5.6.2 A transitional period that defers the effect of a ruling

258. Besides the question to which legal situations and relationships the invalidity applies, the question arises whether the invalidity has immediate effect or whether the Court of Justice has adopted a transitional period for the invalidity to take effect. In that respect, the restriction of the temporal effect of a ruling is distinguished from the adoption of a transitional period. The first relates to the scope of the invalidity and the latter solely defers the effect of a ruling, but does not as such answer the question to which legal relationships the ruling applies after the transitional period has expired.1 The Court of Justice can decide to suspend the effect of the ruling by adopting a transitional period that defers the effect of the ruling. In Test-Achats the Court adopted such a transitional period for the invalidity of the directive to take effect without giving insight into its considerations. The main reason for the Court’s decision to restrict the retroactive effect of the nullity must have been to avoid an unwanted domino effect caused by immediate invalidity which would result in chaotic scenes in the insurance sector, in which oodles of contracts would have to be revised instantaneously, which would be at odds with the principle of legal certainty.2 The estimated quantity of legal relationships that would be affected by the invalidity of a directive and the interests of the parties involved are of relevance for adopting a transitional period on the basis of which the effect of the invalidity is deferred.3 Besides the impact on existing insurance agreements, in respect of new insurance contracts legislatures must adopt new laws on this matter and the insurance companies offering insurances in the European Union would have to design new rules for calculation of premiums and benefits.4 Yet, the adoption of a new calculation system requires time. It would thus be fair to allow both national legislatures and insurance companies a reasonable time to modify their laws and their calculation systems, respectively.5

259. As regards the decision whether or not to adopt a transitional period, the Court of Justice has to balance the rights and interests involved. That is, on the one side, the protection of the particular right or general principle that is infringed by the invalid instrument and, on the other side, the quantity of legal relationships affected and the interests of the parties involved, including the principle of legal certainty and the protection of legitimate expectations. Cases in which the Court of Justice adopts a transitional period are unique; in most cases, the Court either holds that there are no overriding considerations of legal certainty6 or does not touch upon the issue at all. In the Digital Rights case, for example, the Court gave preference to the immediate protection of the right to privacy by deciding – contrary to what Advocate General Cruz Villalón advised7 – that the Data Retention Directive was invalid in its entirety and with immediate effect.8 Also, in the Schrems judgment concerning the European Commission’s Safe Harbour Decision, the Court of Justice states that the Decision is invalid without paying further attention to the consequences of the immediate invalidity.9 In view of the questions arising as a result of the rather opaque rationale of the Court of Justice’s rulings in these cases, it would be desirable if the Court could provide for transparency as regards the decision to adopt or refuse a transitional period. Also, as the restriction of the temporal effect of a ruling is distinguished from the adoption of a transitional period, it would be applaudable if the Court would always consider both options in cases concerning the invalidity of an instrument, and when it interprets Union law in a way that may have a considerable impact on existing and future horizontal legal relationships. If the Court would do that, it would at least avoid the course of events that took place after the ruling in Test-Achats.

260. As discussed in §5.2.2.2, in Test-Achats the Court of Justice adopted a transitional period, but remained silent as regards the scope of the invalidity of the directive. The European Commission issued Guidelines in which it stated that the unisex rule of Article 5(1) of the Directive applies only to contracts concluded after 21 December 2012 and to amendments of existing contracts that require mutual consent.10 This implies that as long as their contracts remain unamended, insured persons who have been discriminated against in relation to the contract that they concluded before 21 December 2012, remain subject to discrimination which is prohibited by the law in force.11

261. The possible concern of the European Commission that the legal certainty and the legitimate expectations of private parties could be jeopardised by acute and retroactive effect of the unisex rule is understandable.12 The transitional period adopted by the Court alleviated the implications of invalidity of Article 5(2) Directive and the corresponding implementation measures in the sense that the parties involved were given time to adapt to the new legal situation. In spite of this, according to the Commission the unisex rule applies only to new contracts and amended contracts insofar as the amendment requires mutual consent.13 It is hard to grasp why existing legal relationships in which the contract is not amended accordingly14 and in which the insured party is discriminated on account of gender are excluded from the unisex rule when parties are awarded time to adapt, in any case.

262. Member States are not legally bound by the Commission Guidelines and can thus deviate from them. In that respect, national transitional law may be of relevance for existing horizontal legal relationships as regards the legal consequences of the invalidity and the applicability of the new legal situation. Given the principles of effectiveness and effective judicial protection, it is unlikely that Union law precludes a Member State from regulating that, for the sake of the protection of the right to non-discrimination on account of gender, from 21 December 2012 onwards the unisex rule applies to both existing and new legal relationships. Differently however, national transitional law may stipulate that legal relationships that came about in conformity with the law in force at the time of establishment of the legal relationship, remain intact even when they are in conflict with the new legal situation – i.e. new legislation and/or invalidity of the legislation.15 Applied to the case of Test-Achats, such a rule means, similar to the Commission Guidelines, that existing legal relationships in which the insured party is discriminated on account of gender are excluded from the unisex rule and that, unlike the Commission Guidelines, amendments of existing contracts may be excluded too. Such a rule in transitional law may be at odds with the principle of effectiveness, effective judicial protection and the general principle of equal treatment between men and women.16