8.4.3 Potential solutions: the protection of legitimate expectations or compensation for loss resulting from administrative acts?

419. In Laval the trade unions had relied on the Swedish legislation that allowed them to take their actions as well as on the interlocutory decision by the Arbetsdomstolen that stated that it would be improbable that the collective actions were unlawful. Although the decision of the Arbetsdomstolen appeared to be a fertile source for criticism1, it is far from remarkable that a national court adapts its position as a result of a ruling delivered by the Court of Justice. Despite the fact that it has been argued that the Swedish State could incur liability for the change of position of the Arbetsdomstolen, on the basis of Köbler it would be impossible to the hold the Swedish State liable for the interlocutory decision of the Arbetsdomstolen.2 Further, the trade unions tried to challenge the constitutionality of the judgment of the Arbetsdomstolen before the Högsta Domstolen, but their request was denied.3 As far as I know, no other action for State liability was brought.

420. In the horizontal proceedings in for instance Kücükdeveci and Dansk Industri the argument raised by the employers that they had legitimately relied upon legislation of the Member State did not bring solace in the sense that they could escape from the consequences of the disapplication of the particular problematic legislative provision – e.g. being held liable or having to comply with remaining legislative provisions.4 To my knowledge, none of the employers involved in the cases discussed have brought an action against the German State claiming State liability for wrongful implementation and/or compensation for the breach of their legitimate expectations.

I recall that in view of the effectiveness and the supremacy of Union law, the party that relied upon the problematic legislation can as a rule not successfully invoke its legitimate expectations in the context of the horizontal proceedings to escape civil liability or modification of the horizontal legal relationship.5 The reason for this is that the Court of Justice prefers the effective judicial protection of the right infringed over the protection of legitimate expectations of the party breaching the right. While the Court of Justice has confirmed this approach only in relation to the principle prohibiting age discrimination,6 it is, in view of the Court’s considerations, likely that it applies to other Union rights as well. In that sense, national courts must conclude that in such horizontal proceedings the legitimate expectations of the party that relied on the problematic legislation cannot be protected.

421. The question arises whether parties are entitled to compensation for damages by the State on the basis of the infringement of legitimate expectations in the event that they suffer damages as a result of the disapplication of national legislation that is substantively incompatible with Union law. In principle, this question is governed by national law and not by Union law.7 After all, such vertical proceedings do not involve the effective judicial protection of a right that Union law confers upon a private party: it concerns the breach of the legitimate expectations of a private party resulting from the disapplication of legislation as a result of a failure of the Member State to comply with its obligations under Union law, which – as discussed in the preceding sections – do not confer a subjective right on private parties. In such a (national) procedure the good faith of the private party that claims the protection of its legitimate interests is essential. In that respect, the (potential) knowledge of a private party as concerns the content and effect of a rule of Union law must be taken into account in the assessment of whether the expectation that the national provision applied was legitimate and whether, in the specific circumstances of the case, the State is liable to compensate damages.8 Depending on the approach taken as well as on the Memer State regime applicable, the most plausible legal bases of the claim for the compensation aiming at the protection of legitimate expectations are the liability for unlawful conduct of the State (onrechtmatige overheidsdaad; Haftung der Behörde)9 or the right to compensation for a lawful act of the State.10

422. As regards the national rules applicable to such situations it is argued in (German) literature that the damages suffered by a party as a result of the disapplication of legislation due to its incompatibility with Union law primarily result from a lawful act and not from an unlawful act of the State.11 That is, the damages directly result from the fact that a national court disapplies the particular legislation: without the horizontal proceedings in which the legislation was disapplied, the private party would not have suffered these damages. On the basis of the case law of the Court of Justice national courts are obliged to disapply such legislation that is substantively incompatible with Union law. The disapplication of such legislation is therefore a lawful act that causes damages for the party that relied upon the applicability of the legislation. In such an event the concept of the offsetting of the disadvantages or compensation for loss resulting from administrative acts (nadeelcompensatie; Nachteilsausgleich) could possibly bring solace to the party that suffers damages as a result of the disapplication of the problematic national legislation.12

Thus far, a duty to compensate damages resulting from lawful acts of the Union or of Member States is not recognized in Union law.13 On the contrary, in FIAMM the Court of Justice coldshouldered a duty to compensate damages resulting from lawful acts of the Union.14 The arguments employed by the Court may apply in the same way to lawful acts of Member States, be it that this does not preclude the application of national regimes.15 On the other hand, in the literature it has been argued that compensation for damages resulting from lawful acts on the basis of égalité actually does fit within the system of Article 340 TFEU.16 Be that as it may, it goes beyond the scope of this study to elaborate on national regimes for the protection of legitimate expectations and compensation for loss resulting from administrative acts.17 In any case, it cannot be accepted that a private party that, in horizontal proceedings, suffers damages resulting from the disapplication of legislation incompatible with Union law, cannot come knocking on the Member State’s door to receive compensation for those damages, which after all result from the failure of the Member State to comply with Union law in the first place.