Law of the European Union

 

 

‘The CJEU case-law on horizontal direct effect of directives lacks consistency.’

            Direct effect, as it relates to European Union law, hinges on the premise that Union law can, if accordingly formulated, grant rights on individuals which the national courts of EU member states are compelled to acknowledge and apply.  It is important however to note that none of the EU Treaties directly states the direct effect[1]. The European Court of Justice (ECJ) applied the direct effect principle for the very first time in Van Gend en Loos[2]. Since then, the ECJ has been seen to loosen up in its application of direct effect to treaty articles, in addition to expanding the principle. Consequently, direct effect may apply to nearly all the likely types of EU legislation, mainly regulations, but also directives under certain circumstances. In Defrenne v. SABENA[3], the ECJ established that there are two forms of direct effect: horizontal direct effect and vertical direct effect.  The difference between these two varieties of direct effect is reliant on the entity or individual against whom the right is being applied. Vertical direct effect deals with the relationship between national law and EU law. In particular, vertical direct effect is concerned with the state's duty to guarantee its compatibility with and its observance of EU law. Consequently, citizens of such a state rely on the vertical direct effect in actions against public bodies or the state in what can be described as an “emanation of the state” Foster v. British Gas Plc[4]. On the other hand, horizontal direct effect deals with the relationships between one individual and another, including companies[5]. In the effect that a given provision of EU law assumes the form of a horizontal direct effect, it means that citizens can now depend on it when faced with actions against each other[6]. Whereas directives cannot be directly enforced horizontally, on the other hand, certain provisions of legislative acts and treaties are capable of being horizontally directly effective[7]. Even so, various CJEU case-laws on horizontal direct effects of directives lack consistency.

            Whereas regulations have horizontal as well as vertical direct effect, in contrast, directives lack horizontal direct effect. This difference is rather unconvincing seeing as many lay persons fail to understand why they could be compensated in one case but not in another. The cases on the issue are essential in understanding this point. One of these cases Marshall v Southampton[8] while the second case is Duke v GEC[9]. In Marshal v Southampton, the defendant, Mrs Marshall had opened brought proceedings against her employers on grounds that she was being asked to retire at an earlier age in comparison with her male colleagues. This, to her, constituted discrimination on the basis of her sex. The claim was successful. The EUCJ ruled in favour of the defendant even as that directive was yet to be fully applied in the UK[10]. The claim was allowed because the directive constituted a vertical direct effect. This should have thus fallen under the horizontal direct effect but was instead interpreted as applying to the vertical direct effect[11]. Directives that are yet to be applied lack horizontal effect and as such, persons have no rights against others who are not regarded as an 'emanation of the state.'[12] This point is well illustrated in Duke v GEC Reliance Ltd (1988). In this case, the defendant, Mrs. Duke, could not count on the same directive that Mrs Marshall had relied on in Marshal v Southampton. The court disallowed her claim on grounds that she had not acquired right since her employer was not, in the submission of the court, an 'arm of the state'. This is a clear indication of the unfairness evident in permitting rights in certain cases but not in others. The EUCJ endeavoured to reduce this difference in Francovich v Italian Republic[13]. In this case, the claimant, Mr Francovich, had brought proceedings against the Italian Government for its failure to execute a directive which protected employees in the event that their employers went insolvent. Mr Francovich's employer had become insolvent and hence failed to pay his wages. The claim was successful. The EUCJ, in permitting the claim, delineated three conditions which had to be fulfilled prior to permitting a claim: (i) the rights had to be defined and clear; (ii) the individuals ought to possess rights courtesy of the directive; and (iii) a causal relationship was necessary between the contravention of state's responsibility and the harm or damage incurred[14].

            The issues emanating from the difference made between employers being interpreted as constituting part of the state[15], even as other employers are not seen in this light, appears for the most part to have been overtaken by event following the decision by the EUCJ acknowledge that individuals had a right to make a claim for possible compensation regardless of the sector where they work[16]. Cases like The Queen v HM Treasury[17] have had and will continue to have in coming years,  significant impact on employees' claims for compensation by the state in the event that the state has fallen short of its responsibility to apply EU law.

            Although directives cannot be enforced horizontally under the fundamental principle of EU law, the ECJ has on several occasions unconditionally declined to apply horizontal direct effect to directives[18]. Nevertheless, succeeding judgements of the ECJ have marred the issue. In Mangold v Helm[19], the defendant (Mangold) was a 56 year old German who worked in the private sector on a contract under fixed terms of employment. In due course, Mangold opened proceedings against his employer before the German courts, seeking to contest the fixed term of his employment contract. The defendant argued that his fixed term contract was in breach of Directive 2000/78, which outlaws different forms of discrimination, such as discrimination on the basis of age. The discrimination happened following the introduction in 2002 of a German law that only allowed employees below the age of 52 to be on fixed term of contract but only under unusual situations.

            While this Directive had been taken up in 2000, member states had a 3 year grace period before transposing it. Moreover, member states could even delay transposing the Directive up to December 2006. Directives may only have direct effect following the expiry of their transfer date[20]. It is important to note that the defendant had entered into his employment contract in July 2003. 

            Consequently, based on a conventional investigation, he was not in a position to count on the Directive.  In its ruling, the court failed to adopt this assessment, and instead held that the national court was obliged to select any provision of the national law that was deemed to be in disagreement with the Directive despite the fact that there was still a grace period before the expiry date for transposing it. The court in making its ruling relied on two key reasons. First, during the transfer period, member states were responsible for desisting from taking actions which could gravely jeopardise the realisation of the Directive's goals. This is a rather uncontroversial reasoning, seeing as it fails to widen the scope of current case law[21].

            Since the German government failed to explain impartially the discrimination against older employees, this enabled Mangold to effectively count on a horizontal directive that was yet to be applied, against his former employer. The Mangold case law, therefore typified a notable extension of existing case law, given that it permitted horizontal enforcement of a Directive before its a transfer date.  It was also not clear yet if the court, in its judgement was limited to discrimination on grounds of age or it had created a new principle for authorizing rights acknowledged by EU law. Nonetheless, Kücükdeveci[22] clarified that the court was indeed creating a novel principle. Kücükdeveci worked for a German company since she was 18 years. The company issued her with a notice of termination after 10 years of service. However, her employer gave Kücükdeveci a notice applicable to a worker who had been with the company for only three years in line with the German law which indicated that period of employment below the age of 25 ought to be ignored when computing an employee's length of employment. The EUCJ, in its ruling that was based on a reference by a German court, found the national legislation to have been unlawful, because “EU law, more particularly the principle of non-discrimination on grounds of age as given expression by the Directive”[23] ruled out national rulings of this kind. In addition, the EUCJ took into account the question of if, in proceedings involving private entities, national courts could dis-apply legislation that appears to contravene the non-discrimination principle.

            In Marleasing SA v La Comercial[24], the court ruled against the application of horizontal direct effect on Directives. The court further reaffirmed that where the principle of indirect effect was concerned, there is need for a national court to see to it that it fully interprete national legislation, talking into account the purpose and wording of all relevant Directives, as a men of realising the Directive's objective. Such a responsibility applies regardless of whether the national legislations under review were implemented prior to or following the Directive[25]. The onus is on national courts therefore to do everything in their powers to see to it that their interpretation of domestic law conforms to Community law.

            On other occasions, the courts have found a cause to justify the application of the direct effect. One such case law is Benkharbouche[26] in which foreign domestic workers brought forth claims that they had been racially discriminated and that there had been violations of the 1998 Working Time Regulations. The foreign domestic workers were employed by various embassies in London. While making its ruling, the Court of Appeal noted that the right to effective remedies as enshrined in Article 47 of the Charter had horizontal direct effect. The Court of Appeal thus sought to dis-apply section 16(1)(a) of the 1972 State Immunity Act. This particular Act confers immunity on embassies against claims of discrimination by employees.

            The Vidal-Hall[27] case law involved three Claimants who had sued Google after the company had placed cookies on their computers without their having authorised such a move. The Claimants therefore endeavoured to have the company served out of the UK jurisdiction. The Claimants were seeking compensation form Google on grounds of acute distress which they allegedly suffered upon their realisation that the action by Google to place cookies on their computers could potentially reveal sensitive personal information to entities involved in on screen advertisements. A key hurdle for the Claimants was that section 13(2) of the 1998 Data Protection Act distinctly restricted damages suffered on account of 'pure' distress to definite circumstances that had no application. In overcoming this challenge, the Court of Appeal ruled on the need to dis-apply section 13(2) on grounds that Articles 8 and 7 of the Charter which are concerned with   right to data protection and right to family and private life, in that order, had horizontal direct effect. 

            In both of the above two case laws, the Court of Appeal established that the decision arrived at by the CJEU in “AMS” did not warrant the application of the horizontal direct effect of the charter[28]. In particular, Lord Dyson, in making his ruling in Benkharbouche, indicated that: “It follows from the approach in the Kücükdeveci and AMS cases that EU Charter provisions which reflect general principles of EU law will [have horizontal direct effect]. In AMS however, the CJEU failed to establish that the horizontal direct effect could be applied to the charter. Advocate General Cruz  Villalón, in submitting his Opinion in AMS, confronted what he termed as the “question of principle” , and ultimately submitted that there was a possibility that the there could be a horizontal direct effect on the Charter. Nonetheless, the CJEU simply maintained that there was no ground for a horizontal direct effect on the Charter, based on Article 27.  As a result, the court declined to articulate this “question of principle”.

The evolution of this incident is thus in sharp contrast with the establishment of the horizontal direct effect as it relates to the EU Treaties. In International Transport Workers' Federation v Viking Line ABP[29] for example, the CJEU was responsible for propelling the Treaties' horizontal direct effect. With regard to the Vidal-Hall/Benkharbouce approach however, this seems primarily to be a development of the English judicial system. There appears on various occasions, to be a certain level of consistency in regards to the decision made by the CJEU on the one hand, and the national courts of EU member states on the other hand, on position taken regarding in there is a horizontal direct effect on specific Directives.  One wonders then if these decisions are an indication of the correct balance of power between judges of member states and the CJEU. Allowing of horizontal direct effect accords judges of the courts of member states the power in certain situations to examine key laws against human rights standards, as well as to dis-apply certain provisions in the event that they are interpreted as falling short of the established standards. This particular approach resulted in an especially distinct result in Vidal-Hall, in which the Court of Appeal maintained that the English Parliament had incorrectly interpreted Article 23 of the 1998 Data Protection Act (section 13[2]). There was no clarity, nonetheless, on the intended meaning of Article 23 by the authors of the Directive. Specifically, the Directive does not refer to either “moral damages” or “distress”. Even so, the Court of appeals endeavoured to give substance to Articles 7 and 8 of the Charter in a way congruent with the Directive's understanding of the EU law. Accordingly, the Court of Appeal ruled that this interpretation eclipsed Parliament's understanding of that right.

            In sum, the CJEU case law on horizontal direct effect of directives lacks consistency. Direct effects in relation to EU law entails relationships between one individual and another, including companies. Although the horizontal direct effect do not apply to directives, the CJEU has sought to apply horizontal direct effect in cases where national courts have ruled otherwise and in others, held that the horizontal direct effect does not apply. The only time when directives apply is after the expiry of their transfer date. However, on various occasions, the CJEU may apply a horizontal direct effect on a directive and this signifies a notable extension of existing case law. On other occasions, the CJEU has ruled against the use of horizontal direct effect on Directives by indicating that national courts ought to fully interpret the wording and purpose of relevant Directives. This in itself indicates just how CJEU case laws on horizontal direct effect of directives lack consistency.

 

 

 

 

 

 

 

 

 

 

 

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[1] Raitio J, The Principle of Legal Certainty in EC Law (Springer Science & Business Media, 2003)

 

[2] Chalmers D, Davies G & Monti G, European Union Law: Cases and Materials

(Cambridge University Press, 2010)

 

[3]  Defrenne v Sabena (No 2) (1976) Case 43/75

 

 

[4] Foster v British Gas plc (1990) C-188/89

 

[5] N. Busby ‘Only a Matter of Time’ (2001) 64 Modern Law Review 489.

 

[6] C. McCrudden ‘The Effectiveness of European Equality Law: National Mechanisms

for Enforcing Gender Equality Laws in the Light of European Requirements’ (1993)

13 Oxford Journal of Legal Studies 320

[7] Schiek, D Economic and Social Rights Under the EU Charter of Fundamental Rights: A Legal Perspective (Edward Elgar Publishing, 2012)

 

[8] Marshall v Southampton and South West Hampshire Area Health authority (1986)

 

[10] Craig, P & de Búrca, G,  EU Law: Text, Cases and Materials (3rd ed.). (Oxford University Press, 2003)

[11] Bobek M,  Of Feasibility and Silent Elephants: Legitimacy of the Court of Justice and National Courts, in Judging Europe’s Judges: The Legitimacy of Case Law of the European Court of Justice Examined 197 (Maurice Adams, Johan Meeusen, Gert Straetmans & Henri de Waele eds., 2013).

[12] Craig, P & de Búrca, G,  EU Law: Text, Cases and Materials (3rd ed.). (Oxford University Press, 2003)

 

[13] Francovich and Bonifaci v Republic of Italy (C-6, 9/90) [1991

 

[14] Penelope K, Law of the European Union (Pearson Education, 2007).

 

[15] Weatherill, S, Cases and materials on EU law (Oxford University Press, 2007).

 

[16] Conway D, EU Law (Routledge, 2015).

 

[17] The Queen v HM Treasury, ex parte British Telecommunications plc (1996)

 

[18] (Faccini Dori v Recreb Srl: C-91/92 [1995] All ER (EC) 1).

 

[19] Mangold v Helm: C-144/04 [2006] All ER (EC) 383

 

[20] Pubblico Ministero v Ratti: 148/78 [1979] ECR 1629)

 

[21] Inter-Environnement Wallonie ASBL v Région Wallonne: C-129/96 [1998] All ER (EC) 155).

 

[22] Kücükdeveci v Swedex GmbH & Co KG: C-555/07 [2010] All ER (EC) 867)

 

[23] Ibid

[24] Marleasing SA v La Comercial Internacional de Alimentacion SA: C-106/89 [1990] ECR I-4135.

 

[25] Marleasing SA v La Comercial Internacional de Alimentacion SA: C-106/89 [1990] ECR I-4135.

 

[29] Busby N, A Right to Care?: Unpaid Work in European Employment Law (OUP Oxford, 2011)

 

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