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The Charter, the Court - and the Crisis

Catherine Barnard

PAPER NO. 18/2013

AUGUST 2013

The Charter, the Court - and the Crisis

Catherine Barnard, Trinity College, Cambridge*

A. Introduction The incorporation of the Charter of Fundamental Rights into the EU Treaties is the most profound

Constitutional change in the EU in the last decade. It has created a seismic shift in the attitude of the

Court of Justice to the Charter of Fundamental Rights and to human rights more generally. This has

led to some key decisions, in cases such as Volker and Schecke1 and Test-Achats,2 where the Court

has declared EU legislative provisions contrary to the Charter. In other cases the strong hand of the

Charter can be felt orientating the direction of travel of the reasoning and the final.

Yet the same Court, in Pringle,3 has said that the conclusion of the European Stability Mechanism

Treaty did not infringe the principle of effective judicial protection under Article 47 of the Charter

because ‘the Member States are not implementing Union law, within the meaning of Article 51(1) of

the Charter, when they establish a stability mechanism such as the ESM where the [TEU and TFEU]

do not confer any specific competence on the Union to do so’. The same may apply to the Treaty on

Stability, Coordination and Governance (TSCG), since it, too, is an agreement between 25 Member

States and not (yet) part of EU law. More generally, the Court has so far refused to apply the Charter

to national measures which have been taken as part of the conditionality for ‘bail-outs’ granted by

EU/IMF and national funds.

This suggests a developing twin-track approach: on the one hand the Charter will be applied with

vigour to non-crisis situations; on the other, the Charter will not be applied to rules arising out of the

EU’s response to the financial and economic crisis. Ultimately, such an approach, with crisis related

measures in the slow lane, is not legally, politically or practically sustainable. While it is

understandable that the Court does not wish to jeopardise the political compromises - some drawn

up with great care, others hurriedly pulled together in the middle of the night – necessary to

respond to the crisis, the tools it has used to ring fence such measures from the scrutiny of EU law,

and the Charter in particular, have been pretty blunt. Further, a closer examination of the terms of

the TSCG suggest that the stark dichotomy between EU law, to which the Charter will apply, and

non-EU law, to which it will not, cannot be sustained in the longer term. If this is correct, this raises

the question as to how the Court might decide to apply the Charter to such politically sensitive

issues.

This paper is structured as follows. It will begin by arguing in section B that the Charter’s arrival has

in areas not directly related to the crisis already had a profound effect on the EU’s legal and political

scene. This section will distinguish between three, overlapping effects of the Charter: (1) direct

*I am grateful to Michael Waibel for his comments. Earlier versions of this paper have been presented at conferences and seminars organised by University Carlos III, Faculty of Law, University of Zagreb and the Court of Justice of the European Union. 1 Case C-92/09 and C-93/09 Volker and Schecke, judgment of 9 November 2010.

2 Case C–236/09 Test-Achats [2011] ECR I–000.

3 Case C-370/12 [2012] ECR I-000, para. 179.

impact, where the Charter has resulted in concrete reforms to EU and national law; (2) indirect

impact, where the Charter has steered the development of other rules and possibly precipitated a

reconsideration of earlier hierarchies; and (3) shadow effect, where the Charter itself is not cited but

the decision can be understood against the backcloth of the Charter.

Second, the paper will turn to examine, ‘crisis-related’ situations where the Charter has, so far, had

little impact, namely the reforms to national labour law required by the troika in the wake of the

financial crisis (section C). It will then consider whether the Charter might apply to measures

adopted under the ESM and TSCG. Finally, it will examine how the Court might apply the Charter

when it eventually comes to hear a challenge to a national reform under the Charter. Section D

concludes.

B. The Ways in which the Charter’s Presence has been felt in ‘non-

crisis’ situations

1. The direct impact of the Charter

1.1 Striking down legislative acts of the EU institutions

With its decision in Kücükdeveci,4 decided shortly after the Charter came into force, the Court made

its intention plain: the Charter was going to change things, and change things it did, not only in

respect of the facts of Kücükdeveci (on which see further below) but also in respect of the impact of

the Charter on the EU institutions.

First, in Volker and Schecke5 the Court struck down EU legislation, for the first time,6 for its

incompatibility with fundamental rights, and the Charter in particular. The case concerned an EU

Regulation requiring individuals to agree that, in order to receive money from EU agricultural funds,

their name, address and the amounts they receive had to be recorded on a publicly accessible

website. In a robust retort to its critics that it doesn’t take rights seriously,7 the Court used the

Charter to strike down the Regulation for its incompatibility with an individual’s fundamental right to

privacy, in part because the Council and Commission had failed to consider whether there were any

less restrictive alternatives to achieve the objective of transparency.

Second, in Test-Achats8 the Court also declared a provision of Directive 2004/113 on equal

treatment between men and women in the access to, and supply of, goods and services to be

incompatible with the Charter. Article 5(1) of the Directive laid down the principle of equal

treatment; Article 5(2) allowed Member States to derogate from that principle to allow sex-based

actuarial factors to calculate insurance premiums. The Court said that because Article 5(2) enabled

the Member States ‘to maintain without temporal limitation an exemption from the rule of unisex

premiums and benefits, this works against the achievement of the objective of equal treatment’,9

contrary to Articles 21 and 23 of the Charter. The Court therefore ruled that the derogation was

4 Case C-555/07 Kücükdeveci v Swedex GmbH & Co. KG, judgment of 19 January 2010, para. 22.

5 Case C-92/09 and C-93/09 Volker and Schecke, judgment of 9 November 2010.

6 Although cf Joined Cases C-402/05P and C-415/05P Kadi and Al Barakaat International [2008] ECR I-6351.

7 J. Coppel and A. O’Neill, “The European Court of Justice: Taking Rights Seriously” (1992) 14 Legal Studies 227

8 Case C–236/09 Test-Achats [2011] ECR I–000.

9 Para. 32.

invalid from 21 December 2012, the date when the Member States had to review their use of the

derogation. The decision was met by a chorus of disapproval in those states, such as the UK, which

have taken advantage of the derogation.10 Yet the logic of the ruling is clear: sex-based actuarial

factors are based on stereotypical assumptions which are incompatible with the case-by-case, merit-

based approach that should be taken to decision-making.

Given that the Court has shown itself increasingly willing to strike down EU legislation for breach of

the Charter, this means that pre-screening of draft legislation for its compatibility with the Charter

has become all the more important. The Commission already does this11 and is proud of its success.

It cites, by way of example, the approach it took in drawing up legislation on the use of security

scanners for detecting unsafe objects carried by passenger at EU airports. It relates that

The preparatory phases leading to the adoption of this legislation took into account the

impact of different policy options on fundamental rights so as to ensure that this legislation

complies with the Charter. Member States and airports wishing to deploy security scanners

must comply with minimum conditions set by the EU's new rules to safeguard fundamental

rights. Most importantly, passengers will be entitled to opt out from the security scanner

procedure and to be checked by alternative screening methods. Passengers must be

informed of the possibility to opt out, of the scanner technology used and of the conditions

associated with its use. In addition, detailed conditions are laid down to ensure that the right

to the protection of personal data and private life is respected, for instance, the obligation

that security scanners shall not store, retain, copy, print or retrieve images. As far as health

considerations are concerned, only scanners that do not use ionising radiation are allowed

as a method for screening persons.12

1.2 The Charter as the starting point for judicial analysis

The existence of the Charter has legitimised the Court’s ability to refer to human rights when

deciding cases. No longer is it constrained by having to argue that human rights are general

principles of law which are inspired by the constitutional traditions of the Member States and by

international treaties, especially the ECHR.13 It now has its own catalogue of human rights which it

will use as the starting point for its analysis.14

Sometimes the Court will draw considerable inspiration from the case law of the ECHR to put flesh

on the bones of the Charter right. This can be seen in McB,15 where the Court considered in detail

whether the orthodox interpretation of the Brussels II bis Regulation 2201/200316 should be

reconsidered in the light of the Charter, albeit that it ultimately concluded that the Charter did not

10

See Commission Communication, Guidelines on the application of Council Directive 2004/113/EC to insurance in the light of the judgment of the Court of Justice of the European Union in Case C-236/09 Test-Achats, C(2011) 9497 11

See eg Operational Guidance on taking account of fundamental rights in Commission Impact Assessments SEC(2011) 567. 12

See the Application of the EU Charter of Fundamental Rights COM(2012) 169 final. 13

Case 11/70 International Handelgesellschaft [1970] ECR 1125; Case 4/73 Nold [1974] ECR 491. 14

See eg Case C-279/09 DEB v. Bundesrepublik Deutschland [2010] ECR I-000, paras 30-36. 15

Case C-400/10 PPU McB v. LE [2010] ECR I-000. 16

Reg. 2201/2003 concerning jurisdiction and the recognition and enforcement of judgments in matrimonial matters and the matters of parental responsibility (OJ [2003] L338/1).

affect the Regulation’s interpretation. In other cases it makes next to no reference to the case law of

the ECHR, relying instead on its own interpretation of the Charter.17

Further, the advent of the Charter has opened up the range of fundamental rights that the Court is

prepared to refer to. So in Y and Z18 the Court examined the right to religious freedom in Article

10(1) religion when interpreting the meaning of ‘an act of persecution’ in Directive 2004/83, and in

Kamberaj19 the Court looked at Article 34 on social assistance. It said:

It follows that, when determining the social security, social assistance and social protection

measures defined by their national law and subject to the principle of equal treatment

enshrined in Article 11(1)(d) of Directive 2003/109, the Member States must comply with

the rights and observe the principles provided for under the Charter, including those laid

down in Article 34 thereof. Under Article 34(3) of the Charter, in order to combat social

exclusion and poverty, the Union (and thus the Member States when they are implementing

European Union law) ‘recognises and respects the right to social and housing assistance so

as to ensure a decent existence for all those who lack sufficient resources, in accordance

with the rules laid down by European Union law and national laws and practices’.

1.3 Requiring Member States to act in compliance with EU law

(a) The case law

Not only has the Charter had a significant effect on the work of the EU institutions but it is also

beginning to shape Member States’ policy choices. This can be seen in two cases, NS20 and DEB.21 NS

concerned an Afghan national who first arrived in Greece but who ended up in the UK where he

claimed asylum. Under Regulation 343/2003, it should have been Greece which dealt with NS’s

application, not the UK, and so the UK tried to return him there. However, he argued that the UK

should accept responsibility for his asylum claim under the derogation in Article 3(2), on the grounds

that his fundamental rights would be breached if he returned to Greece, in particular Article 4 on the

prohibition of inhuman or degrading treatment.

The Court said that it had to be assumed that the treatment of asylum seekers in all Member States

complied with the requirements of the Charter, the Geneva Convention and the ECHR.22 However, it

added that if there were ‘substantial grounds for believing that there are systemic flaws in the

asylum procedure’ – as had been shown was the case in Greece23- resulting in inhuman or degrading

treatment of asylum seekers transferred to Greece, that transfer would be incompatible with the

Charter.24 The UK therefore had to consider NS’s application.

17

See eg Case C-70/10 Scarlet Extended v. SABAM [2011] ECR I-000, paras. 41ff; Joined Cases C-356/11 and C-357/11 O and S v. Maahanmuuttovirasto [2012] ECR I-000. 18

Joined Cases C-71/11 and C-99/11 Bundesrepublik Deutschland v. Y and Z [2012] ECR I-000, para. 56. 19

Case C-571/10 Kamberaj v. IPES [2012] ECR I-000, para. 80. 20

Joined Cases C-411/10 and C-493/10 NS v. Secretary of State for the Home Department [2011] ECR I-000. 21

Case C-279/09 DEB [2010] ECR I-000. 22

Para. 80. 23

See also the decision of the European Court of Human Rights in MSS v. Belgium , judgment of 21 January 2011. 24

Para. 86.

In DEB German law granted legal aid to both natural and legal persons but the conditions under

which legal aid was granted to legal persons were more restrictive than those for natural persons.

These rules resulted in DEB, a company and thus a legal person, being denied legal aid. This meant

that it could not sue Germany for state liability under EU law because it could not make an advance

payment in respect of costs, nor could it afford to instruct a lawyer which was mandatory in claims

of this sort. The Court, having examined Article 47 of the Charter and Article 6(1) ECHR, as

interpreted by the Court of Human Rights, concluded that:

It is not impossible for legal persons to rely on that principle [effective judicial protection]

and that aid granted pursuant to that principle may cover, inter alia, dispensation from

advance payment of the costs of proceedings and/or the assistance of a lawyer.

(b) The effect of Protocol 30

Since the Charter is already having a profound effect on Member State law, are the UK and Poland

exempted from these obligations as a result of their so-called ‘opt-out’ in Protocol 30?

The impression that Protocol 30 is an opt-out comes from the speech of the then British Prime

Minister, Tony Blair, who said to Parliament that ‘It is absolutely clear that we have an opt-out from

both the charter and judicial and home affairs.’25 Yet, if Protocol 30 is compared with other genuine

‘opt-outs’, such as the UK/Denmark opt-out from EMU, it looks nothing like it, a point the UK itself

has now conceded. For example, in its evidence to the House of Lords Select Committee, the

Department of Work and Pensions’ (DWP) said that ‘The UK Protocol does not constitute an “opt-

out”. It puts beyond doubt the legal position that nothing in the Charter creates any new rights, or

extends the ability of any court to strike down UK law’.26 More significantly, the UK’s lawyers told

the Court of Appeal in Saaedi27 that:

the Secretary of State accepts, in principle, that fundamental rights set out in the Charter

can be relied on as against the UK, and submits that [Cranston J, the first instance judge]

erred in holding otherwise. … The purpose of the Charter protocol is not to prevent the

Charter from applying to the United Kingdom, but to explain its effect.

All this seems pretty conclusive: Protocol 30 is not (generally) an opt-out, a view that the Court

seemed to confirm in NS,28 as Saeedi became when it was referred to the Court, where it said ‘Article

1(1) of Protocol (No.30) explains Article 51 of the Charter with regard to the scope thereof and does

not intend to exempt the Republic of Poland or the United Kingdom from the obligation to comply

with the provisions of the Charter or to prevent a court of one of those Member States from

ensuring compliance with those provisions.’

2. The indirect impact of the Charter While the direct impact of the Charter has been the most headline-grabbing, the Charter is also

having an indirect effect. Most obviously this is the case where the Court has used the Charter to

25

http://www.publications.parliament.uk/pa/cm200607/cmhansrd/cm070625/debtext/70625-0006.htm (accessed 22 Dec. 2010) 26

House of Lords EU Select Committee, The Treaty of Lisbon: An Impact Assessment, 10th

Report, 2007-8, HL Paper 62, para.5.86. 27

[2010] EWCA Civ 990, para. 8. 28

Joined Cases C-411/10 and C-493/10 NS v. Secretary of State [2011] ECR I-000, paras. 119-120.

steer the interpretation of secondary legislation or to buttress a particular interpretation of those

rules, serving to give that interpretation legitimacy though the reference to human rights. This is

largely the approach the Court adopted prior to 200929 and can still be seen post-Lisbon. For

example, in Chalkor AE Epexergasias Metallon30 the Court considered the application of Article 47

on the right to effective judicial protection but the Charter did not alter its (much contested)

interpretation of Article 263 TFEU:

The review of legality provided for under Article 263 TFEU, supplemented by the

unlimited jurisdiction in respect of the amount of the fine, provided for under Article 31

of Regulation No 1/2003, is not therefore contrary to the requirements of the principle of

effective judicial protection in Article 47 of the Charter.

The advent of the Charter may also be responsible for a certain reorientation of the case law or a

shifting in priorities. The well-known Viking31 decision was much criticized for prioritizing the

economic right of free movement over the social right to strike: the free trade orientation of much

of the Court of Justice’s case law, as exemplified by the Säger market access approach,32 inevitably

led it in that direction. However, the incorporation of the Charter might require a re-evaluation of

the competing rights. This is certainly what AG Cruz Villalón suggested in Santos Palhota.33 Having

cited Article 31 of the Charter, he said:

As a result of the entry into force of the Treaty of Lisbon, when working conditions

constitute an overriding reason relating to the public interest justifying a derogation from

the freedom to provide services, they must no longer be interpreted strictly. In so far as the

protection of workers is a matter which warrants protection under the Treaties themselves,

it is not a simple derogation from a freedom, still less an unwritten exception inferred from

case-law. To the extent that the new primary law framework provides for a mandatory high

level of social protection, it authorises the Member States, for the purpose of safeguarding a

certain level of social protection, to restrict a freedom, and to do so without European Union

law’s regarding it as something exceptional and, therefore, as warranting a strict

interpretation.

This also seemed to be the view of Advocate General Trstenjak who forcefully argued in Commission

v. Germany (occupational pensions)34 that:

183. The approach adopted in Viking Line and Laval un Partneri, according to which [Union]

fundamental social rights as such may not justify – having due regard to the principle of

proportionality – a restriction on a fundamental freedom but that a written or unwritten

ground of justification incorporated within that fundamental right must, in addition, always

be found, sits uncomfortably alongside the principle of equal ranking for fundamental rights

and fundamental freedoms.

29

See eg Case C-244/06 Dynamic Medien [2008] ECR I-505. 30

Case C-386/10 P [2011] ECR I-000, para. 67. For a more recent example, see Case C-426/11 Alemo-Herron v. Parkwood Leisure Ltd [2013] ECR I-000. 31

Case C-438/05 Viking [2007] ECR I-10779. 32

Case C–76/90, Säger [1991] ECR I–4221. 33

Case C-515/08 Santos Palhota [2010] ECR I-000. 34

Case C-271/08 [2010] ECR I-000.

184. Such an analytical approach suggests, in fact, the existence of a hierarchical relationship

between fundamental freedoms and fundamental rights in which fundamental rights are

subordinated to fundamental freedoms and, consequently, may restrict fundamental

freedoms only with the assistance of a written or unwritten ground of justification. ...

186. In my view, there is no such hierarchical relationship between fundamental freedoms

and fundamental rights.

So far these sorts of observations have not led to a dramatic change in approach by the Court. But

they do set the mood music which the Court may eventually listen to, and heed.

More generally, the advent of the Charter appears to have given the Court of Justice more

confidence to offer its views on human rights, even where its competence to do so might be

questioned. So, for example, the Charter is clear that if there is no link with EU law, the Charter does

not apply.35 However, in Dereci the Court nevertheless made the rather surprising observation that:

... if the referring court considers, in the light of the circumstances of the disputes in the

main proceedings, that the situation of the applicants in the main proceedings is covered by

European Union law, it must examine whether the refusal of their right of residence

undermines the right to respect for private and family life provided for in Article 7 of the

Charter. On the other hand, if it takes the view that that situation is not covered by

European Union law, it must undertake that examination in the light of Article 8(1) of the

ECHR.’

While the last sentence of this quote is legally correct, since all EU Member States are signatories to

the ECHR, the Court of Justice’s competence to tell the national courts to conduct an examination in

the light of EU law is far from clear.

3. The shadow effect of the Charter The third impact of the Charter is a paradoxical one: there are cases where the Charter’s name is not

mentioned but the spirit of the Charter pervades the judgment. Ruiz Zambrano36 is perhaps the best

example of this. Mr Ruiz Zambrano was a Columbian national living in Belgium. He was a failed

asylum seeker but with non-refoulement protection (ie non-return to a place of danger). While in

Belgium, he and his Columbian wife had two children (Diego and Jessica) of Belgian nationality. The

question for the Court was whether he could rely on rights laid down by EU law to prevent himself

and thus his family from being deported from Belgium. The Court said that a refusal to grant Mr Ruiz

Zambrano a residence permit would lead to a situation where those children, citizens of the Union,

would have to leave the territory of the Union in order to accompany their parents. Similarly, if a

work permit were not granted to Mr Ruiz Zambrano, he would risk not having sufficient resources to

provide for himself and his family, which would also result in the children, citizens of the Union,

35

See eg Art. 51(1). See eg Case C-483/09 Magatte Gueye [2011] ECR I-000, para. 69: ‘Lastly, it is clear that the fact that it is mandatory to impose an injunction to stay away in accordance with the substantive law at issue in the main proceedings does not, per se, fall within the scope of the Framework Decision and, accordingly, it cannot, in any event, be assessed in the light of the provisions of the Charter of Fundamental Rights of the European Union.’ 36

Case C-34/09 Ruiz Zambrano v. ONEm [2011] ECR I-000. See also Case C-34/10 Bruestle v Greenpeace [2011] ECR I-000.

having to leave the territory of the Union. In those circumstances, the Court concluded ‘those

citizens of the Union would, in fact, be unable to exercise the substance of the rights conferred on

them by virtue of their status as citizens of the Union.’

In its short (seven substantive paragraph) judgment, the Court made no reference to human rights,

despite the detailed human rights analysis contained in the Advocate General’s Opinion. However,

the Court has long recognised the right to family life as a fundamental right and this seems to have

covertly shaped the Court’s judgment.37

C. The Charter and the Crisis

1. Conditionality

So far we have focused on those areas where the Charter has had a significant effect. We turn now

to consider the opposite: the situations where the Charter has yet to bite. A good example of this

are the reforms to national labour law agreed with the troika (IMF/European Commission/ECB) as a

condition for loans or other financial support from the EU/Member States/IMF. Take, for example,

the case of Portugal. On 7 April 2011 Portugal requested financial assistance from the EU, the euro

area Member States and the International Monetary Fund (IMF). An Economic Adjustment

Programme was negotiated in May 2011 between the Portuguese authorities and the troika, with

the agreement on the programme being formally adopted on 17 May 2011 at the Eurogroup/ECOFIN

meeting in Brussels. The Memorandum of Understanding (MoU) and the Loan Agreement were

signed thereafter. The Economic Adjustment Programme for Portugal included a joint financing

package of €78 billion (EU/EFSM – €26 billion, Euro area/EFSF – €26 billion, IMF – about €26

billion).38 The Memorandum of Understanding (MoU) identified reforms to large tracts of labour law,

reforms which built on the tripartite agreement of March 2011 on employment and competitiveness

signed by the socialist government and the social partners (with the exception of the Communist

General Confederation of Portuguese Workers).39

In its implementing Decision 2011/344/EU, which expressly refers to the MoU, the Council

confirmed the Portuguese government’s commitment40 to adopting ‘the first batch of measures

aimed at strengthening labour market functioning by limiting severance payments and making

37

See C. Barnard, ‘Citizenship of the Union and the Area of Justice: (Almost) The Court’s Moment of Glory’ in A. Rosas, E. Levits and Y. Bot, The Court of Justice and the Construction of Europe: Analyses and perspectives on Sixty Years of Case Law (The Hague, Asser Press, 2012). 38

Information from http://ec.europa.eu/economy_finance/assistance_eu_ms/portugal/index_en.htm 39

http://www.eurofound.europa.eu/eiro/2011/07/articles/pt1107039i.htm (last accessed 21 Nov 2012). 40

Art. 3(5) says ‘Portugal shall adopt the following measures before the end of 2011, in line with specifications in the Memorandum of Understanding…’ (emphasis added). The 9

th Recital provides that ‘The Commission, in

liaison with the ECB, should verify at regular intervals that the economic policy conditions attached to the assistance are fulfilled’. This suggests that financial support to Eurozone countries is somewhere in between being mandatory – i.e. the Council deciding with binding legal effect that these reforms must be undertaken – and a formally unilateral and voluntary undertaking of an IMF member in exchange for liquidity assistance. I am grateful to Michael Waibel for this observation.

working time arrangements more flexible’ by the end of 2011,41 and bringing the system of

severance payments ‘in line with practices in other EU Member States, based on the specification in

the Memorandum of Understanding’ by 2012.42 In the MoU the government said it would:

1.9. Ensure that the aggregate public sector wage bill as a share of GDP decreases in 2012

and 2013 [Q2-2012 for assessment; Q2-2013 to complete process]:

i. Limit staff admissions in public administration to achieve annual decreases in

2012-2014 of 1% per year in the staff of central administration and 2% in local and

regional administration. [Q3-2011]

ii. Freeze wages in the government sector in nominal terms in 2012 and 2013 and

constrain promotions.

iii. Reduce the overall budgetary cost of health benefits schemes for government

employees schemes (ADSE, ADM and SAD) lowering the employer’s contribution and

adjusting the scope of health benefits, with savings of EUR 100 million in 2012.

Cuts to public sector wages were made as a result, including the loss of the thirteenth and

fourteenth month salary. In the light of the Court’s increasingly expansive reading of the Charter

outlined above, it was inevitable that trade unions would try to argue that the radical reforms to

national labour law contravened the Charter.43 This led to the reference in Sindicatos dos Bancários

do Norte44 which, inter alia, raised the question whether ‘the salary cut made by the State, by means

of the Lei do Orçamento de Estado para 2011, applicable only to persons employed in the public

sector or by a public undertaking, contrary to the principle of prohibition of discrimination in that it

discriminates on the basis of the public nature of the employment relationship?’ There were further

questions about the compatibility of the reforms with the Charter. For example, the third question

said:

Must the right to working conditions that respect dignity, laid down in Article 31(1) of the

Charter of Fundamental Rights of the European Union, be interpreted as meaning that it is

unlawful to make salary cuts without the employee's consent, if the contract of employment

is not first altered to that effect?

The fifth question was even more expansive:

As a salary cut is not the only possible measure and is not necessary and fundamental to the

efforts to consolidate public finances in a serious economic and financial crisis in the

country, is it contrary to the right laid down in Article 31(1) of the Charter of Fundamental

41

Art. 3(5)(c) of Council Implementing Decision 2011/344/EU on granting financial aid to Portugal (OJ [2011] 159/88). This Implementing Decision is based on Council Regulation (EU) No 407/2010 establishing a European financial stabilisation mechanism (OJ [2010] L118/1) adopted under Art. 122(2) TFEU. 42

Art. 3(6)(i) of Council Implementing Decision 2011/344/EU on granting financial aid to Portugal (OJ [2011] 159/88). 43

The section that follows draws on C. Barnard, ‘The Charter in time of crisis: a case study of dismissal’ in N. Countouras and M. Freedland (eds), Resocialising Europe, (Cambridge, CUP, forthcoming). 44

Case C-128/12 Sindicato dos Bancários do Norte v. BPN – Banco Português de Negócios SA. See also the reference in Case C-264/12 Sindicato Nacional dos Profissionals de Seguros e Afins v Fidelidade Mundial, reference lodged 29 May 2012.

Rights of the European Union to put at risk the standard of living and the financial

commitments of employees and their families by means of such a reduction?

In fact, before the Court of Justice had a chance to rule on the matter, the Portuguese Constitutional

Court found the public sector pay cut to contravene the equality provision, Article 13, of the

Portuguese Constitution.45 The decision required some rethinking of the budgetary plans for 2013,46

revisions which themselves were declared unconstitutional.47 The Court of Justice subsequently

declined to hear the reference, not because the national court had already ruled on some of the

issues but because this was a matter of national law, not EU law:48

9 Dans le cadre d’un renvoi préjudiciel au titre de l’article 267 TFUE, la Cour peut uniquement

interpréter le droit de l’Union dans les limites des compétences attribuées à l’Union

européenne….

10 S’agissant des exigences découlant de la protection des droits fondamentaux, il est de

jurisprudence constante qu’elles lient les États membres dans tous les cas où ils sont appelés à

appliquer le droit de l’Union (…).

11 Toutefois, il convient de rappeler que, aux termes de l’article 51, paragraphe 1, de la

Charte, les dispositions de celle-ci s’adressent «aux États membres uniquement lorsqu’ils

mettent en œuvre le droit de l’Union» et que, en vertu de l’article 6, paragraphe 1, TUE, qui

attribue une valeur contraignante à la Charte, celle-ci ne crée aucune compétence nouvelle

pour l’Union et ne modifie pas les compétences de cette dernière (…).

12 Or, malgré les doutes exprimés par la juridiction de renvoi quant à la conformité de la loi de

finances pour 2011 avec les principes et les objectifs consacrés par les traités, la décision de

renvoi ne contient aucun élément concret permettant de considérer que ladite loi vise à

mettre en œuvre le droit de l’Union.

The Court has also refused to hear references from Romania about reforms to Romanian labour law.

For example, in Case C-434/11 Corpul Naţional al Poliţiştilor, the Court refused to hear a challenge to

45

Case 353/2012, judgment of 5 July 2012 http://www.tribunalconstitucional.pt/tc/acordaos/20120353.html; for a report in English, see http://www.bbc.co.uk/news/world-europe-18732184 and http://www.labourlawnetwork.eu/national_labour_law_latest_country_reports/national_court_rulings/court_decisions/prm/64/v__detail/id__2281/category__28/size__1/index.html. 46

Yet in its most recent report the IMF still notes ‘Fiscal spending, particularly on public wages and social transfers, ratcheted up for many years, with a weak link between the state’s goals and the budget’s spending allocation. The main focus will have to be on further rationalizing public sector pay and employment as well as reforming pensions and other social transfers, aiming at more efficient public services and more equitable re-distribution’: http://www.imf.org/external/np/ms/2012/112012b.htm. 47

Case No. 187/2013 of 5 April 2013, http://www.tribunalconstitucional.pt/tc/acordaos/20130187.html. According to Jose Joao Abrantes, writing for the European Labour law network (http://www.labourlawnetwork.eu/national_labour_law_latest_country_reports/national_court_rulings/court_decisions/prm/64/v__detail/id__2906/category__28/index.html), ‘The Constitutional Court ruled that the plan to reduce the amounts of vacation allowance due to public servants and pensioners was unconstitutional (Law n. 66-B/2012, Articles 29, 31 and 77) given its conflict with constitutional principle of equality (Article 13 of the Portuguese Constitution). The Court also decided for the unconstitutionality of the cuts in sickness and unemployment benefits (Law n. 66-B/2012, Article 117, n. 1) considering a conflict with the constitutional principle of proportionality (Article 2 of the Portuguese Constitution). 48

Order of 7 March 2013.

national law for its compatibility with the Charter despite the fact that the reduction in Romanian

public sector salaries by, for example, Laws 118/2010 and 285/10,49 was part of a package of

measures designed to rebalance the books of the Romanian government and a condition precedent

for further instalments of money being lent to it by the EU/IMF/World Bank.50 It may be that an

inadequately drafted order for reference, which failed to make express the links between the

national reforms and bailout conditionality, gave the Court an escape route from having to decide

difficult cases.51 However, these decisions should not be seen in isolation, as the next section

demonstrates.

2. The application of the Charter to the ESM Treaty and the TCSG As we saw in the introduction, in Pringle the Court of Justice made clear that the conclusion of the

European Stability Mechanism Treaty did not infringe the principle of effective judicial protection

under Article 47 of the Charter because ‘the Member States are not implementing Union law, within

the meaning of Article 51(1) of the Charter, when they establish a stability mechanism such as the

ESM where the [TEU and TFEU] do not confer any specific competence on the Union to do so’. For

similar reasons it could be argued that the conclusion of the TSCG did not infringe the Charter

because the Member States are not implementing Union law, within the meaning of Article 51(1) of

the Charter.

However, the TSCG is different to the ESM because, with the exception of the debt brake, the

content of the fiscal compact part of the TSCG largely overlaps with the content of the ‘six pack’

rules (five regulations and one directive) which are part of EU law. Further, the link with the EU

49

According to Raluca Dimitriu, writing for the European Labour law network (http://www.labourlawnetwork.eu/national_labour_law/legislative_developments/prm/109/v__detail/id__1108/category__29/size__1/index.html), the law provided for:

- A reduction of 25 per cent of the monthly salaries/military payments/other payments and other salary-related rights in the public sector - A reduction of 15 per cent in unemployment payments and in the obligations of the state as a result of laying-off employees through collective dismissals - A reduction of 15 per cent of the pensions, to be paid or currently being paid - The elimination of the occupational pensions of magistrates (which are not based on a contribution system).

These measures were temporary; provision is now being made to restore salaries to previous levels (http://www.labourlawnetwork.eu/national_labour_law/legislative_developments/prm/109/v__detail/id__2215/category__29/size__1/index.html). The reduction in salaries was challenged, inter alia, in the Romanian Constitutional Court which decided in its decisions Nos. 871, 872, 873 and 874/2010 that the decrease in public sector salaries was constitutional so long as it was temporary and justified by exceptional circumstances, namely a threat to the economic stability of the country. The Constitutional Court considered that the reduction of the monthly salaries/military payments/other payments by 25 per cent has been imposed to cut public expenditure, thus safeguarding national security which included social and economic security. During the 99th Conference of the International Labour Organisation, several important union confederations (Cartel Alfa) filed a complaint against the Romanian Government because of the salary cuts. 50

See eg Annex I of the Supplemental MoU of February 2010 (http://ec.europa.eu/economy_finance/articles/financial_operations/pdf/2010-02-25-smou_romania_en.pdf) adopted in the context of Council Decision 2009/459/EC (OJ [2009] L 150/08) which in turn was adopted under Regulation (EC) No 332/2002. Full details of the Romanian position can be found in http://ec.europa.eu/economy_finance/eu_borrower/balance_of_payments/romania/romania_en.htm. 51

In Portugal’s case there is also a further question to what extent the thirteenth and fourteenth month salary cuts were actually included in the MoU or whether the Portuguese government went further than required by the MoU.

Treaties is much stronger (especially bearing in mind the commitment in Article 16 of incorporating

the substance of the TSCG into the legal framework of the Union), with the TSCG being hierarchically

inferior to the EU Treaties, including the Charter. Article 2(2) TSCG provides:

This Treaty shall apply insofar as it is compatible with the Treaties on which the European

Union is founded and with European Union law’.

This might suggest that acts taken under the TSCG should be read subject to the Charter (which they

would be if they were taken under the six pack which is part of EU law). And even if this analysis is

incorrect, then the EU institutions which are ‘borrowed’ under both the ESM and TSCG, especially

the Commission and the ECB, must surely need to act in compliance with the Charter since the

Charter is addressed to the EU institutions.52

3. Effect of non-application of the Charter While the Court’s refusal to engage with the Charter in respect of ‘crisis’ measures may be the result

of a pragmatic decision to ensure the troika negotiators have a free hand to deliver what they

perceive to be in a country’s best interest, it overlooks the fact that the states affected by

conditionality are all signatories to other international standards with their own review bodies,

notably the ILO and the European Committee on Social Rights (ECSR). The ECSR is a body of the

Council of Europe whose role is ‘to judge that States party are in conformity in law and in practice

with the provisions of the European Social Charter’.53 The ILO has become increasingly critical of the

Court of Justice over the years, condemning it, in particular, for its judgment in Viking and Laval54

and the effect this is having on freedom of association, collective bargaining and the right to strike.55

It has also been critical of the major reforms to Greek labour law as a condition of the bailout.56

Similarly, the ECSR has criticised the major reforms to Greek law and the various ways they have

contravened the provisions of the ESC.57

52

Art. 51(1). 53

http://www.coe.int/t/dghl/monitoring/socialcharter/ecsr/ecsrdefault_EN.asp. See further U. Khaliq, ‘The EU and the European Social Charter’ (2012-13) 15 CYELS forthcoming. 54

Case C-341/05 Laval un Partneri Ltd. v. Svenska Byggnadsarbetareförbundet [2007] E.C.R. I-11767; Case C-438/05, International Transport Workers’ Federation v. Viking Line ABP [2007] E.C.R. I-10779 55

See eg the Report of the Committee of Experts on the Application of Conventions and Recommendations, 2010 report which says ‘The Committee observes with serious concern the practical limitations on the effective exercise of the right to strike of the BALPA workers in this case. The Committee takes the view that the omnipresent threat of an action for damages that could bankrupt the union, possible now in the light of the Viking and Laval judgements, creates a situation where the rights under the Convention cannot be exercised. While taking due note of the Government’s statement that it is premature at this stage to presume what the impact would have been had the court been able to render its judgement in this case given that BALPA withdrew its application, the Committee considers, to the contrary, that there was indeed a real threat to the union’s existence and that the request for the injunction and the delays that would necessarily ensue throughout the legal process would likely render the action irrelevant and meaningless’: http://www.ilo.org/public/libdoc/ilo/P/09661/09661(2010-99-1A).pdf 56

http://www.ilo.org/brussels/press/press-releases/WCMS_193308/lang--en/index.htm 57

See eg General Federation of employees of the National Electric Power Corporation (GENOP-DEI) and Confederation of Greek Civil Servants’ Trade Unions (ADEDY) against Greece, Complaint No. 65/2011, Adopted by Resolution CM/ResChS(2013)2 on 5 Feb 2013.

4. How might the Charter apply? Assuming the analysis above is correct and the Charter will eventually be considered to apply to acts

taken by Member States as part of the conditionality of receiving a bailout, and to acts of the EU

institutions taken under the TSCG, this raises the question as to what effect the Charter might have.

In other words, how might the Court engage in a balancing exercise of competing rights (eg the

freedom to conduct a business under Article 16 on the one hand, and the right to protection against

unjustified dismissal under Article 30 and the right to fair and just working conditions under Article

31, on the other). Assuming the Court eventually recognises that its attempts to avoid answering the

questions are unsatisfactory both legally and politically, there seems to be two possible routes for it

to pursue.

The first possibility is for the Court to address the issue directly and substantively, perhaps wrapped

in a ‘margin of appreciation’ cloak, and work out how to balance the competing interests between

those inside work (but possibly losing their jobs) and those without work. The Court’s case law on

age discrimination might provide a template. A long line of case law broadly suggests that the Court

is sensitive to arguments based on intergenerational fairness and creating opportunities for younger

people to get into the employment market by removing older workers.58 The EU2020 strategy also

appears to mandate precedence to those out of work: the third strand, inclusive growth, is about

ensuring ‘at least 20 million fewer people [are] in or at risk of poverty and social exclusion’. One of

the two flagship initiatives under this strand is guaranteeing ‘respect for the fundamental rights of

people experiencing poverty and social exclusion, and enabling them to live in dignity and take an

active part in society mobilising support to help people integrate in the communities where they

live, get training and help to find a job and have access to social benefits’. This might suggest that

the Court will give priority to any measure which will facilitate job creation, even though as

Armingeon and Baccaro have argued, there is little evidence that cutting labour standards does

improve competitiveness.59

A second possibility, and my favoured solution, is to adopt a procedural approach. In essence this

means verifying whether, in introducing the changes, the state, in accordance with its industrial

relations tradition, has consulted the relevant parties, in particular the social partners,60 in advance

of taking the decision. Some support for a more procedural approach by the Court of Justice can be

gleaned from Volker and Schecke. 61 As we saw above, the Court had to strike a ‘proper balance’62

between the interests of taxpayers, who had a right to be kept informed of the use of public funds,

with the right to privacy of individuals in receipt of public money. It concluded that there was

nothing to show that when adopting the legislation ‘the Council and the Commission took into

consideration methods of publishing information on the beneficiaries concerned which would be

consistent with the objective of such publication while at the same time causing less interference

with those beneficiaries’ right to respect for their private life in general and to protection of their

personal data in particular’. Because the institutions did not properly balance the competing

58

See eg Case C-411/05 Palacios de la Villa [2007] ECR I-8531. 59

K. Armingeon and L. Baccaro, Political Economy and the Sovereign Debt Crisis: the Limits of Internal Devaluation’ (2012) 41 ILJ 254. 60

This would be compatible with Art. 152 TFEU. 61

Cases C-92/09 and C-93/09 [2010] E.C.R. I-000, para. 81. 62

Para. 79.

interests ‘the Council and the Commission exceeded the limits which compliance with the principle

of proportionality imposes.’63

Thus the problem was less the outcome of the balancing exercise than the method with which that

balance was undertaken. Translating this into reviewing reforms of national labour law for their

compatibility with the Charter, the role of the Court would be to check that the state has engaged in

appropriate discussions with interested parties prior to deciding on the reforms necessary. There is

some evidence in the case of Portugal that this is already so. In its Letter of Intent, Memorandum of

Economic and Financial Policies, and Technical Memorandum of Understanding with the IMF, the

Portuguese government says:64

Reforms in labour and social security legislation will be implemented after consultation with

social partners, taking into account possible constitutional implications, and in respect of EU

Directives and Core Labour Standards.

Thus, Portugal has demonstrated an awareness that it needs to go through the correct procedures

and check that its reforms are still compatible with EU and (ILO?) core labour standards.

Furthermore, the proposed Regulation on the strengthening of economic and budgetary surveillance

of Member States experiencing or threatened with serious difficulties with respect to their financial

stability in the euro area (one of the so-called ‘two pack’) expressly provides in Article 6a:65

The Member State concerned shall seek the views of social partners as well as relevant civil

society organisations when preparing a draft macroeconomic adjustment programme, with

a view to contributing to building consensus over content.

In other words the effect of any procedural approach would be to force the states to undertake an

ex ante consultation process and an ex ante review but allowing the Member States to choose their

own reforms so long as they do not undermine the ‘essence’66 of, say, the right to unjustified

dismissal or fair and just working conditions. Yes, there is a risk to this exercise becoming merely a

‘filing-cabinet’ exercise, prompting a politically correct paper trail. But the Court would surely be

wise to this. As we have seen, ex ante control is very much the vogue in the EU as far as human

rights are concerned;67 an approach by the Court towards encouraging this would seem a promising

way forward.

D. Conclusions The birth of children transforms their parents’ lives forever; no longer can they go back to the free-

spirited pre-children days. The same is likely to be true of the Charter: it has transformed the EU’s

landscape forever and the EU will (hopefully) never go back to pre-Charter, pre-human rights days

when the EU was a glorified trading area. As this paper has shown, the Charter has already proved

63

Para. 86. 64

http://www.imf.org/external/np/loi/2012/prt/101412.pdf 65

COM(2011)19. 66

Art. 52(1). See also Case C-544/10 Deutsche Weintour [2012] ECR I-000, para. 54; Case C-426/11 Alemo-Herron [2013] ECR I-000, para. 36. 67

See eg Operational Guidance on taking account of fundamental rights in Commission Impact Assessments, SEC(2011) 567 final, 6.5.2011 considered above.

legally significant in important areas, such as asylum and citizenship; it has yet to bite in the most

sensitive area of all - the consequences of the financial crisis. This failure is damaging to the long

term legitimacy of the Union and undermines the Court’s oft-expressed commitment to human

rights. Human rights are universal and that includes those citizens whose countries are in receipt of a

bail-out.