7.5 Consequences of the disapplication of a legislative provision with a substantive defect in a horizontal legal relationship

333. In some of the cases discussed a legislative provision must be set aside after a substantive compatibility review against Union law in the context of the proceedings between private parties.1 These cases reflect the impact Union law can sometimes have on a horizontal relationship via the disapplication of national legislative provisions that substantively conflict with Union law. This is a type of direct horizontal effect, because the horizontal legal relationship can potentially2 be impacted by the compatibility review and not directly by the rule of Union law as such.3

334. In Laval the collective actions were based upon a provision in Swedish law that was in conflict with Article 56 TFEU. Kücükdeveci and the German cases about the clerk and the baker concerned the dismissal of employees in conformity with a provision in German law on the basis of which the term of notice was calculated without taking into account the years of employment before the 25th birthday of the employee. The German provision was in conflict with the general principle of Union law prohibiting age discrimination. In Mangold and the German case about the production worker, the fixed-term employment contracts at stake were also based upon a provision in German law that was in conflict with the general principle prohibiting age discrimination. Lastly, in Dansk Industri, the employer’s refusal to pay a severance fee was based upon a Danish provision that discriminated on account of age, which was therefore in conflict with Union law.

335. After the disapplication of a legislative provision on the basis of which a private party has acted4 or adopted a particular contractual clause5, the juridical basis for this conduct vanishes. The disapplication of the problematic provision has ex tunc effectand thus dates back in time. Each of the national courts in the cases mentioned in no. 334 assessed the lawfulness of the particular conduct or the validity of the contractual clause in question and determined the legal consequences by applying remaining legislative provisions ex post facto.6 The case studies illustrate that the ex post facto application of remaining legislation can result in new obligations for the private party that first relied upon the problematic legislative provision. These new obligations in turn result in the effective judicial protection of the rights infringed in the first place. The new obligations resulted from the ex post facto application of – a combination of – remaining leges speciales, or of general rules on the validity of juridical acts, on the modification of a contractual relationship, or on civil liability.

336. As regards the ex post facto application of remaining leges speciales, we have seen that when a discriminatory legislative provision on fixed-term contracts was disapplied, the remaining rules on the duration of employment contracts applied. In the case concerning the production worker who was employed under a fixed-term contract, the Bundesarbeitsgericht held that the contractual term regulating the limited duration of the employment contract was null and void (unwirksam).7 After determining the ineffectiveness of the clause that stipulated the fixed duration of the employment contract, the Bundesarbeitsgericht applied the remaining legislation on the duration of contracts. It held that any limitation of the duration of the employment contract could not be justified and that the employer could not successfully bring a claim for the protection of his legitimate expectations.8 Consequently, the employee was entitled to an open-ended employment agreement.9

337. In Dutch law, Article 7(1) subparagraph c) of the Act on equal treatment on the basis of Age in Employment (Wet Gelijke Behandeling op grond van Leeftijd bij de arbeid (WGBL)) stipulates that different treatment on account of age can be objectively justified when the different treatment has a legitimate aim and is appropriate and necessary to achieve the aim pursued: a classic proportionality test, be it that the element of proportionality stricto sensu is absent.10 If there is no justification for the age discrimination, Article 13 WGBL stipulates that clauses that discriminate on account of age are null and void. Hence, when a provision of national law that was relied upon by an employer that adopted a discriminatory clause in the employment agreement would be set aside because it is in conflict with Union law, the particular contractual clause – that now lacks statutory legal ground – would be null and void according to Article 13 WGBL. As a consequence of this nullity, the clause regulating the fixed duration of the employment contract has never existed. As a result, the employment contract has an open-ended character, unless the duration is limited on the basis of other provisions (which are compatible with Union law). This is illustrated by the case about the troublesome KLM stewardess, who successfully challenged the fixed-term clause in her employment contract.11 Nevertheless, given the problematic behaviour of the stewardess, the court dismissed the woman’s claim to be factually employed again in her old position. The court arrived at this conclusion after having balanced the interests of both KLM and the stewardess. Instead, the parties had to find another appropriate position for the woman.

338. In cases falling outside the scope of leges speciales like the WGBL the validity of a juridical act that is in conflict with Union law has to be assessed on the basis of the general provisions on nullity or partial nullity (Article 3:40 (1) BW in conjunction with Article 3:41BW).12 In light of the absence of direct horizontal effect of directives, the mere fact that a juridical act is in conflict with what a directive requires, is however not sufficient to render the particular juridical act null and void per se.

339. Further, we have seen that employers were confronted with the obligation to pay an additional sum of money to a former employee on the basis of a prolonged term of notice that, other than the originally applied term of notice, did not constitute age discrimination.13 In Kücükdeveci as well as in the German case of the clerk, the statutory term of notice applicable to their dismissal was discriminatory and therefore inapplicable. Whereas in both cases the German courts confirmed that the dismissal as such was not discriminatory and therefore remained unaffected, the term of notice was, according to remaining law, prolonged based on a calculation that was not discriminatory. As a result of the extended term of notice applicable to the respective dismissals, the employers were held to pay an additional amount equal to the pay for the extended period. This seems a reasonable, proportionate solution from the perspective of the employee, whose right is protected. The employer, however, is confronted with a new financial obligation resulting from the disapplication of the legislative provision he based its calculation for the term of notice on. Nevertheless, it seems reasonable, and from a Union law perspective also necessary, that in the balancing of interests the employee’s protection against age discrimination outweighs the purely financial interest of the employer.

For the sake of accuracy, it should be emphasised that this type of modification of the horizontal legal relationship in conformity with remaining law is different from civil liability to pay damages.

340. Lastly, I recall that in Laval, besides establishing liability on the basis of the direct horizontal effect of Article 56 TFEU, the Arbetsdomstolen disapplied §42(3) Co-Determination Act because it was in conflict with Article 56 TFEU. As a consequence, the remaining, general rule on collective actions ‘revived’ and applied ex post facto to the collective actions initiated by the trade unions. The ex tunc assessment of the collective actions against §42(1)Co-Determination Act resulted in the liability of the trade unions to pay damages.14 This course of events is in line with case law of the Court of Justice.15

341. In conclusion, in each of the cases in which a national provision was disapplied due to its substantive incompatibility with a fundamental principle of Union law, the private party that had breached that principle by relying on the particular national provision was confronted with new obligations. As such, the specific obligations imposed in these concrete cases – i.e. the remedies determined – respect the ex tunc effect of rulings of the Court of Justice and support effective judicial protection and the effectiveness of Union law.