8.2.2 Restricted temporal effects and transitional periods: what is the leitmotiv?

356. First and foremost it is clear that the effectiveness of Union law is the driving force behind the rule that rulings of the Court of Justice have ex tunc effect and behind the reason that the Court of Justice rarely restricts the effect of a ruling in whichever way.1 In view of the preceding, the question arises how the rulings in Test-Achats, Defrenne II and Barber – in which the Court either adopted a transitional period or restricted the temporal effect of the ruling – relate to cases like Mangold and Kücükdeveci – in which the Court kept entirely mum about that issue.2 The result of the transitional period adopted in Test-Achats was that the effect of the invalidity of the relevant Directive was deferred. Because the Court had not stated anything about the temporal effect of the invalidity after the expiry of the transitional period, the European Commission published Guidelines on the basis of which the temporal effect of the invalidity was restricted: the invalidity of the Directive applies to new legal relationships only.3 The result of the restricted effect of the rulings in Defrenne II and Barber was that women who had been discriminated against as regards their wages and retirement payments could not support any claim by invoking Article 157 TFEU in relation to legal situations prior to the date of the judgment. The result of the rulings in Mangold and Kücükdeveci – which have ex tunc effect, as their temporal effect was not limited, and which have immediate effect, as the Court did not adopt a transitional period – is that, in a case against their employer, employees can claim the disapplication of a national provision that is incompatible with the principle prohibiting age discrimination, also as concerns legal situations prior to that ruling. In cases like Mangold, national courts are obliged to disapply such national provisions. The implications of the acute, ex tunc disapplication of such provisions for the employers in such cases are instantaneous and significant, also in legal relationships existing prior to the Court’s rulings, insofar as their legal effects have not already been exhausted.4

357. Beyond a doubt, the instantaneous implications of the interpretation and effect given to the principle prohibiting age discrimination by the Court in Mangold and Kücükdeveci support the effectiveness and effective judicial protection of Union law. At the same time, those instantaneous consequences may jeopardize the legal certainty and the legitimate expectations of many employers that in numerous legal relationships relied upon national legislation that was incompatible with that principle in good faith.5 Nonetheless, apparently not in a way justifying a restriction of the effects of the rulings for overriding considerations of legal certainty, according to the Court of Justice. In which way do these cases differ from the legal situations and the implications of the interpretation given to Article 157 TFEU in Defrenne II and Barber? For what reason did the Court pass over this issue? Both the direct horizontal effect of Article 157 TFEU and the effect awarded to the principle prohibiting age discrimination can affect a large number of horizontal legal relationships – particularly employment relationships – and have a considerable impact on them.6

358. As regards the adoption of a transitional period, it is recalled that the reasoning behind the adoption of the transitional period in Test-Achats remains obscure. This case is distinguished from the other cases in the sense that it concerned the invalidity of a directive and not solely the interpretation of a rule of Union law. Therefore, the ruling of the Court was relevant not only for legal relationships falling within the scope of that directive, but also – and particularly – for the European legislature and national legislatures that had to adopt new legislation that would comply with Union law. Speculatively, this aspect may have played an important role in the adoption of the transitional period, beside the aim to avoid a sudden impact of the invalidity on the European insurance market.7

359. Imagine that the proceedings in Test-Achats would not have been vertical, but horizontal: a group of individuals had brought a case against a private insurance company in which they invoked the principle prohibiting discrimination on account of gender in order to disapply the particular Belgian legislation that, in conformity with the Directive, allowed certain exceptions to that principle for an undetermined period of time. Assume that the national court would have referred the case to the Court of Justice, asking about the compatibility of the national provision and the Directive with Union law. The character of the proceedingsdoes not affect the reasoning behind the invalidity of the Directive. Therefore, it is assumed that the Court would have still declared the Directive to be invalid. Further, although the Court’s considerations to adopt a transitional period are absent, in light of the Opinion of Advocate General Kokott it is possible that the Court would also adopt a transitional period in the hypothetical situation, in order to avoid a sudden impact on the insurance market and to give the European and national legislatures time to adjust their legislation.8 Yet, the adoption of a transitional period would be at the cost of the effectiveness and effective judicial protection of the rule of Union law. Also, a transitional period does not as such answer the question to which legal situations the ruling ultimately applies. Considering the rulings in Mangold, Kücükdeveci and Dansk Industri (effective judicial protection), and the rulings in DefrenneII and Barber (restricted temporal effect) it is hard to say what the Court would decide as regards the temporal effect of the invalidity once the transitional period has expired. The Court’s case law concerning the relationship between temporal effect and legal certainty, and the effectiveness and effective judicial protection of Union law is inconsistent and therefore future decisions are unpredictable.9 I will discuss four possible decisions on the basis of the Court’s case law.

360. First of all, if the Court would rule in line with Test-Achats it would remain silent about the temporal effect of the invalidity – i.e. to which legal relations it eventually applies after the expiry of the transitional period. This is unlikely, because in a horizontal case the Court should be inclined (i) to pay more attention to the implications of its ruling for the horizontal legal relationships involved, and (ii) to decide, at any rate, that the private party who initiated the proceedings culminating in the Court’s decision enjoys the benefits of that decision.10 As a matter of fact, it would have been desirable for the Court to do so in the actual judgment in Test-Achats.

361. Second, if the Court of Justice would rule in line with Defrenne II and Barber, the Court would decide that the invalidity of the Directive and the consequences for related national legislation – after the expiry of a possible transitional period – could be invoked only in legal situations establishedafter its ruling. This scenario would be most favourable in terms of legal certainty and the protection of legitimate expectations of the insurance companies. In that sense, this scenario is in line with the approach taken in the Guidelines of European Commission.11

362. Third, if the Court would rule in line with Advocate General Kokott’s Opinion, the invalidity of the Directive would have ex tunc effect after the expiry of the transitional period.12 In other words: after the expiry of the transitional period, the invalidity of the Directive would affect all legal relationships, including ones established prior to the ruling on the invalidity and those established during the transitional period.

363. Fourth, if the Court would rule in line with Mangold, Kücükdeveci and Dansk Industri, there would not be a transitional period at all, meaning that the invalidity of the Directive has immediate effect for future and past cases – insofar as the latter’s legal effects have not been fully exhausted. The ex tunc effect of the invalidity includes the obligation of national courts to disapply the national legislation that is incompatible with Union law ex tunc. The disapplication would have instantaneous implications for the horizontal legal relationship in question.13 This scenario is most favourable in terms of the effectiveness and effective judicial protection of Union law, and most detrimental to the legitimate expectations of insurance companies that relied on the respective legislation. This scenario is opposed to the original ruling in Test-Achats.

In truth, the number of legal relationships affected by a ruling like Test-Achats compared to the number of legal relationships affected by the rulings in Mangold, Kücükdeveci and Dansk Industri could be a reason for the Court to adopt a transitional period14 as well as to restrict the temporal effect of the invalidity. Further, the fact that Mangold and Kücükdeveci concerned the interpretation of Union law and not the invalidity of a rule of Union law may have been decisive. After all, interpretations of Union law – including interpretations on the effect of the rule – only clarify in which way the particular rule of Union law should have always been understood and applied, which is technically a different situation than the invalidity of a rule.15

364. Clearly, there are certain distinguishing aspects of the cases which might explain the different mode of operation employed by the Court of Justice in these cases, yet it would have been more satisfying if the Court would have explicitly given reasons for its choices, so that the distinguishing factors of these cases would be unveiled. Apart from that, it is noted here that in future cases in which the Court declares a rule of Union law to be invalid, it would be advisable for the Court to immediately clarify whether the invalidity has ex tunc effect or whether the temporal effect of the invalidity is restricted, as well as whether the invalidity has immediate effect or whether its effect is deferred by a transitional period. In earlier cases the Court has decided on only one of those two issues, as a result of which new proceedings16 or additional guidelines by the European Commission were needed17.

365. Lastly, the question arises what the Court of Justice would decide in the hypothetical horizontal cases, concerning the effect of the invalidity of the directive for (i) the parties that initiated proceedings resulting in the ruling of the Court or (ii) parties that brought equivalent claims before a national court prior to the Court of Justice’s ruling. In Dansk Industri the Court held that “the protection of legitimate expectations cannot, in any event, be relied on for the purpose of denying an individual who has brought proceedings culminating in the Court interpreting EU law as precluding the rule of national law at issue the benefit of that interpretation”[Emphasis added: I.A.].18 On an equal footing, the invalidity of a directive and the consequences of that invalidity for national legislation, are likely to immediately apply to those parties and to other parties that have brought similar claims before national courts before the date of the particular ruling. Their action to safeguard their rights justifies that the restricted temporal effect of the judgment does not affect their position. It is however unclear how this approach relates to the adoption of a transitional period. On the one hand, also in relation to a transitional period it can be argued that the parties that initiated the proceedings that resulted in the Court’s ruling, as well as other parties that brought an equivalent claim prior to the Court’s ruling, cannot be denied the benefits of the interpretation given to Union law in that ruling, or of the invalidity declared. On the other hand, the Court of Justice’s reasons to adopt a transitional period may justify that the transitional period also applies to the parties initiating the case.19 The fact that the legitimate expectations of the opposite party cannot be relied upon to deny a private party that started the proceedings the benefit of the Court’s ruling, does not mean that there are no other reasons for the Court to do so. For example, in Pinna I it held that “it is for the Court to decide whether an exception to that temporal limitation of the effect of its judgment may be made in favour of the party which brought the action before the national court or in favour of any other person who took similar steps before the declaration of invalidity or whether, conversely, a declaration of invalidity applicable only to the future constitutes an adequate remedy even for persons who took action at the appropriate time with a view to protecting their rights”.20

366. All in all, the above underlines that it would be helpful if the Court gave more insight into its leitmotiv for what it considers to be exceptional circumstances and overriding considerations of legal certainty, because currently its practice of restricting temporal effects or rulings or adopting a transitional period seems too arbitrary. It is a task for the Court of Justice to consider, of its own initiative, whether it is desirable to limit the effect of a particular ruling, and to build coherent case law on this matter. In my view, the effectiveness and effective judicial protection of Union law should remain the guiding principles in determining whether or not the temporal effect and scope of a ruling must be limited. Whenever the Court of Justice makes an exception to those principles by adopting a transitional period or restricting the temporal effect of a ruling, that exception must be clearly reasoned and coherently applied to similar cases. Referring national courts as well as intervening Member States that submit their observations, can support the Court of Justice by providing information on the potential consequences of possible interpretations for the underlying horizontal legal relationship and on the probable impact of the anticipated ruling on similar horizontal legal relationships.