In Palacios de la Villa (C-411/05) the Court of Justice had an opportunity to express its views on Mangold (C-144/04) - a judgment, which gave rise to much criticism not only from the part of the European legal doctrine, but also from one of the Court’s Advocates General (see also this related post concerning Lindorfer - judgment in Case C-227/04 P). In fact, given the circumstances of the case, the Court did not have to say much as regards Mangold. Rather, it added another piece to its jigsaw concerning horizontal direct effect of directives. Hence the reference to Pfeiffer (C-397/01 to C-403/01) in the title of this post.
In the case before the referring court from Madrid, Mr. Palacios de la Villa contested the automatic termination of his contract of employment based on his reaching the age-limit for compulsory retirement, which was presupposed by the applicable collective agreement. The agreement was in conformity with relevant Spanish legislation, which allowed such a termination, provided that an employee has fulfilled the conditions set out in the social security legislation of the Spanish State for entitlement to a retirement pension under the contribution regime. Mr. Palacios de la Villa contested this as discrimination on the grounds of age.
The legislation that implemented directive 2000/78 to the Spanish law expressly allowed such an automatic termination of a contract of employment and added: “such a measure must be linked to objectives which are consistent with employment policy and are set out in the collective agreement, such as increased stability in employment, the conversion of temporary contracts into permanent contracts, sustaining employment, the recruitment of new workers, or any other objectives aimed at promoting the quality of employment”. This additional requirement concerning the objectives of the possibility to terminate the contract of employment once an employee reaches retirement age was not mentioned in the previous legislation, applicable to Mr. Palacio de la Villa’s situation.
The Madrid court considered this as a possible breach of “the principle of equal treatment, which prohibit[ed] any discrimination whatsoever on the grounds of age and [was] laid down in Article 13 EC and Article 2(1) of directive 2000/78”. Its preliminary reference therefore asked on the conformity of the Spanish legislation with the mentioned principles. In case of their breach the referring court wanted to know whether these principles require it “as a national court, not to apply to this case” the contested provisions.
Before analysing whether or not the legislation in question was in conformity with directive 2000/78 or principles mentioned by the Madrid court, one could wonder what effects the Directive would produce in the dispute between Mr. Palacios de la Villa and his former employer. In Pfeiffer the Court stated:
The Court has consistently held that a directive cannot of itself impose obligations on an individual and cannot therefore be relied upon as such against an individual […]. It follows that even a clear, precise and unconditional provision of a directive seeking to confer rights or impose obligations on individuals cannot of itself apply in proceedings exclusively between private parties. (paras. 108 and 109)
This was exactly what some governments asserted in their submissions: directive 2000/78 could govern the case of Mr. Palacio de la Villa only through the principle of consistent interpretation, not through direct effect. The case cannot be distinguished from Pfeiffer, where the Court reached the above-cited conclusions and found consistent interpretation the only possibility left for the national court.
Nevertheless, despite these doubts made expressly in their submissions, the Court examined only the material scope of directive 2000/78 - whether the rules prohibiting discrimination, contained in the directive, intended to govern ‘employment and working conditions, including dismissals and pay’ within the meaning of its Article 3(1)(c). The nature of the relationship, i.e. whether it was a dispute between private parties, which could significantly limit the effects produced by the directive, the Court left unattended. What is not surprising - unfortunately - the Court did not mention any objections made by the participating governments and went directly to the examination of compatibility of the Spanish legislation with the directive. As it had not found any conflicts (on this see the very end of this post), it did not have to rule on what effects the directive could precisely produce in the dispute before the Madrid court.
However, to be fair with the Court, Palacios can be reconciled with Pfeiffer in the following way: in both cases the Court firstly examined compatibility of national legislation with the directive. Only after taking this (first) step, it continued to elaborate what consequences that finding would have in the case (second step). One could therefore say that the first step does not concern direct effect and all the exemptions from its application.
This view would come very close to a recent Lenaerts’ and Corthaut’s proposal having primacy as a “basic conflict rule” of the EU legal order and leaving very little for direct effect, defined very narrowly - as “the very particular way of invoking a higher norm in order to enforce rights that were conferred upon the applicant by that norm and which would not otherwise have existed in the internal legal order” (“Of birds and hedges: the role of primacy in invoking norms of EU law”, (2006) 31 EL Rev 287 at 291, an earlier version can be found here - pdf). All other “work” of making EU law effective in national legal order is according to Lenaerts and Corthaut being done by the principle of primacy.
Therefore, the first step made by the Court in Palacio, examining whether a norm of national law conformed to Union law, would be a consequence of primacy of EU law and would not entail the question of what the finding of a breach would mean for the national legal order and legal relationships existing there on the basis of the conflicting rules of national law. The main disagreement concerns the second step: what follows from finding the breach?
This would slightly undermine a conclusion recently reached by Dougan in his “When worlds collide! Competing visions of the relationship between direct effect and supremacy” (2007) 44 CML Rev 931 to the effect that Pfeiffer represented rejection of the “primacy” model as “a working template for the relationship between direct effect and supremacy” (p. 953). To the contrary, the first step taken by the Court in Pfeiffer, where the Court actually established incompatibility of the German legislation with the Working Time Directive, would confirm that primacy was in this case, and remains to be “the basic conflict rule of the EU legal order”.
Again, the second step is much more contested. There Dougan has very good arguments to doubt that primacy was “the basic conflict rule” in Pfeiffer. Instead of relying on consistent interpretation the Court could have ruled that the directive produced “exclusionary effects”, having required setting aside the conflicting legislation, which was not excluded in horizontal situations under the primacy model. However, he himself admits that neither the primacy, nor his own (“trigger”) model provide a complete and inherently consistent theory.
I would add, on the basis of the above analysis, that Dougan did not include the first step in his analysis, although it can prove crucial in cases such as Palacio or Pfeiffer: it allows the Court to rule on compatibility of national legislation without it being necessary to have an applicant who would finally benefit from its ruling. Pfeiffer reinforces this possibility of judicial review without a suitable applicant, totally within the logic of the primacy model.
We actually do not know what would follow as the second step in Palacios, should the Court have found the Spanish legislation in breach of the directive 2000/78. However, if the Court intends to stick to Mangold, the only possible way to go would be (at least in my opinion) to allow the directive to produce horizontal direct effects. The underlying rationale (like it or not) would be horizontal direct effect of the principle prohibiting discrimination on the grounds of age, which the directive “only seeks to implement”, invented by the Court in Mangold. If it was possible to invoke the principle in a horizontal dispute before the period for implementing the directive had expired, it should be even more so thereafter. Another case currently pending before the Court, C-427/06 Bartsch (argued before the Court recently), can show how firmly is Mangold embedded in the heads of the ECJ’s judges.
Finally, to complete this comment, how did the Court come to the conclusion that the Spanish legislation was compatible with the directive? After excluding that the mere absence of statement of objectives pursued by the possibility to terminate a contract of employment of an employee who reached the retirement age would be contrary to the directive: “In the absence of such precision, it is important, […], that other elements, taken from the general context of the measure concerned, enable the underlying aim of that law to be identified for the purposes of judicial review of its legitimacy and whether the means put in place to achieve that aim are appropriate and necessary” (para. 57). Then the Court exercised such review and found that the Spanish legislation was “objectively and reasonably justified in the context of national law by a legitimate aim relating to employment policy and the labour market”, and that “the means put in place to achieve that aim of public interest do not appear to be inappropriate and unnecessary for the purpose”.
PS: I was inspired in the “step” analysis of application of EU law by national institutions by Sacha Prechal (Direct Effect, Indirect Effect, Supremacy and the Evolving Constitution of the European Union in Barnard (ed), The Fundamentals of EU Law Revisited: Assessing the Impact of the Constitutional Debate? (OUP 2007), particularly at 42.
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In the case before the referring court from Madrid, Mr. Palacios de la Villa contested the automatic termination of his contract of employment based on his reaching the age-limit for compulsory retirement, which was presupposed by the applicable collective agreement. The agreement was in conformity with relevant Spanish legislation, which allowed such a termination, provided that an employee has fulfilled the conditions set out in the social security legislation of the Spanish State for entitlement to a retirement pension under the contribution regime. Mr. Palacios de la Villa contested this as discrimination on the grounds of age.
The legislation that implemented directive 2000/78 to the Spanish law expressly allowed such an automatic termination of a contract of employment and added: “such a measure must be linked to objectives which are consistent with employment policy and are set out in the collective agreement, such as increased stability in employment, the conversion of temporary contracts into permanent contracts, sustaining employment, the recruitment of new workers, or any other objectives aimed at promoting the quality of employment”. This additional requirement concerning the objectives of the possibility to terminate the contract of employment once an employee reaches retirement age was not mentioned in the previous legislation, applicable to Mr. Palacio de la Villa’s situation.
The Madrid court considered this as a possible breach of “the principle of equal treatment, which prohibit[ed] any discrimination whatsoever on the grounds of age and [was] laid down in Article 13 EC and Article 2(1) of directive 2000/78”. Its preliminary reference therefore asked on the conformity of the Spanish legislation with the mentioned principles. In case of their breach the referring court wanted to know whether these principles require it “as a national court, not to apply to this case” the contested provisions.
Before analysing whether or not the legislation in question was in conformity with directive 2000/78 or principles mentioned by the Madrid court, one could wonder what effects the Directive would produce in the dispute between Mr. Palacios de la Villa and his former employer. In Pfeiffer the Court stated:
The Court has consistently held that a directive cannot of itself impose obligations on an individual and cannot therefore be relied upon as such against an individual […]. It follows that even a clear, precise and unconditional provision of a directive seeking to confer rights or impose obligations on individuals cannot of itself apply in proceedings exclusively between private parties. (paras. 108 and 109)
This was exactly what some governments asserted in their submissions: directive 2000/78 could govern the case of Mr. Palacio de la Villa only through the principle of consistent interpretation, not through direct effect. The case cannot be distinguished from Pfeiffer, where the Court reached the above-cited conclusions and found consistent interpretation the only possibility left for the national court.
Nevertheless, despite these doubts made expressly in their submissions, the Court examined only the material scope of directive 2000/78 - whether the rules prohibiting discrimination, contained in the directive, intended to govern ‘employment and working conditions, including dismissals and pay’ within the meaning of its Article 3(1)(c). The nature of the relationship, i.e. whether it was a dispute between private parties, which could significantly limit the effects produced by the directive, the Court left unattended. What is not surprising - unfortunately - the Court did not mention any objections made by the participating governments and went directly to the examination of compatibility of the Spanish legislation with the directive. As it had not found any conflicts (on this see the very end of this post), it did not have to rule on what effects the directive could precisely produce in the dispute before the Madrid court.
However, to be fair with the Court, Palacios can be reconciled with Pfeiffer in the following way: in both cases the Court firstly examined compatibility of national legislation with the directive. Only after taking this (first) step, it continued to elaborate what consequences that finding would have in the case (second step). One could therefore say that the first step does not concern direct effect and all the exemptions from its application.
This view would come very close to a recent Lenaerts’ and Corthaut’s proposal having primacy as a “basic conflict rule” of the EU legal order and leaving very little for direct effect, defined very narrowly - as “the very particular way of invoking a higher norm in order to enforce rights that were conferred upon the applicant by that norm and which would not otherwise have existed in the internal legal order” (“Of birds and hedges: the role of primacy in invoking norms of EU law”, (2006) 31 EL Rev 287 at 291, an earlier version can be found here - pdf). All other “work” of making EU law effective in national legal order is according to Lenaerts and Corthaut being done by the principle of primacy.
Therefore, the first step made by the Court in Palacio, examining whether a norm of national law conformed to Union law, would be a consequence of primacy of EU law and would not entail the question of what the finding of a breach would mean for the national legal order and legal relationships existing there on the basis of the conflicting rules of national law. The main disagreement concerns the second step: what follows from finding the breach?
This would slightly undermine a conclusion recently reached by Dougan in his “When worlds collide! Competing visions of the relationship between direct effect and supremacy” (2007) 44 CML Rev 931 to the effect that Pfeiffer represented rejection of the “primacy” model as “a working template for the relationship between direct effect and supremacy” (p. 953). To the contrary, the first step taken by the Court in Pfeiffer, where the Court actually established incompatibility of the German legislation with the Working Time Directive, would confirm that primacy was in this case, and remains to be “the basic conflict rule of the EU legal order”.
Again, the second step is much more contested. There Dougan has very good arguments to doubt that primacy was “the basic conflict rule” in Pfeiffer. Instead of relying on consistent interpretation the Court could have ruled that the directive produced “exclusionary effects”, having required setting aside the conflicting legislation, which was not excluded in horizontal situations under the primacy model. However, he himself admits that neither the primacy, nor his own (“trigger”) model provide a complete and inherently consistent theory.
I would add, on the basis of the above analysis, that Dougan did not include the first step in his analysis, although it can prove crucial in cases such as Palacio or Pfeiffer: it allows the Court to rule on compatibility of national legislation without it being necessary to have an applicant who would finally benefit from its ruling. Pfeiffer reinforces this possibility of judicial review without a suitable applicant, totally within the logic of the primacy model.
We actually do not know what would follow as the second step in Palacios, should the Court have found the Spanish legislation in breach of the directive 2000/78. However, if the Court intends to stick to Mangold, the only possible way to go would be (at least in my opinion) to allow the directive to produce horizontal direct effects. The underlying rationale (like it or not) would be horizontal direct effect of the principle prohibiting discrimination on the grounds of age, which the directive “only seeks to implement”, invented by the Court in Mangold. If it was possible to invoke the principle in a horizontal dispute before the period for implementing the directive had expired, it should be even more so thereafter. Another case currently pending before the Court, C-427/06 Bartsch (argued before the Court recently), can show how firmly is Mangold embedded in the heads of the ECJ’s judges.
Finally, to complete this comment, how did the Court come to the conclusion that the Spanish legislation was compatible with the directive? After excluding that the mere absence of statement of objectives pursued by the possibility to terminate a contract of employment of an employee who reached the retirement age would be contrary to the directive: “In the absence of such precision, it is important, […], that other elements, taken from the general context of the measure concerned, enable the underlying aim of that law to be identified for the purposes of judicial review of its legitimacy and whether the means put in place to achieve that aim are appropriate and necessary” (para. 57). Then the Court exercised such review and found that the Spanish legislation was “objectively and reasonably justified in the context of national law by a legitimate aim relating to employment policy and the labour market”, and that “the means put in place to achieve that aim of public interest do not appear to be inappropriate and unnecessary for the purpose”.
PS: I was inspired in the “step” analysis of application of EU law by national institutions by Sacha Prechal (Direct Effect, Indirect Effect, Supremacy and the Evolving Constitution of the European Union in Barnard (ed), The Fundamentals of EU Law Revisited: Assessing the Impact of the Constitutional Debate? (OUP 2007), particularly at 42.
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