Bundesverfassungsgericht

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The Mangold judgment of the European Court of Justice does not transgress Community competence in a constitutionally objectionable manner

Press Release No. 69/2010 of 26 August 2010

Order of 6 July 2010
2 BvR 2661/06

The complainant is an enterprise involved in automotive supplies which concluded several fixed-term employment contracts in February 2003 with previously unemployed individuals without having objective reasons for the fixed term of employment. According to the version of § 14.3 sentence 4 of the Law on Part-Time Working and Fixed-Term Contracts (Teilzeit- und Befristungsgesetz - TzBfG) which was applicable at that time, it was possible to deviate from the principle that objective reasons are required to give rise to a fixed term of employment if the employee had already reached the age of 52 on commencement of the employment relationship.

The plaintiff of the initial proceedings, who had been employed by the complainant on this basis, later asserted a claim vis-à-vis the complainant with regard to the ineffectiveness of his fixed-term employment contract. His request for a finding that the employment relationship was to continue and for continued employment was successful before the Federal Labour Court (Bundesarbeitsgericht).

The Federal Labour Court found that the employment relationship between the parties had not ended as a result of its fixed-term nature. It further stated that national courts could not apply § 14.3 sentence 4 of the Law on Part-Time Working and Fixed-Term Contracts because they were bound in this respect by the judgment of the European Court of Justice of 22 November 2005 in Case C-144/04 Mangold ([2005] ECR I-9981). A provision of national law such as § 14.3 sentence 4 of the Law on Part-Time Working and Fixed-Term Contracts was said to be incompatible with Anti-Discrimination Directive 2000/78/EC and the general principle of non-discrimination in respect of age according to this judgment. Since the judgment of the European Court of Justice was absolutely clear, there was no need for a renewed submission. Although the agreement on a fixed term of employment which was the subject of the dispute was reached prior to the Mangold judgment, the Federal Labour Court refused to apply § 14.3 sentence 4 of the Law on Part-Time Working and Fixed-Term Contracts for reasons of the protection of legitimate expectations under Community or national law.

The complainant considers its contractual freedom and its right to its lawful judge to have been violated by the judgment of the Federal Labour Court. It asserts that a violation of its contractual freedom has taken place from two different points of view. It is said to emerge, firstly, from the Federal Labour Court having taken the Mangold judgment of the European Court of Justice as a material basis, with which the latter Court was said to have transgressed its competences in several respects. In the view of the complainant, a violation of its contractual freedom furthermore follows from the Federal Labour Court having not granted sufficient protection of its legitimate expectations. Finally, it is said that the Federal Labour Court should have referred to the European Court of Justice the question as to whether principles of protection of legitimate expectations under Community or national law did not require the Mangold judgment to be subject to a time restriction.

The Second Senate of the Federal Constitutional Court rejected the constitutional complaint as unfounded. The ruling was handed down with 6:2 votes with regard to the grounds and with 7:1 votes with regard to the outcome. Justice Landau has added a dissenting opinion to the ruling.

In essence, the decision is based on the following considerations:

1. The complainant's contractual freedom has not been violated because the impugned judgment of the Federal Labour Court is based on a non-permissible further development of the law on the part of the European Court of Justice, and the Mangold judgment should therefore not have been applied in Germany as a so-called ultra vires act.

As the Senate found in its Lisbon judgment, ultra vires review of acts of the European bodies and institutions by the Federal Constitutional Court may only be exercised in a manner which is open towards European law. It can hence only be considered if a breach of competence on the part of the European bodies and institutions is sufficiently qualified. This is contingent on the acts of the authority of the European Union being manifestly in breach of competences and the impugned act leading to a structurally significant shift to the detriment of the Member States in the structure of competences between Member States and the European Union.

When reviewing acts of the European bodies and institutions, the Federal Constitutional Court must in principle adhere to the rulings of the European Court of Justice as providing a binding interpretation of Union law. Insofar as the European Court of Justice has not yet clarified the questions which have arisen, it should therefore be afforded the opportunity to interpret the Treaties prior to the acceptance of an ultra vires act, as well as to rule on the validity and interpretation of the acts in question.

Measured against this, the Federal Labour Court has not ignored the scope of the complainant's contractual freedom. At any rate, the European Court of Justice has not violated its competences by virtue of the outcome found in the Mangold judgment in a sufficiently qualified manner.

This particularly applies to the derivation of a general principle of non-discrimination in respect of age. It is irrelevant whether such a principle could be derived from the constitutional traditions common to the Member States and their international agreements. For even a putative further development of the law on the part of the European Court of Justice that would no longer be justifiable in terms of legal method would only constitute a sufficiently qualified infringement of its competences if it also had the effect of establishing competences in practice. The derivation of a general principle of non-discrimination in respect of age would however not introduce a new competence for the European Union, nor would an existing competence be expanded. In this sense, Anti-Discrimination Directive 2000/78/EC had already made non-discrimination in respect of age binding for legal relationships based on employment contracts, and hence opened up discretion for interpretation for the European Court of Justice.

2. The complainant's contractual freedom has also not been violated because the impugned judgment of the Federal Labour Court did not grant any protection of legitimate expectations.

Confidence in the continuation of a law can be affected not only by the retroactive finding of its invalidity by the Federal Constitutional Court, but also by the retroactive finding of its inapplicability by the European Court of Justice. The possibilities for Member States' courts to grant protection of legitimate expectations are however pre-defined and limited by Union law. Protection of legitimate expectations can accordingly not be granted by virtue of the Member States' courts applying a national provision the incompatibility of which with Union law has been found for the time prior to the issuance of the preliminary ruling.

No indications are found in the case-law of the European Court of Justice, by contrast, that Member States' courts are precluded from granting secondary protection of legitimate expectations by compensation. To ensure constitutional protection of legitimate expectations, one must hence consider in constellations of retroactive inapplicability of a law as a result of a ruling of the European Court of Justice to grant compensation domestically for a party concerned having trusted in the statutory regulation and having made plans based on this trust.

Measured by this, the Federal Labour Court has not ignored the scope of protection of legitimate expectations that is to be constitutionally granted. Because of the primacy of application of Community and Union law, it was allowed to not consider itself able to grant protection of legitimate expectations by confirming the rulings of the previous instances that had been handed down in favour of the complainant. A claim to compensation against the Federal Republic of Germany without a violation of the primacy of application for the loss of assets which the complainant suffered by virtue of the employment relationship being extended for an indefinite period of time was not the subject-matter of the proceedings before the Federal Labour Court.

3. The complainant was, finally, not denied its lawful judge by virtue of the Federal Labour Court not submitting the case to the European Court of Justice. The Federal Labour Court justifiably presumed in this respect that it was not obliged to effect such a submission.

The Federal Constitutional Court confirms its case-law in this context, in accordance with which the standard of arbitrariness which it generally applies when interpreting and applying competence norms also applies to the obligation to make a reference in accordance with Art. 267.3 TFEU (see Decisions of the Federal Constitutional Court (Entscheidungen des Bundesverfassungsgerichts - BVerfGE) 82, 159 ). The Federal Constitutional Court is not obliged by Union law to fully review the violation of the obligation to submit under Union law and to orientate it in line with the case-law that has been handed down by the European Court of Justice on this matter (different view in BVerfG, Order of 3rd Chamber of the First Senate of 25 February 2010 - 1 BvR 230/09 -, NJW 2010, p. 1268 ).

Dissenting opinion of Justice Landau:

Justice Landau takes the view that the Senate majority is taking too far the requirements as to the finding of an ultra vires act by the Community and Union bodies by the Federal Constitutional Court. The Senate majority is said to have transgressed the consensus on which the Lisbon judgment was based by requiring not only a "manifest", but also a "sufficiently qualified" breach of competences. In the Senate's opinion, the breach must not only be manifest, but it must additionally lead to a structurally significant shift in the arrangement of competences between Member States and a supranational organisation. Hence, the Senate majority is said to be ignoring the fact that any exercise of sovereign power had to have a democratic legitimation according to the Lisbon judgment. This is however said not to be the case if the Community and Union bodies violate their competences.

The European Court of Justice is said to have manifestly transgressed the competences granted to it to interpret Community law with the Mangold judgment. The question left open by the Senate majority, namely whether the European Court of Justice had left the field of justifiable interpretation, was manifestly to be answered in the affirmative. It was said in particular to be not justifiable to derive a specific prohibition of age discrimination from the constitutional traditions common to the Member States or their international agreements.

Under these circumstances, it is said that the Federal Labour Court was prevented from invoking the Mangold judgment, setting aside § 14.3 sentence 4 of the Law on Part-Time Working and Fixed-Term Contracts and granting the action against the employment relationship being extended for an indefinite period of time. Since the Federal Labour Court had not been free to openly deviate in its ruling from the case-law of the European Court of Justice, the Federal Labour Court should have debated or deliberated on all available possibilities to solve the immanent tensions.