8.2.3 Effective judicial protection in principle outweighs the protection of legitimate expectations

367. As indicated in §8.2.1, when the Court of Justice does not restrict the temporal effect of its ruling or adopt a transitional period for the ruling to take effect, the principal rule applies: the ruling applies ex tunc.1 In the context of the case studies in Part I, the interpretations given to Union law in for example Angonese, Laval, Mangold, Kücükdeveci, AMS, and Dansk Industri apply ex tunc in all legal relationships to which the relevant rule applies, insofar as their legal effects have not been fully exhausted. In Part I and Part II it was demonstrated that the ex tunc application of the interpretations given to Union law by the Court of Justice can result in the imposition of new obligations to a private party that was not aware – and in some situations did not have to be aware – of the particular effect given to the rule of Union law in question.2 The imposition of new obligations as a result of the private party’s unconscious infringement of Union law can be at odds with the principle of the protection of legitimate expectations and the principle of legal certainty.3 This is especially true for obligations imposed upon parties that, in good faith, had relied upon national legislation that turned out to be incompatible with a rule of Union law and therefore had to be disapplied.

368. In a number of cases discussed in Chapter 4, the respective German courts held that the employers could not successfully invoke the protection of their legitimate expectations in the event that they were confronted with the disapplication of a provision of national law that was incompatible with Union law.4 Firstly, in some cases it was concluded that the legal consequences of the disapplication of the German provisions for the employers did not constitute a serious economic risk, nor a threat to their existence and that therefore the respective employers could not successfully invoke the protection of their legitimate expectations.5 Secondly, a number of German courts have stated that the employer in the case in question could not invoke the protection of the legitimate expectation that the legislative provision upon which it had relied was applicable, since in German literature the compatibility of this very provision with Union law was highly questioned.6 This consideration implies that private parties in Germany are expected to be aware of case law and legal literature on the compatibility of domestic provisions with general principles of Union law, and that insofar as they are not, a claim for the protection of legitimate expectations is unlikely to succeed. This far-reaching approach reflects the importance of anticipating new developments on the basis of rulings of the Court of Justice, not only by courts and legislatures, but also by private parties and legal practitioners. The reticence shown by these German courts is in line with the Court of Justice’s case law concerning the principles of effectiveness, effective judicial protection and the supremacy of Union law.7

Almost a decade later, in Dansk Industri the Danish Supreme Court wished to inquire how the disapplication of national legislation incompatible with the general principle prohibiting age discrimination relates to the principle of legal certainty and the principle of the protection of legitimate expectations and whether national courts are permitted to, in the horizontal proceedings, weigh the interests of the parties involved resulting in the protection of the legitimate expectations of the party that relied on the problematic legislation.8

369. The principle of legal certainty requires that legislation is clear and precise, so that parties subject to that legislation are able to ascertain unequivocally what their rights and obligations are and may act accordingly.9 The fact that the Court of Justice interprets and, in doing so, clarifies the scope and content of provisions of Union law with ex tunc effect, is not necessarily contrary to the principle of legal certainty, as long as the Court refrains from adopting an interpretation that is discordant with earlier interpretations.

370. The principle that legitimate expectations have to be protected is connected to, or even the corollary of, the principle of legal certainty.10 Whereas legal certainty is based primarily on objective criteria, legitimate expectations are based on merely subjective criteria related to the individual case in which the claim for the protection of legitimate interests is raised.11 Parties that act in good faith on the basis of law as it is or seems to be, should not be frustrated in those expectations.12

371. In response to the questions of the Danish Supreme court, the Court of Justice held that:

In other words, national courts must disapply the problematic provision ex tunc and subsequently determine the legal consequences of the disapplication for the horizontal legal relationships ex post facto.14 By allowing national courts to protect the legal certainty and legitimate expectations of private parties in such cases, the effectiveness of Union law would be jeopardized.15 The Court of Justice argues that the protection of legal certainty and the legitimate expectations of the party that relied on the legislation in good faith would de facto result in the restriction of the temporal effect of the Court’s interpretation16, which would then not be applicable in the proceedings at hand.17

372. As discussed in the previous sections, a national court is not permitted to restrict the temporal effect of an interpretation given to Union law by the Court of Justice. Whether or not there are truly exceptional circumstances or overriding reasons of legal certainty that justify a restriction of the temporal effect of a ruling, is a matter that is exclusively decided upon by the Court of Justice.18 The Court seldom concludes that such exceptional circumstances indeed occur19, which makes a claim for the protection of legal certainty and legitimate expectations virtually prospectless. Consequently, the interpretation of Union law by the Court of Justice must be applied by national courts “even to legal relationships which arose and were established before the judgment ruling on the request for interpretation”.20 In addition, as noted already in no. 365, “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.”21 Consequently, national courts have barely any elbowroom in horizontal proceedings in which national legislation is incompatible with Article 21 Charter as concretised by a directive, within the scope of which the particular national legislation falls.

373. In Bauer and Broûonn and Cresco Investigation the Court of Justice has added a building block to this branch of case law. In Bauer and Broûonnthe Court of Justice held that Article 31(2) Charter is unconditional and sufficient in itself to confer a subjective right upon a private party, which right can be invoked as such.22 As a result, in horizontal proceedings, national courts must disapply legislation that is incompatible with this provision, and “employers cannot rely on that national legislation in order to avoid payment of the allowance in lieu which they are required to pay pursuant to the fundamental right guaranteed by that provision”.23 In the same vein as Dansk Industri, the Court of Justice blocks the possibility for employers to claim protection of their legitimate expectations concerning the applicability of national provisions that are incompatible with Article 31(2) Charter.

374. In January 2019, with reference to the most salient consideration in Egenberger24, the Court held in Cresco Investigation that:

In this case, the particular effect of Article 21 Charter resulted in the broader application of a national legislative provision instead of its disapplication. As a result, employers were obliged to entitle all employees working on Good Friday to receive an additional allowance, instead of only those who have a specific religious background. The reason for this solution of the Court lies in the fact that disapplication of the particular national provision would have been detrimental to all employees as none of them would be entitled to an additional allowance anymore. The Court of Justice states:

375. The rulings of the Court in Dansk Industri, Bauer and Broûonnand Cresco Investigation sharpen the obligation of national courts to ensure the full effect and the effective judicial protection of Union law by disapplying national legislation, and by requiring them to grant private parties the protection afforded by Union law. From these rulings it follows that national courts are not allowed to protect the legitimate expectations of the private party that relied upon that legislation instead.27 The rulings can be explained on the basis of the effectiveness of Union law. Nonetheless, the disapplication of national legislation can have significant consequences for the private party that relied on the problematic national law in good faith, and that is subsequently confronted with new obligations. According to the Danish Supreme Court national courts must be free to conclude that in such cases the protection of legal certainty and legitimate expectations outweighs the protection of the right to non-discrimination. This was one of the reasons why the Danish Supreme Court refused to obey the Court of Justice’s ruling in Dansk Industri.28 From this case as well as from the criticism to Laval – in which basically a similar situation occurred29 – it is clear that the rather one-dimensional approach taken by the Court of Justice is rife with controversy, in view of the repercussions of that approach on the private party that in good faith relied on national law.30 In my view, that controversy could be taken away if parties such as the German and Danish employers and the Swedish trade unions would have the option to receive restitution from the Member State that failed to comply with Union law. §8.4 demonstrates that today such options are however fairly limited.

376. Lastly, in the context of Laval the trade unions and two judges argued that the protection of legal certainty and legitimate expectations justified mitigation of the amount of damages payable.31 Mitigation of damages can indeed soothe the impact of the disapplication of a national provision that a private party relied on and that now has to be disapplied. However, if applied in the wrong way, mitigation of damages is detrimental to the effective judicial protection of the party whose right was infringed. After all, the damages payable aim at restoring the patrimonial situation of the aggrieved party; mitigation of the damages payable may jeopardizes restoration and may consequently result in an ineffective remedy.

In the build-up to its final ruling, the Arbetsdomstolen was requested by the trade unions to refer new preliminary questions to the Court of Justice concerning, amongst others, the possibility to mitigate damages payable.32 However, the Arbetsdomstolen neither saw reason to refer such questions to the Court of Justice, nor to mitigate the damages payable by the trade unions. Besides, in the concrete case of Laval it can be argued that in view of earlier case law of the Court of Justice in relation to the free movement of workers, the direct horizontal effect of the freedom to provide services could have been anticipated. Therefore, the expectations of the trade unions that their actions were compatible with Union law were not legitimate.33

377. In my view, and with an eye on the effectiveness and the effective judicial protection of Union law, mitigation of amounts payable for infringements of rights stemming from Union law with the aim to honour the legitimate expectations of the party that relied on the problematic national legislation is not allowed. That does however not mean that national rules on mitigation of damages cannot be applied at all to cases in which a right stemming from Union law is infringed; on the basis of the principle of equivalence they apply to cases falling within the scope of Union law in the same way as they do in purely domestic cases, except that damages can simply not be mitigated with the aim to soften the impact of the disapplication of a national provision for the party that is confronted with the new obligations.