Remedies for infringements of EU law in legal relationships between private parties (LBF vol. 18) 2019/5.2.2.4:5.2.2.4 The consequences of invalidity: the European Commission vs. Kokott

Remedies for infringements of EU law in legal relationships between private parties (LBF vol. 18) 2019/5.2.2.4

5.2.2.4 The consequences of invalidity: the European Commission vs. Kokott

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236. The Court of Justice can confine the ex tunc effect of a ruling in which it declares an act invalid, but only if there are overriding considerations of legal certainty.1 This criterion forms a high threshold for the Court to actually confine the effect of the nullity of an act by an EU institution2 or a provision in Union law3.4 Should the Court decide that a restriction of the retroactive effect is justified, the case law of the Court demonstrates that in such an event another rule applies:

“Accordingly, when the Court makes use of the possibility of limiting the effect on past events of a declaration […] that a measure is invalid, 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.”5

Notwithstanding the clarity of the fact that Article 5(2) Directive is invalid from 21 December 2012 onwards, the Court of Justice remains silent as regards the scope of applicability and the consequences of this invalidity.6 Clearly, from 21 December 2012 onwards insurance companies must have a calculation system for premiums and benefits that complies with the new European and domestic legislation. But, does the new calculation system apply only to new contracts, or does the invalidity of the Directive and implementation legislation also require the revision of insurance contracts that have been concluded under the old – discriminatory – legislation?7

237. The European Parliament expressed serious concerns about gender discrimination in the European Union and beyond, and called on the European Commission to “take into account the implications of the Test-Achats case in future legislation in order to improve legal certainty, notably and urgently in relation to Directive 2004/113/EC [...]”.8 In response to this, the Commission revised the Guidelines concerning the application of Directive 2004/113/EC.9 The Guidelines are not binding upon Member States, nor upon the Court of Justice.10 The Commission states that the ruling in Test-Achats should be interpreted as requiring that from 21 December 2012 onwards Article 5(1) Directive applies without the possibility to derogate.11 Further, the unisex rule in Article 5(1) Directive applies only to ‘new contracts’ concluded after 21 December 2012.12 Neither Union law nor case law of the Court of Justice provide for a definition of what a ‘new contract’ is. Consequently, the European Commission felt the need13 to introduce such a definition itself and states that the unisex rule laid down in Article 5(1) of the Directive shall apply whenever

“a) a contractual agreement requiring the expression of consent by all parties is made, including an amendment to an existing contract and b) the latest expression of consent by a party that is necessary for the conclusion of that agreement occurs as from 21 December 2012.”14

By this approach the unisex rule can apply also to existing contracts, but only when they are amended and their amendment requires the expression of consent of both parties – in all other cases existing contracts would not fall within the scope of the new Article 5(1) Directive.15 The Commission puts forward two arguments in favour of applying the unisex rule to new contracts only. Firstly, the Commission wishes to avoid a sudden revision of the insurance market. Secondly, referring to the principle of legal certainty, the Commission argues that the insurance contracts concluded before 21 December 2012 were in conformity with the provision in the Directive and in national law.16

238. Advocate General Kokott took a different stance and argued that after the expiry of the transitional period, all insurance premiums would have to be neutral in terms of gender – including premiums of existing insurance contracts:

“It would not be justified to permanently deny insured persons who have been discriminated against, who may, for example, in the past have concluded life assurance contracts, the adjustment to which they are entitled, particularly since such contracts may in many cases continue to run for a period of many years.17 The general principle of non-retroactivity under European Union law does not prohibit a new legal situation from being applied to the future effects of existing situations.18”19

The approach of Kokott is in line with earlier case law in which the Court of Justice demonstrated that the principle of non-retroactivity under Union law does not prohibit that a new legal situation – such as the invalidity of Article 5(2) Directive – is applied to existing situations in terms of their future effects.20

Lastly, as regards the use of gender as an actuarial factor in the calculation of premiums and benefits the Commission emphasises that it must not result in differences in individuals’ premiums and benefits.21 Although in 2014 the Court of Justice had another chance to clarify whether it, as a number of authors have suggested, indeed requires unisex tariffs, it remained silent on that matter.22

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