of expression - I do not believe this to be the case, especially in light on the “necessity requirement” that I will analyse further on.

Let’s flutter back to the ruling:

Professor Peers’ comments on the scope and interpretation of Article 52(1) of the Charter provide useful guidance to assess the judgment of the Court.

Article 52(1) of the Charter contains three different elements:

-          a procedural rule (limitations on rights ‘must be provided for by law’);

-          a rule on the justifications for limiting rights (‘objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others’), and

-          several interlinked rules on the balancing test to be applied as between rights and limitations (the obligation to ‘respect the essence of’ the rights; the ‘principle of proportionality’; and the requirement of necessity).

The Court and AG go through all the above-cited elements in an orderly fashion.

The limitations to the exercise of the freedom of expression that may flow from the Anti-Discrimination Employment Directive are indeed provided for by law, since they result directly from that directive.

They respect the essence of the freedom of expression, since they are applied only for the purpose of attaining the objectives of said Directive, namely to safeguard the principle of equal treatment in employment and occupation and the attainment of a high level of employment and social protection; Further to this argument, the Court notes in paragraphs 37 and 38 of the ruling “recital 11 of the directive states that discrimination based inter alia on sexual orientation may undermine the achievement of the objectives of the FEU Treaty, in particular the attainment of a high level of employment and social protection, raising the standard of living and the quality of life, economic and social cohesion and solidarity, and the free movement of persons. (The) Directive is thus a specific expression, within the field that it covers, of the general prohibition of discrimination laid down in Article 21 of the Charter”;

They respect the principle of proportionality in so far as the prohibited grounds of discrimination and the material and personal scope are defined in the directive, and the interference with the exercise of freedom of expression does not go beyond what is necessary to attain the objectives of the directive, in that only statements that constitute discrimination in employment and occupation are prohibited.

Finally, the Court elaborates with more detail the last requirement, the “necessity test”: the limitations to the exercise of freedom of expression arising from Anti-Discrimination Employment Directive are necessary to guarantee the rights in matters of employment and occupation of persons who belong to a protected group. The AG opinion underlines (in para 70) the following section of Article 10(2) of the European Convention on Human Rights (ECHR) which seems to be perfectly complementary with Art 52(1) of the Charter: “the exercise of (freedom of expression) carries with it duties and responsibilities, may be subject to such formalities, conditions, restrictions or penalties as are prescribed by law and are necessary in a democratic society (…) for the protection of (…) rights of others”.

Analysing the “necessity test” from another perspective, the Court adds that considering statements as falling outside the scope of that directive solely because they were made “outwith a recruitment procedure, in particular in the context of an audiovisual entertainment programme, or because they allegedly constitute the expression of a personal opinion” could make the “very essence of the protection afforded by that directive in matters of employment and occupation (…) become illusory” (para 54 of the judgment).

Finally, the Court aligns itself with the AG opinion that “in any recruitment process, the principal selection takes place between those who apply, and those who do not” and mentions paragraph 57 of her opinion, where she quotes a section of AG Maduro’s opinion in Feryn: “(A) public statement from an employer that persons of a certain racial or ethnic origin need not apply has an effect that is anything but hypothetical. To ignore that as an act of discrimination would be to ignore the social reality that such statements are bound to have a humiliating and demoralising impact on persons of that origin who want to participate in the labour market and, in particular, on those who would have been interested in working for the employer at issue”.

Associations with standing to bring legal proceedings

The Court moves on to the first question: whether the Anti-Discrimination Employment Directive must be interpreted as precluding national legislation under which an association of lawyers whose objective is the judicial protection of persons having in particular a certain sexual orientation and the promotion of the culture and respect for the rights of that category of persons, automatically, on account of that objective and irrespective of whether it is a for-profit association, has standing to bring legal proceedings for the enforcement of obligations under that directive and, where appropriate, to obtain damages, in circumstances that are capable of constituting discrimination, within the meaning of that directive, against that category of persons and it is not possible to identify an injured party.

The Court analyses step by step the various facets of this complex question.

According to Article 9(2) of the Anti-Discrimination Employment Directive, Member States are to ensure that associations, organisations or other legal entities which have a legitimate interest in ensuring that the provisions of the directive are complied with, may engage, either on behalf or in support of a complainant, with his or her approval, in any judicial and/or administrative procedure provided for the enforcement of obligations under the directive.

Since no injured party can be identified in the present case, Article 9(2) of the Directive does not require an association such as that at issue in the main proceedings to be given standing in the Member States to bring judicial proceedings. Nevertheless, Article 8(1) of the Anti-Discrimination Employment Directive provides that Member States may introduce or maintain provisions which are more favourable to the protection of the principle of equal treatment than those laid down in that directive. This is the case for Italy where article 5 of its Legislative Decree n° 216/2003 provides that “trade unions, associations and organisations (…) shall also have standing in cases of collective discrimination where it is not automatically and immediately possible to identify individuals affected by the discrimination”.

Therefore, as was the case with Asociaţia Accept, the Court recalls that Article 9(2) of the Anti-Discrimination Employment Directive in no way precludes a Member State from laying down, in its national law, the right of associations with a legitimate interest in ensuring compliance with that directive to bring legal or administrative proceedings to enforce the obligations resulting therefrom without acting in the name of a specific complainant or in the absence of an identifiable complainant.

In those cases, it is for that Member State to decide under which conditions an association such as that at issue in the main proceedings may bring legal proceedings and for a sanction to be imposed in respect of such discrimination.

With regards to sanctions, the Court, quoting Asociaţia Accept, recalls that sanctions are required, in accordance with Article 17 of the Anti-Discrimination Employment Directive, to be effective, proportionate and dissuasive, regardless of whether there is any identifiable injured party. As noted by Djelassi and Mertens, sanctions can therefore, include the payment of pecuniary damages also in the present case where there is no identifiable complainant and no ongoing recruitment procedure.

Similarly, the Court leaves Member State to determine whether the for-profit or non-profit status of the association is to have a bearing on the assessment of its standing to bring such proceedings. The AG provides further insight on this issue: mentioning the written observations of the Greek Government, she analyses the possible risk that a profit-making association abusing the right to bring proceedings in order to enhance its profits, which, according to the Greek Government, would jeopardise the attainment of the objectives of the directive. First, she notes that given the uncertainty inherent in litigation a “trigger-happy” approach to launching actions would itself be “a risky strategy for a commercially minded association to adopt”. Secondly, it is the duty of the national court to verify if necessary that the Associazione is complying with its stated objectives to protect the interests of the persons in question and with its statutes as regards its status.

Although not repeated by the Court, another aspect of the AG’s opinion in this issue is worth mentioning: apparently NH had argued that the Associazione could not be considered to have a legitimate interest to enforce the rights and obligations deriving from Directive since its members were lawyers and trainee lawyers and supposedly they were not all LGBTI* persons. The AG Opinion finds this argument irrelevant and notes that “one does not require, of a public interest association dedicated to protecting wild birds and their habitats, that all its members should have wings, beaks and feathers”. She underlines that “there are many excellent advocates within the LGBTI community, who can and do speak eloquently in defence of LGBTI rights. That does not mean that others who are not part of that community – including lawyers and trainee lawyers motivated simply by altruism and a sense of justice – cannot join such an association and participate in its work without putting at risk its standing to bring actions”.

Conclusions

The present case fills a series of remaining gaps and completes the trilogy of rulings (Feryn, Asociaţia Accept, present case) on discriminatory statements made in a public setting against hiring employees from protected categories.

There are many more aspects that hopefully the Court will clarify in the future: what about statements made in a private setting? What about categories of individuals that are protected by Article 21 of the Charter but not by the scope of the Directive (discriminations based on social origin, genetic features, language, political or any other opinion, property, birth)? The abbreviation LGBTI is often used in the ruling, yet could the directive be considered to apply to members of that community other than homosexual and bisexual individuals?

Nevertheless, this case will likely have an important impact in the daily lives of LGBTI* individuals, whether they are thinking of applying for a job or currently working with a discriminating employer or persons with/perceived to have an influential role within the company.

Furthermore, as noted by Djelassi and Mertens, the implications of this case cover all groups of persons protected by the anti-discrimination directives.

This case is, in other words, pretty fly for a discrimination guide.

Barnard & Peers: chapter 20

Photo image: Wikicommons media – by Sergio D’Afflitto

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