Discriminating against families: Italian family benefits before the ECJ

 

 

Virginia Passalacqua, post-doctoral researcher in EU law, Utrecht University

 

In Italy, if you are a multimillionaire and you just had a baby, the State gives you 960 euros. However, if you are, say, the non-EU domestic employee of such a millionaire and you also just had a baby, the State gives you zero.

How is this possible? Thanks to Italian legislation that for 20 years has discriminated systematically against foreign families. No wonder, these families are also poorer compared to Italian ones: 25% of them were in absolute poverty in 2020, against 6% of Italian ones.

In July 2020, the issue of discriminatory criteria for access to family benefits arrived before the ECJ, thanks to a reference by the Italian Constitutional Court (ICC), currently pending (O.D. and others, C-350/20).

This is the fourth time that the ECJ is asked to assess Italian discriminatory criteria to access family benefits (after Martinez Silva, VR, and WS). But this time, the ECJ is called to interpret a new legal parameter: Art. 34.2 of the Charter of Fundamental Rights of the EU (the Charter). Can this be a game-changer?

The relevance of Art. 34.2 of the Charter has been questioned by commentators: admittedly, secondary norms are sufficient to declare the Italian law incompatible with EU law. Yet, it is argued that the ECJ should not miss this opportunity to clarify that migrants’ equal access to benefits is a fundamental right in the EU, providing guidance both to the Italian top Court and to the lawmaker.

 

The dispute before the ICC and the preliminary question

 

The facts of the case are rather simple. O.D. and seven other TCNs applied for family benefits, either assegno di maternità or bonus bebè, alias maternity and childbirth allowance.

The maternity allowance exists since 2001 and is granted to low-income women that do not receive a job-related maternity allowance. Instead, the childbirth allowance was introduced in 2014 to support families with a newborn. This was originally granted only to low-income families, but a 2019 amendment made all families eligible; still, the amount of the allowance varies according to their income (from 960 to 1920 euros p/y).

The Italian National Institute for Social Security (INPS) refused to grant O.D. and others the maternity and childbirth allowances because only Italian nationals, EU citizens, and TCN long-term residents are eligible under Italian law. Instead, the applicants are single permit holders: legally residing TCN workers whose status is regulated by the Single Permit Directive 2011/98/EU.

O.D and others challenged such refusal on the grounds that it entailed discrimination and was contrary to EU law. Indeed, Art. 12 of the Single Permit Directive imposes to Member States to grant single-permit holders equal treatment with nationals in several areas, including “branches of social security, as defined in Regulation (EC) No 883/2004”. They argued that the two allowances must be considered as social security and that they are equally entitled to them.

The applicants, supported by ASGI - a pro-migrant association, won all the proceedings against INPS before first and second-instance courts, until they reached the Italian Supreme Court. This decided to refer their cases to the ICC for a constitutionality assessment, which, in turn, decided to make a preliminary reference to the ECJ, under the consideration that this is an area “marked by the growing influence of EU law”.

The preliminary reference asks whether the childbirth and maternity allowances can be considered as branches of social security under Regulation 883/2004 so that they would fall in the scope of application of Art.12 Directive 2011/98 and Art. 34.2 of the Charter, which grants equal treatment to any legally resident person in matters of social security and social advantage.

I will tackle these issues in order.

 

Are the maternity and childbirth allowances to be considered as social security under Regulation 883/2004?

 

Arguably, EU law and case law leave little space for interpretation on this question. The ECJ has consistently held that to understand whether a benefit falls within the scope of Regulation 883/2004 we need to look at its “constituent elements”, i.e. “its purpose and the conditions for its grant, and not on whether it is classified as a social security benefit by national legislation” (UB C-447/18, at 22).

First, the benefit’s purpose must be related to one of the risks listed in Art. 3 of Regulation 883/2004, among which appear “maternity and equivalent paternity benefits” and “family benefits”, defined as “all benefits in kind or in cash intended to meet family expenses” (Art. 1).

Second, the benefit must be granted automatically on the basis of objective criteria, without any individual or discretionary evaluation of personal needs (Martinez Silva, at 22).

Both maternity and childbirth allowances are granted on the basis of objective criteria (i.e. income and the birth of a new child) and give economic support to families. They perfectly match the ECJ definition of social security, and this is why all first and second-instance Italian courts upheld the applicants’ view and granted them equal access to the allowances as required by Art. 12 of the Single Permit Directive.

INPS and the Italian government, however, advanced an exception in respect to the childbirth allowance. They argued that its goal is to incentivizing birthrate, rather than meeting family expenses; this would be confirmed by the fact that (from 2019) the childbirth allowance is a universal benefit, granted to all families and not only to low-income ones.

But this point too had already been addressed by the ECJ, in the case law on free movement of workers. In Reina, the Court assessed whether a German measure (“childbirth loan”) could be legitimately reserved to German nationals on the grounds that it was aimed “to make up the relative deficit in births among the German population in relation to the foreign population”.

Unsurprisingly, this chauvinistic argument did not convince the ECJ. The Court stated that the sole fact that a social measure pursues a demographic aim is not enough to exclude it from the scope of application of EU law and that social security and advantages must be granted equally to EU migrants (Reina at par 15; Commission v. Greece, C-185/96, at 34). Ironically enough, in the case of Reina the discriminated family was of Italian nationality.

 

Art. 34.2 of the Charter: a hollow hope or an added value?

 

As mentioned, the Italian Constitutional Court’s decision to invoke Art. 34.2 of the Charter was met with skepticism by commentators, who deemed it superfluous and of questionable relevance (Giubboni, 2021). This is because, as previously shown, secondary law is sufficient to declare unlawful the exclusion of single permit holders from the beneficiaries of the two allowances. So, does the Charter lack any added value?

Upon a closer look, the answer is no. Art. 34.2 of the Charter states:

Everyone residing and moving legally within the European Union is entitled to social security benefits and social advantages in accordance with Union law and national laws and practices.

This provision does present at least three important advantages. First, it refers to both social security and social advantages, while Art. 12 of the Single Permit Directive refers only to social security. Second, it grants equal treatment to all migrants residing legally, without making distinctions based on status. Third, it confers to the migrants’ right to equality a fundamental status in the EU.

The concreteness of the first two advantages is tempered by their limited scope of application (the Charter applies to Member States only when they implement EU law) and by their being subject to limitations under EU and national law. Instead, the third advantage, abstract as it is, is more significant.

In a context where even the European Social Charter grants migrants only limited access to social benefits (see Art. 19), the broad scope of Art. 34.2 sounds revolutionary. This confirms that, despite the (often valid) criticisms against the restrictive EU migration policy, fighting discrimination against migrants is a hallmark of the EU.

Indeed, the ECJ has fought discrimination against (EU and TCN) migrants for decades, pioneering the idea that equality is a necessary precondition for inclusion and integration (Kamberaj, at 90).

The case of O.D. and Others offers the ECJ the opportunity to clarify the fundamental nature of the principle of equal access to benefits for TCN migrants, which so far has been relegated to an ‘ordinary legislative function’ (Muir, 2020, at 121). This would pursue not only a rhetorical function, but it would provide guidance amidst a very confusing “polycentric” adjudication practice (Kilpatrick, 2014).

Especially in Italy, national courts have suffered from a lack of uniform interpretation when adjudicating migrants’ equal treatment (also because of the ‘dual preliminarity’ controversy, Lazzerini 2020). And the ICC denounced this situation in its reference: “The sheer number of pending disputes is testament to the serious uncertainty concerning the meaning to be ascribed to EU law.”

Moreover, Italian norms in many parts contain discriminatory provisions against migrants, and a current proposal to reform family benefits features again discriminatory selection criteria, despite a pending Commission infringement on the matter.

The ECJ evaded its obligation to interpret Art. 34.2 once (in the case of UB, C-447/18). This time, it should state clearly that migrants’ equal access to benefits is a fundamental principle of the Union, sending a powerful message to the Italian Constitutional Court and the Italian lawmaker.

 

Conclusion

 

The preliminary reference in the case of O.D. and Others speaks of an alarming phenomenon. In Italy, TCN families in need have been denied equal access to social benefits for decades, and the childbirth allowance reached a low point in this respect: it is universally granted to all but to TCN migrants.

Against this background, the preliminary reference in the case of O.D. and Others offers an important opportunity. The ECJ has a long tradition of fighting discrimination and constitutionalizing equality. In the case of O.D. and Others, its ruling can acquire erga omnes effect thanks to the follow-up ICC judgment.

The EU Court should not miss this opportunity for stating out and loud that equality is a fundamental principle of the EU also when it comes to TCN migrants, which cannot be disposed of by the erratic will of the government of the day.

 

Barnard & Peers: chapter 26

JHA4: chapter I:6

Photo Credit: Guiseppe Milo, via Wikimedia Commons

Analysis 3 of the Brexit deal: Human Rights and EU/UK Trade and Cooperation Agreement

Professor Steve Peers, University of Essex

Introduction

While the UK has left the European Union, its participation in the European Convention on Human Rights (ECHR) lives on. Yet although ECHR participation is separate from EU membership, there are links between human rights and EU law. Although those particular links have now ended for the UK, there is now a different set of links between human rights and the newly applicable Trade and Cooperation Agreement (TCA) between the EU and the UK.

This blog post examines those links, looking in turn at: (a) human rights conditionality in the TCA as a whole; (b) human rights conditionality in the criminal law part of the TCA; (c) the protection of social rights in the TCA; (d) data protection issues in the TCA; (e) the role of the courts on the EU side. There’s also a possibility for disapplying the services rules to a particular company covered by sanctions, including sanctions on human rights grounds (Article SERVIN.1.3), but I don’t look further at that in this blog post (although note that unlike some other issues discussed in this blog post, the normal TCA dispute settlement rules would apply to any disputes about such sanctions). (Update April 28, 2021: this blog post has been updated to refer to the final numbering of TCA Articles. It has retained the old numbering too, for the convenience of anyone used to using it).

This blog post is the third in the series of analyses of the TCA – following on from my overview of the TCA, and Professor Tamara Hervey’s analysis of the social security provisions. (Update: later blog posts cover dispute settlement and environment and climate change).

As a reminder, the TCA is a separate treaty from the withdrawal agreement, which continues to apply between the UK and the EU. The rules on termination or suspension of the TCA are quite different from those applicable to the withdrawal agreement (which I discussed here) – and not only as regards human rights issues.

Summary of this blog post

The general rules on human rights conditionality of the whole TCA allow it to be terminated or suspended (perhaps in part) on human rights grounds, but this is not automatic and is subject to a fairly high threshold.  For criminal law, there is a special form of fast track termination (if the UK or a Member State denounces the ECHR or some of its Protocols, including on the death penalty) or suspension. Again, this is not automatic. For social/labour rights, there are general rules which may lead to a panel report, but not retaliation, as well as a non-regression obligation, which can result in retaliation, most likely in the area of trade. For data protection law, there’s a short transition period where in principle the UK is covered by data protection law, following which much will depend on whether it has obtained a valid adequacy decision from the EU. Finally, the role of the courts in human rights disputes may be important too – most obviously as regards data protection adequacy decisions, where prior case law sets out the possibility to argue that a non-EU country does not meet the standards which it needs to meet to get one, but potentially in some other EU/UK human rights disputes too.

 

Human rights conditionality in the TCA as a whole

The starting point for human rights conditionality of the TCA as a whole is the ‘common provisions’ of the TCA (in Title II of Part Six). This begins with a dedicated Article on human rights:

Article 763 (previously COMPROV.4): Democracy, rule of law and human rights

1. The Parties shall continue to uphold the shared values and principles of democracy, the rule of law, and respect for human rights, which underpin their domestic and international policies. In that regard, the Parties reaffirm their respect for the Universal Declaration of Human Rights and the international human rights treaties to which they are parties.

The ECHR is not mentioned specifically, although it is, of course, one of the international human rights treaties which the UK is party to. There are subsequent Articles on climate change, weapons of mass destruction (WMDs), serious crime, counter-terrorism, data protection, and global cooperation. However, only the provisions on human rights, climate change and WMDs are then described by Article 771 (previously COMPROV.12) as constituting ‘essential elements of the partnership established by this Agreement and any supplementing agreement’.

The consequence of defining an issue as an ‘essential element’ of the TCA is that it is then subject to a special procedure in Title III of Part Six, potentially leading to fast-track termination or suspension of the entire agreement, partly or wholly:

Article 772 (previously INST.35): Fulfilment of obligations described as essential elements

1. If either Party considers that there has been a serious and substantial failure by the other Party to fulfil any of the obligations that are described as essential elements in Article 771 (previously COMPROV.12 [Essential elements]), it may decide to terminate or suspend the operation of this Agreement or any supplementing agreement in whole or in part.

2. Before doing so, the Party invoking the application of this Article shall request that the Partnership Council meet immediately with a view to seeking a timely and mutually agreeable solution. If no mutually agreeable solution is found within 30 days from the date of the request to the Partnership Council, the Party may take the measures referred to in paragraph 1.

3. The measures referred to in paragraph 1 shall be in full respect of international law and shall be proportionate. Priority shall be given to the measures which least disturb the functioning of this Agreement and of any supplementing agreements.

4. The Parties consider that, for a situation to constitute a serious and substantial failure to fulfil any of the obligations described as essential elements in Article 771 (previously COMPROV.12 [Essential Elements]), its gravity and nature would have to be of an exceptional sort that threatens peace and security or that has international repercussions. For greater certainty, an act or omission which materially defeats the object and purpose of the Paris Agreement shall always be considered as a serious and substantial failure for the purposes of this Article.

Note, however, that: a) it must be a ‘serious and substantial failure’ to fulfil obligations described as an ‘essential element’, further defined as a failure whose ‘gravity and nature would have to be of an exceptional sort that threatens peace and security or that has international repercussions’; b) denouncing the ECHR, or any other human rights treaty, is not explicitly mentioned in this context; c) suspension or termination is not automatic (a party ‘may decide’); d) there are procedural requirements, entailing at least a 30-day delay in any measures being taken while discussions are held; and e) there is an obligation of proportionality – which may mean that the complaining party stops short of terminating the entire agreement.

Moreover, either party may terminate the entire treaty anyway with twelve months’ notice, without having to give any grounds or go through any discussion process (Article 779, previously FINPROV.8).  So the ‘essential elements’ clause should be seen in that context – it’s a fast-track to termination (or suspension), but then termination would be possible anyway after a relatively short period if the threshold for fast track termination is not met. It should also be noted that similar clauses exist in other EU treaties with non-EU countries – and the EU is notably reluctant to trigger them. 

A final point: the provisions of Title II of Part Six are excluded from the dispute settlement process (see Article 735(2)(h), previously INST.10(2)(h)). This means that the substantive definitions of ‘essential elements’ of the TCA cannot be subject to dispute settlement. However, there is no exclusion from dispute settlement for Title III of Part Six – ie the provision on the process of deciding on suspension or termination of the treaty. 

 

Human rights conditionality in the criminal law part of the TCA

Part Three of the TCA, which comprises the rules on law enforcement cooperation, contains its own variation on an ‘essential elements’ clause (Article 524, previously LAW.GEN.3):

1. The cooperation provided for in this Part is based on the Parties’ and Member States’ longstanding respect for democracy, the rule of law and the protection of fundamental rights and freedoms of individuals, including as set out in the Universal Declaration of Human Rights and in the European Convention on Human Rights, and on the importance of giving effect to the rights and freedoms in that Convention domestically.

2. Nothing in this Part modifies the obligation to respect fundamental rights and legal principles as reflected, in particular, in the European Convention on Human Rights and, in the case of the Union and its Member States, in the Charter of Fundamental Rights of the European Union.

This Article tells us that Part Three of the TCA is ‘based on…respect for’ human rights, including the ECHR, as well as the ‘importance’ of giving effect to it domestically. Unlike the general provisions in the TCA, here we have an explicit reference to the ECHR.

However, these provisions, by themselves, do nothing. To assess the practical importance of human rights protection to the criminal law Part of the treaty we have to look at Part Three’s own termination clause (Article 692, previously LAW.OTHER.136):

1. Without prejudice to Article 779 (previously FINPROV.8 [Termination]), each Party may at any moment terminate this Part by written notification through diplomatic channels. In that event, this Part shall cease to be in force on the first day of the ninth month following the date of notification. 

2. However, if this Part is terminated on account of the United Kingdom or a Member State having denounced the European Convention on Human Rights or Protocols 1, 6 or 13 thereto, this Part shall cease to be in force as of the date that such denunciation becomes effective or, if the notification of its termination is made after that date, on the fifteenth day following such notification.

3. If either Party gives notice of termination under this Article, the Specialised Committee on Law Enforcement and Judicial Cooperation shall meet to decide what measures are needed to ensure that any cooperation initiated under this Part is concluded in an appropriate manner. In any event, with regard to all personal data obtained through cooperation under this Part before it ceases to be in force, the Parties shall ensure that the level of protection under which the personal data were transferred is maintained after the termination takes effect.

As we can see, either side has a general power to terminate Part Three specifically (leaving in place the rest of the treaty) with nine months’ notice. This differs from the twelve months’ notice as regards the general power to terminate the entire treaty. As with the termination clause relating to the entire TCA, the power to terminate Part Three is not limited to any specific grounds. However, unlike the general TCA termination clause, the Part Three termination clause includes a requirement (in para 3) to discuss the process of wrapping up proceedings which are underway, as well as a safeguard for the protection of personal data which was already transferred. (Update, 28 April 2021: the EU institutions will adopt a statement declaring their intention to use this clause).

Furthermore, Part Three has its own specialist version of the whole TCA’s ‘essential elements’ clause, which similarly provides for a form of fast-track termination (para 2).  Here, the termination of Part Three ends the moment that denunciation of the ECHR or one of the three protocols referred to by the UK or an EU Member State becomes effective – or, if denunciation has already happened, fifteen days after the notice to terminate Part Three. (Note that two of these three protocols concern abolition of the death penalty).

As compared to the whole TCA’s ‘essential elements’ clause, the Part Three fast-track termination clause: that: a) is not subject to the ‘serious and substantial failure’ threshold (or any other threshold above and beyond denunciation of the ECHR or its listed protocols); b) termination is not automatic (a party ‘may’: para 1); c) there are no procedural requirements to discuss the issue, just the requirement to discuss wrapping up proceedings already underway (which, in this context, would likely be affected significantly by the denunciation of the ECHR or its protocols); d) there is no obligation of proportionality; and e) there is no reference in this context to amending or scrapping domestic law giving effect to the ECHR – although of course the general Part Three termination clause could still be invoked in that event.

This is not the end of the matter, though, because the criminal law part also includes its own clause on suspension, as distinct from termination. (You will recall that the ‘essential elements’ clause applying to the entire TCA, discussed above, could be used for termination or suspension, in whole or in part). This is Article 693 (previously LAW.OTHER.137), which provides as follows:

1. In the event of serious and systemic deficiencies within one Party as regards the protection of fundamental rights or the principle of the rule of law, the other Party may suspend this Part or Titles thereof, by written notification through diplomatic channels. Such notification shall specify the serious and systemic deficiencies on which the suspension is based.

5. The Titles concerned by the suspension shall provisionally cease to apply on the first day of the third month following the date of the notification referred to in paragraph 1 or 2, unless, no later than two weeks before the expiry of that period, as extended, as the case may be, in accordance with point (d) of paragraph 7, the Party which notified the suspension gives written notification to the other Party, through diplomatic channels, of its withdrawal of the first notification or of a reduction in scope of the suspension. In the latter case, only the Titles referred to in the second notification shall provisionally cease to apply.

6. If one Party notifies the suspension of one or several Titles of this Part pursuant to paragraph 1 or 2, the other Party may suspend all of the remaining Titles, by written notification through diplomatic channels, with three months’ notice.

7. Upon the notification of a suspension pursuant to paragraph 1 or 2, the Partnership Council shall immediately be seized of the matter. The Partnership Council shall explore possible ways of allowing the Party that notified the suspension to postpone its entry into effect, to reduce its scope or to withdraw it. To that end, upon a recommendation of the Specialised Committee on Law Enforcement and Judicial Cooperation, the Partnership Council may: (a) agree on joint interpretations of provisions of this Part; (b) recommend any appropriate action to the Parties; (c) adopt appropriate adaptations to this Part which are necessary to address the reasons underlying the suspension, with a maximum validity of 12 months; and (d) extend the period referred to in paragraph 5 by up to three months.

8. If either Party gives notification of suspension under this Article, the Specialised Committee on Law Enforcement and Judicial Cooperation shall meet to decide what measures are needed to ensure that any cooperation initiated under this Part and affected by the notification is concluded in an appropriate manner. In any event, with regard to all personal data obtained through cooperation under this Part before the Titles concerned by the suspension provisionally cease to apply, the Parties shall ensure that the level of protection under which the personal data were transferred is maintained after the suspension takes effect.

9. The suspended Titles shall be reinstated on the first day of the month following the day on which the Party having notified the suspension pursuant to paragraph 1 or 2 has given written notification to the other Party, through diplomatic channels, of its intention to reinstate the suspended Titles. The Party having notified the suspension pursuant to paragraph 1 or 2 shall do so immediately after the serious and systemic deficiencies on the part of the other Party on which the suspension was based have ceased to exist.

10. Upon the notification of the intention to reinstate the suspended Titles in accordance with paragraph 9, the remaining Titles suspended pursuant to paragraph 6 shall be reinstated at the same time as the Titles suspended pursuant to paragraph 1 or 2.

Paragraphs 2 to 4 concern data protection, and so are considered separately in a later part of this blog post. Note that: a) there is a threshold of ‘serious and systemic deficiencies’ – which is similar, but not identical, to the general TCA ‘essential elements’ clause; b) suspension is not automatic (a party ‘may’: para 1); c) there are procedural requirements to discuss the issue, which include a power to amend Part Three temporarily or delay the suspension process; d) there is again a requirement to discuss wrapping up proceedings already underway (which, in this context, would again likely be affected significantly by the concerns about human rights); e) there is no obligation of proportionality; f) there is again no explicit reference to amending or scrapping domestic law giving effect to the ECHR – although it is obviously possible that such a development could in practice trigger concerns about ‘serious and systemic deficiencies’; g) suspension takes about three months to take effect, so is slower than the general TCA ‘essential elements’ clause; h) if one party suspends some of Part Three, the other party can suspend the rest of it in return; and i) there is provision to end the suspension if the ‘serious and systemic deficiencies’ have ‘ceased to exist’.

As with the general ‘essential elements’ clause, Part Three has somewhat contradictory rules on dispute settlement, which apply in place of the main dispute settlement rules (or any other dispute settlement process: Article 697, previously LAW.DS.3). However, these special dispute settlement rules don’t apply to the suspension or termination clauses (Article 696, previously LAW.DS.2). On the other hand, the substantive human rights grounds in Part Three (Article 524, previously LAW.GEN.3) can be subject to dispute settlement. So while dispute settlement for the general ‘essential elements’ clause is confusing because the process can be subject to dispute settlement while the substantive clause cannot, the Part Three dispute settlement process is confusing for precisely the opposite reason: the substantive clause can be subject to dispute settlement, while the procedural clause cannot.

In any event, the application of the Part Three dispute settlement rules to the substantive human rights clauses gets us to essentially the same place in the end: in the event that the purely political Part Three dispute settlement process does not lead to a conclusion, one party can suspend some of Part Three in more or less the same way as it can under Article 693 (previously LAW.OTHER.137), discussed above (see Article 700, previously LAW.DS.6).

Finally, it should be noted that Part Three contains a number of specific provisions on human rights relating to specific forms of law enforcement cooperation. For fast-track extradition, Article  604(c) (previously LAW.SURR.84(c)) provides that ‘if there are substantial grounds for believing that there is a real risk to the protection of the fundamental rights of the requested person, the executing judicial authority may require, as appropriate, additional guarantees as to the treatment of the requested person after the person’s surrender before it decides whether to execute the arrest warrant’. Note that this is not explicitly a ground to refuse extradition as such, but rather a possibility to request additional guarantees.

For freezing and confiscation of assets, Article 671 (previously LAW.CONFISC.16) provides that ‘[w]here there are substantial grounds for believing that the execution of a freezing or confiscation order would entail a real risk for the protection of fundamental rights, the requested State shall, before it decides on the execution of the freezing or confiscation order, consult the requesting State and may require any necessary information to be provided.’ This is a similar approach to the extradition clause.

Finally, as regards Europol, Article 570 (previously LAW.EUROPOL.52(3)), concerning ‘restrictions on access to and further use of transferred personal data’, provides (among other things) that ‘Each Party shall ensure, as far as possible, that’ information transferred under the Title of the treaty relating to Europol ‘has not been obtained in violation of human rights. Nor shall such information be transferred if, to the extent reasonably foreseeable, it could be used to request, hand down or execute a death penalty or any form of cruel or inhuman treatment.’

None of these special human rights exceptions are excluded from the rules on dispute settlement regarding Part Three of the TCA.

 

Protection of social rights in the TCA

The protection of social rights has two facets. First of all, the ‘non-regression’ clause relating to existing employment law (Article 386, previously 6.1 of the ‘level playing field’ rules), which applies to ‘labour and social levels of protection’, defined as including ‘(a) fundamental rights at work’ (along with ‘(b) occupational health and safety standards; (c) fair working conditions and employment standards; (d) information and consultation rights at company level; or (e) restructuring of undertakings’). A footnote confirms that this does not apply to social security or pensions, and Article 386(2) clarifies that, on the EU side, ‘“labour and social levels of protection” means labour and social levels of protection that are applicable to and in, and are common to, all Member States’.

Article 387(2) (previously 6.2) sets out the non-regression rule which applies:

A Party shall not weaken or reduce, in a manner affecting trade or investment between the Parties, its labour and social levels of protection below the levels in place at the end of the transition period, including by failing to effectively enforce its law and standards.

To enforce this non-regression rule, there is a special rule on dispute settlement (Article 389, previously 6.4): in place of the general dispute settlement rules, Articles 408-410, previously 9.1 to 9.3, of the level playing field provisions apply. (More about them in a moment).

The second set of relevant rules is found in chapter 8 of the level playing field provisions, on ‘Other instruments for trade and sustainable development’. The term ‘sustainable development’ here does not only refer to environmental law, though. The point of this chapter, according to Article 397(2) (previously 8.1(2)) of the LPF provisions, is to ‘enhance the integration of sustainable development, notably its labour and environmental dimensions, in the Parties' trade and investment relationship and in this respect to complement the commitments of the Parties under Chapter 6 [Labour and social standards] and Chapter 7 [Environment and climate].’ To that end, the parties ‘recall’, among other things, ‘the International Labour Organization (ILO) Declaration on Social Justice for a Fair Globalization, adopted at Geneva on 10 June 2008 by the International Labour Conference at its 97th Session (the “2008 ILO Declaration on Social Justice for a Fair Globalization”)’ (Article 397(1), previously 8.1(1)).

The key provision on labour standards in this chapter (Article 399, previously 8.3) refers expressly to social rights:

1. The Parties affirm their commitment to promoting the development of international trade in a way that is conducive to decent work for all, as expressed in the 2008 ILO Declaration on Social Justice for a Fair Globalization.

2. In accordance with the ILO Constitution and the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up, adopted at Geneva on 18 June 1998 by the International Labour Conference at its 86th Session, each Party commits to respecting, promoting and effectively implementing the internationally recognised core labour standards, as defined in the fundamental ILO Conventions, which are: (a) freedom of association and the effective recognition of the right to collective bargaining; (b) the elimination of all forms of forced or compulsory labour; (c) the effective abolition of child labour; and (d) the elimination of discrimination in respect of employment and occupation.

3. Each Party shall make continued and sustained efforts to ratify the fundamental ILO Conventions if they have not yet done so.

4. The Parties shall exchange information, regularly and as appropriate, on the respective situations and progress of the Member States and of the United Kingdom with regard to the ratification of ILO Conventions or protocols classified as up-to-date by the ILO and of other relevant international instruments.

5. Each Party commits to implementing all the ILO Conventions that the United Kingdom and the Member States of the Union have respectively ratified and the different provisions of the European Social Charter that, as members of the Council of Europe, the Member States of the Union and the United Kingdom have respectively accepted.

6. Each Party shall continue to promote, through its laws and practices, the ILO Decent Work Agenda as set out in the 2008 ILO Declaration on Social Justice for a Fair Globalization (the “ILO Decent Work Agenda”) and in accordance with relevant ILO Conventions, and other international commitments, in particular with regard to: (a) decent working conditions for all, with regard to, inter alia, wages and earnings, working hours, maternity leave and other conditions of work; (b) health and safety at work, including the prevention of occupational injury or illness and compensation in cases of such injury or illness; and (c) non-discrimination in respect of working conditions, including for migrant workers.

7. Each Party shall protect and promote social dialogue on labour matters among workers and employers, and their respective organisations, and with relevant government authorities.

8. The Parties shall work together on trade-related aspects of labour policies and measures, including in multilateral fora, such as the ILO, as appropriate. Such cooperation may cover inter alia: (a) trade-related aspects of implementation of fundamental, priority and other up-to-date ILO Conventions; (b) trade-related aspects of the ILO Decent Work Agenda, including on the interlinkages between trade and full and productive employment, labour market adjustment, core labour standards, decent work in global supply chains, social protection and social inclusion, social dialogue and gender equality; (c) the impact of labour law and standards on trade and investment, or the impact of trade and investment law on labour; (d) dialogue and information-sharing on the labour provisions in the context of their respective trade agreements, and the implementation thereof; and (e) any other form of cooperation deemed appropriate.

9. The Parties shall consider any views provided by representatives of workers, employers, and civil society organisations when identifying areas of cooperation and when carrying out cooperative activities.

Note that a footnote to para 5 clarifies the reference to the ILO Conventions and the Council of Europe Social Charter:

Each Party maintains its right to determine its priorities, policies and the allocation of resources in the effective implementation of the ILO Conventions and the relevant provisions of the European Social Charter in a manner consistent with its international commitments, including those under this Title. The Council of Europe, established in 1949, adopted the European Social Charter in 1961, which was revised in 1996. All Member States have ratified the European Social Charter in its original or revised version. For the United Kingdom, the reference to the European Social Charter in paragraph 5 refers to the original 1961 version.

But again, how does all this (including the extensive environmental provisions that accompany the labour commitments) get enforced? Again, the main dispute settlement rules don’t apply: instead the parties are subject to Articles 408 and 409, previously 9.1 and 9.2, of the level playing field provisions, in place of the general dispute settlement rules (Article 407, previously 8.11). But notice that unlike the non-regression rules, Article 410, previously 9.3, does not apply.  Let’s now see what that means in practice.

Article 408 (previously 9.1) states that the parties must enter into consultation, which may involve information from ILO bodies. Article 409 (previously 9.2) then provides for a panel of experts to be set up, if the consultations are not successful. These experts should also seek guidance from ILO bodies (para 6). The panel is to deliver a report, but para 9 of Article 409 is at pains to point out that this process is toothless:

For greater certainty, the Parties share the understanding that if the Panel makes recommendations in its report, the responding Party does not need to follow these recommendations in ensuring conformity with the Agreement.

Article 409(19) moreover applies some parts of the dispute settlement rules to these panels, but crucially not the parts dealing with remedies. More precisely, it provides that:

Except as otherwise provided for in this Article, Article 739(1) (ex INST.14(1) [Arbitration procedure]), Article 740 (ex INST.29 [Arbitration tribunal decisions and rulings]), and Articles 753 to 758 (INST.30 [Suspension and termination of the arbitration proceedings], Article INST.31 [Mutually agreed solution], Article INST.32 [Time periods], Article INST.34 [Costs], Article INST.15 [Establishment of an arbitration tribunal], or Article INST.28 [Replacement of arbitrators]) as well as Annexes 48 and 49 (previously ANNEX INST [Rules of Procedure for Dispute Settlement] and ANNEX INST-X [Code of Conduct for Arbitrators]), shall apply mutatis mutandis.

Having said that, it is possible that the panel process could have a political impact, as it might be useful for those objecting that the UK (or EU) was not upholding social rights to have a panel report in their favour that they could wave around.

More importantly, there is a key distinction between arguments over the sustainable development provisions – where the dispute stops here – and disputes over non-regression, where, as noted above, Article 410 (ex-9.3) also applies. Article 410 applies the same rules on panels of experts set out in Article 409, but then adds that:

2. For the purposes of such disputes, in addition to the Articles listed in Article 409(19) (ex-9.2(19) [Panel of experts]), Articles 749 and 750 (ex-INST.24 [Temporary remedies] and Article INST.25 [Review of any measure taken to comply after the adoption of temporary remedies]) shall apply mutatis mutandis.

3. The Parties recognise that, where the responding Party chooses not to take any action to conform with the report of the panel of experts report and with this Agreement, any remedies authorised under Article 749 (ex-INST.24 [Temporary remedies]) continue to be available to the complaining Party.

What does this mean in practice? Article 749 states that: a) the losing party must offer compensation if the winning party requests it (para 1); b) the winning party can suspend parts of the TCA if either it decides not to request compensation, or if discussions about compensation do not result in agreement (para 2); c) there are some limits on which provisions can be suspended (para 3); d) suspension must not exceed ‘the level equivalent to the nullification or impairment caused by the violation’ (para 5); e) suspension can relate to any part of the trade heading of the treaty (para 6); f) suspension can also relate to any other part of the treaty subject to the general dispute settlement rules, ‘if the complaining party considers that it is not practicable or effective to suspend obligations’ relating to trade, ‘and that the circumstances are serious enough’ (para 8, presumably still subject to the limits in para 3); g) suspension takes effect 10 days after notifying it, unless the losing party argues that it is disproportionate or in breach of the rules against cross-retaliation (para 10); h) this request delays the suspension until the arbitrators rule on this issue, which must be within 30 days (para 11); and i) suspension is ‘temporary’, lasting until the parties negotiate a solution, agree that the losing party has complied with its obligations, or the losing party has amended its law in order to comply with them (para 13).

What if the losing party claims that it has complied with the ruling, but the winning party does not agree? This is covered by the reference to Article 750, which provides that the losing party must notify any compliance measure to the winning party, which must end its retaliation within 30 days (para 1). If the parties do not agree that the losing party is now complying with the ruling, the winning party may request the arbitration panel to rule on this; the panel must rule within 46 days, and the retaliation must end if it agrees that the losing party is now in compliance (para 2). It is also possible that the losing party is partly in compliance, in which case the level of retaliation must be reduced. 

I’ve left out a discussion of what happens in the event of divergence following future developments in labour law (which the TCA refers to as ‘rebalancing’, because there’s no express mention of human rights in that context. Note, however, that this process is also subject to possible suspension of obligations, subject to special rules on arbitration and a different (higher) threshold to show that this divergence affects trade or investment (‘material impacts on trade or investment…arising as a result of significant divergences’).

 

Data protection issues in the TCA

The immediate starting point of the TCA on data protection is the further transition period (which calls itself a ‘specified period’) during which the UK is still covered by EU data protection law (Article  782, previously FINPROV.10A: note this is excluded from the dispute settlement rules). This period lasts for four months, but is extended to six months unless one of the parties objects (para 4), but can end earlier if the EU Commission adopts ‘adequacy decisions’ simplifying transfer of personal data to the UK on the basis of the GDPR or the law enforcement directive. It is subject to the UK retaining EU data protection law in force during this period (para 1), and not making certain changes to its law (listed in para 3) without the EU’s agreement.  If the UK breaches those terms, the transition period ends (para 5). The process of the EU agreeing to amendments is further spelled out.  

UK are adopted by the European Commission under Article 36(3) of Directive (EU) 2016/680 and under Article 45(3) of Regulation (EU) 2016/679, or (b) on the date four months after

After that point, the data protection rules in the criminal law part of the TCA become more relevant. Article 525 (ex-LAW.GEN.4), which is similar to the general provision on human rights and criminal law cooperation discussed above, provides that criminal law cooperation ‘is based on the Parties’ long-standing commitment to ensuring a high level of protection of personal data. A number of basic data protection principles are then spelled out, but the mechanism to enforce this is the suspension clause for the criminal law part, discussed above. It states that in the event that a data protection adequacy decision ceases to apply, or ‘[i]n the event of serious and systemic deficiencies within one Party as regards the protection of personal data’, it is possible for some or all of the criminal law part of the TCA to be suspended (Article 693(2), ex-LAW.OTHER.137(2)). The rules on suspension of the criminal law part on human rights grounds, discussed above, apply. (Update, April 28, 2021: the EU institutions will adopt a declaration addressing this issue).

Note that there are special provisions on suspension of exchanges of passenger name records (Article LAW.PNR 38) but in this case, suspension can be for any grounds, not only human rights or data protection grounds. Article LAW.PRUM.19 provides for a special suspension rule regarding DNA, vehicle and fingerprint data exchanges only in cases of divergence of legislation. The criminal law dispute settlement rules don’t apply to these suspensions.

Finally, the TCA does not appear to include any express provision dealing with what happens if the Commission does not adopt an adequacy decision within the data protection transition period. (Update, 28 April 2021: the Commission has announced its intention to adopt a draft adequacy decision).

 

Role of the courts on the EU side

The EU courts (and Member States’ national courts) have long had significant roles as regards the protection of human rights within the EU legal order. What role would they have under the TCA?

The first thing to point out is that they would not have any jurisdiction directly as far as the UK was concerned. Any disputes about the application of the TCA within the UK are up to courts in the UK to decide (with the exception of disputes about UK participation in EU funding programmes, such as the research funding legislation). However, EU or Member States’ court rulings could have some indirect impact on the UK – for instance, a ruling that some or all persons subject to UK extradition requests cannot be sent to the UK obviously has an impact upon the UK. (Likewise, UK court rulings applying the treaty could have an equivalent indirect impact upon the EU or individual Member States).

The second thing to point out is that, as observed at the beginning of this blog, human rights issues arise as regards the TCA in a different way than they arise within the scope of EU law as between EU Member States.  In particular, Article 7 TEU – which provides for an essentially political process of determining whether a Member State has seriously and persistently breached EU law (or runs a risk of doing so) does not apply. While the general rules of TCA human rights conditionality are very broadly comparable to Article 7 TEU, they are far from identical. (On the details of Article 7, see further here; on its relationship with ‘ordinary’ EU law, see discussion here).

What if the EU decided to terminate or suspend the TCA on general human rights grounds (the ‘essential elements’ clause)? The starting point is Article 218(9) TFEU, which provides for the suspension of treaties with non-EU countries by the Council, on the basis of a proposal from the Commission.  The European Parliament has no role, and the Council implicitly votes by qualified majority, as it is the default rule for Council voting. (The Council must be unanimous when signing or concluding association agreements, according to Article 218(8); but the reference to the ‘procedure’ there does not apply to para 9). There is, however, no express rule for terminating a treaty.

As for the specific human rights provisions of the TCA, the Council decision on signing the TCA provides that the Commission can take decisions to retaliate as part of the dispute settlement process – which would be relevant to some social rights disputes. The proposal to conclude the TCA provides for the same rule. There is no specific rule on terminating or suspending the criminal law part treaty on human rights grounds, so presumably Article 218(9) TFEU applies, at least as regards suspension. For data protection, EU Commission adequacy decisions can be reviewed via the national courts asking the CJEU questions about their validity – see most recently Schrems II, discussed here.

This well-trodden route to challenging a data protection adequacy decision might well be used again if the Commission adopted an adequacy decision for the UK. But it is an open question how other decisions to suspend or terminate the TCA (or parts of it) on human rights grounds might be challenged in practice. While the CJEU judgment in Racke said that national courts can ask the CJEU if it was valid for the EU to decide to terminate a treaty in light of international law, that  judgment was based on the treaty in question conferring rights on individuals – but this is ruled out for the TCA, except for social security and (on the EU side) the criminal law provisions.

Challenging an implied decision not to trigger suspension or termination might be even more difficult – although this may depend on whether EU trade remedies law is amended to allow unions and environmental NGOs to request the Commission to begin a dispute settlement process, which might mean that its refusal to do so could be challenged in the EU courts. Issues might also arise if the EU decides to end a suspension or retaliation.

It is also possible that national courts might start to come to their own conclusions about the human rights record of the UK (or conversely, courts in the UK might start to do so as regards the EU, or at least some of its Member States). To some extent, this possibility is accommodated by the possibility of asking for human rights safeguards in extradition proceedings, noted above. More broadly the question might arise if the CJEU’s unwillingness to suspend application of the European Arrest Warrant system on human rights grounds pending an Article 7 decision against a Member State (see the 2018 judgment discussed here, as confirmed in December 2020) applies by analogy to the TCA – given that, as noted already, Article 7 does not apply. Of course, the constraints of Article 7 no longer apply to the UK either.

 

Barnard & Peers: chapter 27

Photo credit: www.coe.int

The European Labour Authority: a Brand New EU Agency in Bratislava

Bartłomiej Bednarowicz, PhD Researcher at the Faculty of Law of the University of Antwerp

Background

On Thursday, the Council decided that Bratislava will host the headquarters of a brand new EU agency: the European Labour Authority (ELA). The idea for the ELA was spelt out by President Juncker already in September 2017 in his annual State of the Union address. Juncker viewed ELA’s main mission to ensure EU labour mobility in a simple and effective manner and to strengthen fairness and trust in the internal market. Interestingly, the proposal to establish the ELA rolled out of the European Pillar of Social Rights (EPSR) and was presented as a part of the Social Fairness Package, together with a proposal for a Directive on transparent and predictable working conditions in the EU (adopted by the Council on the very same day as the Regulation establishing the ELA; see discussion of the Directive here), a proposal for a Council Recommendation for access to social protection for workers and the self-employed and a Commission Communication on the monitoring on the implementation of the EPSR.

In a speedy manner, in March 2018 the Commission put forward a legislative proposal to establish the European Labour Agency and on Valentine’s Day in 2019, the Commission, the European Parliament and the Council reached a provisional agreement and changed the name from Agency to Authority. Finally, in June 2019, the Council adopted the proposal for a Regulation and selected Slovakia to host the Authority. The ELA is to start its operations in October 2019 already in Brussels and is expected to reach its full operational capacity in Bratislava by 2024. [Update: the Regulation was published in the EU Official Journal in July 2019]

Competences

Pursuant to the Regulation establishing the ELA, the main objective of the Authority is to assist the Member States and the Commission in their effective application and enforcement of EU law related to labour mobility across the EU and the coordination of social security systems. The ELA has the mandate to act only within the scope of selected EU acts in the framework of: posting of workers, free movement of workers, social security coordination, social aspects of road transport and cooperation between the Member States to tackle undeclared work. This catalogue remains closed but can be extended on a basis of any future acts that confer tasks on the Authority. More importantly, to maintain its mandate, the ELA is to neither affect any rights or obligations of individuals or employers that are granted by either EU or national laws, nor the mandate of national authorities responsible for enforcement in these fields.

Furthermore, in order to attain its primary objective, the ELA has been fitted with some additional tasks. Firstly, it is to facilitate access to information on rights and obligations regarding labour mobility across the EU as well as to relevant services. Secondly, it is to promote and enhance cooperation between the Member States in the enforcement of relevant EU law across the Union, including facilitating concerted and joint inspections. Thirdly, it is to mediate and help to look for a solution in cases of cross-border disputes between the Member States. Finally, it is to support cooperation in tackling undeclared work.

Organisation and the seat selection

The European Labour Authority will have a permanent structure comprising of a Management Board (including representatives of the Member States, Commission, European Parliament and social partners), an Executive Director and a Stakeholder Group with purely advisory functions (including representatives of the Commission and social partners). On top of that, the Authority aims at being made up of around 140 staff members, some of them seconded from the Member States. In addition, there will be one national liaison officer seconded from each Member State who will facilitate the cooperation and exchange of information between the Authority and her Member State. The Executive Director, on the other hand, will be appointed for a five-year term by the Management Board from a list of candidates proposed by the Commission, following an open and transparent selection procedure including a hearing before the European Parliament. Finally, the Commission is willing to secure approximately €50 million for the Authority’s annual budget.

As for its seat, 4 Member States competed in the selection process: Slovakia, Cyprus, Bulgaria and Latvia. The Council, in a rather transparent way, steered the selection process and published on its website all the offers prepared by the governments. Then, the European Commission assessed the offers based on the geographical balance, accessibility of the location, availability of the proposed premises and overall city’s readiness to accommodate the needs of international staff. At the Council meeting convoked on 13 June 2019, 23 Member States voted in favour of the Regulation establishing the Authority with its seat in Bratislava, 3 voted against (Austria, Hungary and Sweden) and 2 abstained (Czechia and Poland). Admittedly, it will be the very first EU agency to be located in Slovakia that advertised itself with a rather dull slogan ‘ELA in Slovakia, a good idea’. At least, the ELA’s staff will enjoy the state-of-the-art L12 building at the ‘Eurovea City’ in Bratislava and a stunning view on the Danube river.

Comments

An idea for a (pan)-European labour inspectorate has been considered for a long time as simply ‘the wishful thinking’ of some social partners, especially workers organisations. It also has never really attracted a lot of attention, as the Commission feared scoring an own goal due to a lack of the Member States’ support to set up such an agency in the first place. However, the Juncker Commission has finally put the social rights back at the EU agenda and proposed a rather breakthrough initiative in a dazzling form of the European Pillar of Social Rights. The Commission has already delivered quite plenty on the Pillar and mainstreamed many fruitful debates surrounding the social aspects of employment that under the years of austerity and flexicurity have been put aside. The Authority indeed emanates from the EPSR and aligns well with the accompanying proposals presented by the Commission within a broad framework of European Union cross-border employment and the Social Fairness Package.

The potential of the Authority cannot be surely underestimated. Its main advantages can be summarised in three aspects. Firstly, in the field of legal issues of international employment, it will provide the national authorities with some valid operational and technical support, mostly to exchange information, develop some best practices, carry out inspections and also to settle any disputes. Bridging the information and cooperation gap between the Member States is indeed a noble objective and quite a desired one as well. In practice, it is often the case that national authorities are unable to facilitate dialogue with each other and exchange information due to the complex and lengthy internal procedures and the language barrier. Having national liaison officers from all Member States designated to be at the ELA’s disposal will definitely plug that gap and speed things up. Moreover, some national authorities might not have even dreamed of an ability of concerted and joint inspections, which is now a powerful tool in the ELA’s arsenal, subject however, to reaching an agreement between the Authority and the concerned Member State(s).

Secondly, what the enforcement of EU employment and social security law often lacked at national level, were synergies with the already existing EU agencies that would allow to rely on their expertise in areas such as health and safety at work, the management of an undertaking that is being restructured, skills forecasting or tackling undeclared work. Therefore, it is the ELA’s task to facilitate it all to untap the available potential and to strengthen the enforcement levels.

Finally, the Authority will simplify cooperation by integrating a number of existing committees and networks amongst the Member States which will hopefully lead to eliminating fragmentation in that area.

On the other hand, the Authority will definitely not serve as a panacea for all the flaws in the system. The role it will play mostly depends on how active the ELA with its Executive Director decides to be. There is a considerable room to be claimed by the Authority with some space for manoeuvre, but there are some open-ended questions as well. Sceptics and pragmatics may wonder how willing some of the national authorities will be to cooperate within the ELA’s network and agree to, for example, conduct inspections on their territory, which can expose the flaws of their own systems on an EU scale. It is also unsure whether the Member States known for a rather lenient approach towards social security laws will deem it in their best interest to assist ELA with the fight against fraud and abuse on their territories, as no such obligation arises. For them, it could mean the end of their competitive advantage of providing a legal framework for cheaper labour through foxy constructions such as letterbox companies.

Examples from the field of social security coordination and the experience with the Administrative Commission, a body comprising of government representatives, capable of reviewing cases of social fraud between the Member States, do not necessarily instil optimism. The number of successful outcomes of such cases is rather scarce and some national authorities are giving up on the Administrative Commission and often try to take matters in their own hands. Essentially, they reach out on their behalf to the institutions in the other Member States mostly without any tangible end-effects. Moreover, the Authority’s tasks might overlap with those of the Administrative Commission, which was a major point of discussion during the negotiations about the ELA. The exact tasks division, despite indicated as ‘without prejudice’, might prove to be more problematic to delineate and can lead to duplication and competence battles. It is also doubtful how effective the Authority can really be and police the EU labour mobility market consisting of approximately 17 million EU-movers with rather modest resources of 140 staff.

To conclude, as for now, the Authority has baby teeth. It will be up to its adopted strategy, action plans and frankly, leadership to make sure that it will eventually get real teeth. The ELA has definitely promising potential but it remains to be seen how it will be utilised and how big of a dossier can it claim and handle. The expectations are high so we should all give the European Labour Authority a big leap of faith and wait for its very first results.

Barnard & Peers: chapter 20

Photo credit: www.landererova12.sk

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

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