Institutional balance and the negotiation of international agreements

Andrés Delgado Casteleiro, Lecturer at Durham Law School

Introduction

In last Thursday’s judgment on the Case C-425/13, Commission v Council, the CJEU was asked to determine the scope of the Council’s powers to issue negotiating directives to the Commission and the role of the special committee overseeing the Commission during the negotiations with Australia concerning the linking of its emissions trading system with the EU.  The case concerns the division of powers between the Council and the Commission and the extent to which the former can exercise some kind of control over how the latter is conducting international negotiations.

Background

Between 2012 and 2013, the Commission negotiated an agreement with Switzerland to link their emissions trading scheme to the EU’s. To be better informed of the how the negotiations were being conducted, the Council set up a special committee pursuant to Article 218 (4) TFEU (the Treaty clause setting out rules on how the EU negotiates and concludes international treaties). However, the Council was not completely satisfied on how the Commission consulted this committee during the negotiations of the agreement. Certain Member States argued that the information provided by the Commission was scant. In fact, the Commission referred the Council to a website of the Swiss Federal Office for the Environment when asked to provide an update on how negotiations were going.

In light of what the Council regarded as the Commission’s failure to effectively consult the special committee, when the Council adopted the negotiating directives for the conclusion of a similar agreement with Australia, it envisaged a greater involvement of the Council during the negotiations through the special committee. The Decision of the Council of the European Union of 13 May 2013 authorizing the opening of negotiations on linking the EU emissions trading scheme with an emissions trading system in Australia (Council Decision) establishes in the second sentence of Article 2 that “the Commission shall report in writing to the Council on the outcome of the negotiations after each negotiating session and, in any event, at least quarterly.” Moreover, Article 1(2) of the Decision states that the Commission shall conduct the negotiations in accordance with the very detailed negotiating directives and procedures set out in the Annex to the Council Decision. The annex provides, among other things, that detailed negotiating positions of the Union shall be established within the special committee.

Inasmuch as the Council Decision restricted the Commission’s scope of maneuver when negotiating with Australia, the Commission brought an action against it. The Commission’s plea boils down to two claims. First, the obligation to report in writing after each negotiation session or at least quarterly constitutes a breach of Article 13(2) TEU (role of the institutions), Article 218(2) to (4) TFEU (Treaty negotiation process), Article 295 TFEU (possibility to conclude interinstitutional arrangements) and the principle of institutional balance. Secondly, in so far as it provides that ‘detailed negotiating positions of the Union shall be established’ by the special committee or the Council, the Commission alleges a breach of Article 13(2) TEU, Article 218 TFEU and the principle of institutional balance.

The Judgment of the CJEU

In relation to the Commission’s first claim, the Court began by recalling the constitutional significance of Article 218 TFEU insofar as it confers specific powers on the EU institutions with a view to establishing a balance between those institutions during the treaty-making procedure. In practice, Article 218 TFEU gives different roles to each institution. Even though the Treaties have decided that the Commission is to act as the negotiator and to ensure the EU’s external representation (in all those areas not covered by the CFSP, see article 17 (1) TEU), the Council is nonetheless entrusted with the power to sign and conclude the agreement. According to the Court, in the context of those functions, the Council and the Commission are required to comply with the second sentence of Article 13(2) TEU, which states, “the institutions shall practice mutual sincere cooperation.” Moreover, that cooperation becomes of crucial importance for EU action at international level, as such action triggers a closely circumscribed process of concerted action and consultation between the EU institutions (para 64).

It is in this context of concerted action and consultation that article 13 (2) TEU triggers that article 218 (4) TFEU comes in, as the consultation and cooperation between the Council and the Commission will be channeled through the special committee. Consequently, what do the obligations of cooperation and consultation amount to? For the Court, those obligations mean that the Commission must provide the special committee with all the information necessary for it to monitor the progress of the negotiations, such as, in particular, the general aims announced and the positions taken by the other parties throughout the negotiations. It is only in this way that the special committee is in a position to formulate opinions and advice relating to the negotiations (para 66).

In any event, the Court also reminds the Commission that regardless of whether there is a special committee in place, it can be required to provide that information to the Council as well. Given the role of the Council in the treaty-making procedure, it should possess all the necessary information to have clear knowledge of the ongoing negotiations concerning the preparation of an agreement that will be submitted for its approval. Consequently, the Court concludes that an obligation such as the one enshrined in Article 2 of the Council decision which sets out the Commission’s obligation to report in writing to the Council on the outcome of the negotiations after each negotiating session and, in any event, at least quarterly’, is in conformity with Article 218(2) and (4) TFEU (para 68).

Furthermore, the Court considers that an obligation of information as the one recognized in Article 2 of the Council decision does not violate Article 13 (2) TFEU, insofar as the Council’s powers to lay down such an obligation of information have been exercised with due regard to the Commission’s power to negotiate international agreements (para 70).

Finally, in relation to Article 295 TFEU concerning the obligation to consult each other and by common agreement make arrangements for their cooperation, the Court understands that this obligation to conclude interinstitutional arrangements does not prevent the Council from being able to set out, in a decision authorizing negotiation, arrangements relating to the information that the Commission must provide to it periodically throughout the negotiating process (para 72). Hence, the Court dismissed the Commission’s first claim.

In relation to the second claim, concerning the powers of the special committee to establish detailed negotiating positions of the Union; the Court conducts its analysis in two stages. First, it examines whether the Council has the power to set up procedures pursuant to the first part of Article 218 (4) TFEU, like the one enshrined in the annex of the Council decision. Secondly, it focuses on the specific procedure set out in the annex to the Council decision and more specifically the powers that were conferred upon the special committee.

In the analysis of whether the Council has the power to set up a procedure like the one drawn up in the annex of the Council Decision, the Court examines the mandate of the special committee. In this regard, it considers that the special committee designated by the Council has the mandate to follow the conduct of the negotiations and guide the negotiator (para 76). In addition, the Court argues that since the Council is empowered to designate a special committee and the Commission is required to conduct the negotiations “in consultation with” that committee, the Commission must inform the committee of all aspects of the negotiations in order that it may be properly consulted (para 77). Therefore, Article 218(4) TFEU generally allows the Council to set out procedural arrangements governing the process for the provision of information, for communication and for consultation between the special committee and the Commission, as such rules meet the objective of ensuring proper cooperation at the internal level (para 78).

However, when analyzing the minutiae of the annex to the Council Decision, the CJEU considered that certain parts of that annex were not designed to enhance the transfer of information and the consultation between the special committee and the Commission. Instead, it argued that the possibility for the special committee to establish detailed negotiating positions as envisaged in the second sentence of the first paragraph of the Annex seek to bind the Commission in contravention of article 218 (4) TFEU, Article 13 (2) TEU and the principle of institutional balance. For the Court, the power to establish detailed negotiating procedures goes beyond the consultative function assigned to the special committee. The annex has the effect of imposing negotiating positions on the negotiator, i.e. the Commission (para 90). Therefore, the Court accepted the Commission’ second claim and partially annulled the Council Decision.

Comment

To a certain extent, the EU’s treaty-making procedure constitutes an example of the Principal – Agent problem. The Council (Principal) authorizes the Commission (Agent) to negotiate on its behalf, yet it does not completely trust the Commission. The Court understands that it is the information asymmetry that fuels the Council’s lack of trust on the Commission’s role as a negotiator. Consequently, anything in the Council decision that might exceed the obligation to inform and consult would be a breach of the principle of institutional balance, regardless of how badly the Commission had previously complied with that obligation.

In this regard, a parallelism with Case C-658/12 European Parliament v Council (Mauritius, AKA Somali Pirates) (discussed here) could be drawn. In that case the Court understood that by not informing the European Parliament (EP) immediately and fully informed concerning the conclusion of an extradition agreement with Mauritius, the Council had breached Article 218 (10) TFEU. Inasmuch as that provision aimed as ensuring that the EP could effectively exercise its powers in relation to the conclusion of international agreements, the Council had breached the principle of institutional balance. In the present case, the Court understands that an obligation to inform the Council on on-going negotiations is an expression of that principle. The Council also needs to be immediately and fully informed throughout the negotiations of an agreement it will end up concluding.

Finally, in the last couple of years we have witnessed an increase in the litigation between the different EU institutions concerning the exercise of their powers and the delicate balance between them in the field of EU External Relations. It appears that the EU institutions are still learning how to live with each other after the Lisbon Reform. Yet within this learning process, it appears, that the EU institutions seem to be moving away from cooperation arrangements and are pushing for a rigid interpretation of their respective powers. This is clearly seen in how the principle of institutional balance figures prominently in the present case or in other cases such as Mauritius Island, Case C-409/13 (Council v Commission) concerning the Commission’s right to withdraw proposals (discussed here), or Case C-28/12, Commission v Council, (US Air Transport Agreement). While in principle this is not per se a problem, it could signal that an increasing institutional divide on the way the to conduct the EU’s external representation after the Lisbon Treaty is emerging.

Barnard & Peers: chapter 24

Photo credit: carbonsolutionsglobal.com

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Slipping through our fingers: the CJEU rules on the value of parenthood in EU law

Steve Peers

The vast bulk of EU legislation and case law on sex discrimination aims to facilitate women’s access to employment, and their equal treatment within the workplace. Yesterday’s CJEU ruling in Maistrellis approaches these issues from an unusual angle: the access of a father to parental leave, in a case where the mother of his children was not working or seeking paid work at all. The judgment raises interesting questions about the role that EU employment and discriminaton law plays in family life. 

Background

EU rules on parental leave date from an agreement of social partners in 1996, which was updated in 2010. This case concerns the 1996 version of the agreement, which begins by stating the social partners’ intention: ‘reconciling work and family life and promoting equal opportunities and equal treatment between men and women’. The preamble refers to the work/life balance point (paragraph 4) and the promotion of ‘women’s participation in the labour force’ (paragraph 7). It also states that ‘men should be encouraged to assume an equal share of family responsibilities’. 

  

The main text of the agreement makes clear that it sets out only ‘minimum requirements’. It applies to ‘all workers, men and women’, who have an employment contract or relationship as defined by national law. It gives ‘men and women workers an individual right to parental leave’ on the birth or adoption of a child, for at least three months, up to an age (up to 8) to be defined by Member States or social partners. ‘To promote equal opportunities’, the right should be non-transferable.

Detailed rules on parental leave must be defined by national legislation and/or collective agreements, as long as those rules meet the minimum requirements in the Directive. These rules can: decide if parental leave is granted on a full-time or part-time basis; set out a waiting period of up to one year of employment; adjust the rules to the particular circumstances of adoption; establish notice periods to be given to the employer; define when the employer can postpone parental leave; and ‘authorise special arrangements’ for small businesses.

Furthermore, the agreement specifies that workers who apply for or take parental leave are protected from dismissal on those grounds. They have the right to return to the same job (or a similar job, if that’s not possible) at the end of the parental leave. Parents also retain any rights which they acquired before the parental leave began, although it’s up to national law or employers to determine whether parents are paid during their leave period. All social security issues are left to national law. Finally, workers are also entitled to time off from work for ‘urgent family reasons’, although the details and limits on this right are left to national law and social partners to determine.

Judgment

The father in this case was a Greek judge, who sought to exercise parental leave for a paid period of nine months. In practice Greek law curtailed this benefit in two ways: first of all by limiting it to mothers only; and secondly (in a rather contradictory manner) by attaching strict conditions as regards fathers, which didn’t apply to mothers. If a mother stays at home to look after the child (as in this case), a father could only obtain the leave if the mother was unable to look after the child due to illness or injury. The Greek courts had already ruled that the first limit was inapplicable, and now asked the CJEU if the second limit breached EU law.

According to the CJEU it did, for two reasons. First of all, it breached the parental leave agreement, because that agreement states that parental leave is an ‘individual right’ which is ‘non-transferable’. Therefore (reiterating prior case law) it applied to each parent. The possible limits referred to in the Directive make no provision for denying parental leave based on the employment status of the spouse. This literal interpretation was reinforced by the overall context of the agreement: obtaining a better work/life balance, and encouraging men to take on more family responsibilities. The right to parental leave also appears in the EU Charter of Fundamental Rights.

Secondly, the Greek rule also violated the EU Directive on sex discrimination in employment. That was because parental leave was a working condition, and the position of men and women was ‘comparable’ as regards bringing up children. The Greek law attached a condition to fathers that it did not attach to mothers, so constituted sex discrimination.

Furthermore, this distinction ‘is liable to perpetuate a traditional distribution of the roles of men and women by keeping men’ in a ‘subsidiary’ role as regards parenting. While the Directive does provide that it is ‘without prejudice’ to the parental leave agreement and the pregnant workers’ Directive, the ‘deprivation’ of a father’s parental leave ‘in no way’ helps the health and safety of pregnant workers or new mothers, which is the purpose of the latter Directive.

Comments

First of all, it should be noted that Greek law, for at least some workers, far surpasses the minimum rules in the agreement – nine months’ paid leave, rather than three months’ unpaid leave. Very few parents in the EU will have access to this generous a parental leave – even the two weeks of paid leave which I enjoyed for each child is better than many fathers get. Indeed, the EU’s pregnant workers’ Directive only requires new mothers to get 20 weeks’ maternity leave on sickness pay (not full pay) as a minimum (note that parental leave applies in addition to maternity leave). It’s doubtful that the EU economy as a whole could withstand such generosity, and indeed I wonder if the Greek benefit has since become rather less generous due to the demands of the Troika.

So it’s important to emphasise that the CJEU is not requiring all employers to give fathers nine months’ fully paid leave for each child. Rather, whatever the period of parental leave (which need not even be paid), it cannot be subject (for fathers) to conditions relating to the mother’s employment status.

The judgment has several interesting implications. First of all, while the CJEU has traditionally ruled that EU sex discrimination law cannot apply to same-sex couples (see the Grantjudgment), it’s arguable that the parental leave agreement can. While that agreement does refer to ‘men’ and ‘women’, the Court’s emphasis on parental leave as an individual right, and the EU Charter ban on discrimination on grounds of sexual orientation, points in favour of it applying to same-sex parents. Although it would be possible to use the EU’s framework equality Directive to challenge a limitation on parental leave based on sexual orientation, it’s possible that parental leave is being limited on a basis other than sexual orientation. In any event, a gay or lesbian parent may prefer to invoke rights as a parent. Having said that, it should be noted that the civil status of same-sex couples (ie access to marriage), is, as EU law currently stands, a matter for Member States to decide (for more on this, see Alina Tryfonidou’s recent blog post). This must equally apply to adoption.

Secondly, the ruling is similarly relevant to any family that does not take the form of two married parents. It must follow from the Court’s ruling that it’s irrelevant whether the parents are unmarried, or whether the parental leave right is being claimed by a single parent. Again, it should be pointed out that EU law doesn’t determine who has custody of a child – at most, it determines which court has jurisdiction to rule on this issue where there is a cross-border element. 

  

Thirdly, while the ruling implicitly extends the parental leave agreement to such non-traditional families, it explicitly confirms its application to the most traditional form of all: families with a stay-at-home mother. As noted above, EU sex discrimination law has its own tradition, constantly aiming to encourage mothers to work. Yet in this case, the Court skipped over the many references to this objective in the relevant EU laws, and asserted instead the father’s individual right to parental leave as well as his right to non-discrimination on grounds of sex.

Reading the case more carefully though, the judgment does challenge the traditional family model in a different way: not by encouraging mothers to return to work (although of course this is still relevant in most other cases), but by encouraging fathers to help them at home. Thirty years ago, the Court was concerned (in its Hofmann judgment) that EU law should not 'alter the division of responsibility between parents', as regards gender roles in the household. Now it’s concerned to make sure that those roles are shaken up.

It’s surely true to say that equality between men and women can’t be achieved without challenging those roles. Yet it’s interesting that in this judgment, the Court wants those roles to be challenged even if there’s no link with the mother’s employment. In this vein, the Court’s assertion that equal treatment as regards parental leave will not undermine the health and safety of new mothers is the understatement of the year: what new mother wouldn’t welcome the assistance of the baby’s father for even a short period, never mind nine months? But this approach subtly alters the purpose of the pregnant workers’ Directive, which is about employed mothers, not those who stay at home. Of course, the Court’s interpretation is entirely justified on social grounds: new mothers can use the help of fathers whether the mothers are employed or not.

Finally, the Court’s ruling implicitly emphasises the value of strengthening both parents’ ties with their children, regardless of any link with the mother’s employment. It’s a good time to reaffirm this link, as parents across EU (including the Court’s staff) brace themselves for the start of summer holidays. For parents, this is an unavoidable and poignant reminder that our babies grow up, our little ones get bigger, and the time we spend with them is always slipping through our fingers.

Barnard & Peers: chapter 20

Photo credit: activebabiessmartkids.com.au

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The Asymmetry in the Right to Free Movement of European Union Citizens: the Case of Students

Francesca Strumia*, Connor Brown**

 *Lecturer in Law, University of Sheffield

** LLB Law European and International, University of Sheffield

This post reflects the preliminary results of a research project conducted as part of the Sheffield Undergraduate Research Experience programme (SURE). It also builds on a presentation at the International Society of Public Law (ICON-S) annual conference in New York on 2nd July 2015

INTRODUCTION

Concerns for strained public resources, weakened trans-national solidarity and disaffection with the idea of ‘ever closer union’ in Europe have made a first victim in public debate: the free movement of persons. This fundamental freedom at the basis of the project of integration conjures up all the above worries: the guarantee of non-discrimination of European Union migrants regardless of their nationality seems a costly one for Member States to uphold; the ‘minimum degree of solidarity’ that free movement of the non-economically active calls for could not resonate less with the European Union public; and if intended as a right for citizens, rather than just for workers, free movement evokes a ‘federalist’ idea of Europe that is heresy in a union that wants to be looser rather than closer. On this background it is easy to see how what was once the ‘dream’ of free movement has become, in many respects, the ‘nightmare’ to paraphrase the title of a 2014 editorial in the Common Market Law Review.

But how far does the ‘nightmare’ go, legally speaking? Two cases decided in the last few months, Dano and Martens, offer a viewpoint in this respect. The two cases have little in common: one is about ‘welfare tourists’, the other is about students; one was much talked about, the other raised little attention. However they do share one element: they reconfirm a difference in treatment between claims against host Member States and claims against home Member States, difference that has come to characterize the law on free movement of European Union citizens. The former claims are subject to stricter conditions - Dano re-emphasizes that a non-economically active migrant does not have a right to reside in a host Member State, let alone a right to non-discrimination there, if she is a burden for the host Member State (see further discussion of Dano here). The latter are more strongly protected - Martens confirms that rigid residence requirements for exportable study grants are a disproportionate way for Member States of origin to avoid financial burdens.

The result is an asymmetry, in cases involving mobility of the non-economically active, between protection of a right to entry (i.e. the right to reside in a host Member State and claim benefits there on a non-discrimination basis) and protection of a right to exit (i.e. the right to leave and export benefits and entitlements from a home Member State). In part, this asymmetry descends from the very evolution of the Court’s free movement test, from one looking for discrimination to one looking for hindrance to movement, and in particular for “any national measures which even though applicable without discrimination on grounds of nationality, are capable of hindering or rendering less attractive the exercise by community nationals of the fundamental freedoms guaranteed by the treaty” (CJEU judgment in Government of the French Community and the Walloon Government v. Flemish Government). The way the test plays out in non-workers cases signals in any case a shift in the understanding of relevant free movement rights – a shift that leads to question for whom free movement is a financial burden, to what extent it involves transnational solidarity and how close is the union that it reflects.

This asymmetry emerges with peculiar clarity in the law on student mobility, of which Martens was the latest expression. This is a particularly significant field for free movement of persons as it has been the forefront of legal change in the context of the evolution of free movement from a right for workers to a right for citizens. In addition, encouraging student mobility is a self-standing Treaty objective (art 165(2) TFEU).  In numerical terms, the importance of student mobility is also on the rise. Between 2002 and 2012, the number of EU students studying in a EU country other than their own (or in a non-EU EEA country or EU candidate country) underwent an 87% increase, from 354,200 to 663,700, and in a single year between 2011 and 2012 it increased by 23%, from 540,900 to 663,700 (Eurostat data).

THE ASYMMETRY IN THE STUDENTS’ CASE LAW

Upon exploring students’ case law it seems, on a prima facie basis, that the asymmetry reigns true in how the law treats on the one hand certain “entry-type claims” - e.g. residence in a host Member State for purposes of study and right to obtain maintenance aid in a host State, and certain “exit-type claims” - e.g. portable study finance and tax relief in the home Member State for study fees paid in a host Member State. In the former respect, secondary legislation (Directive 2004/38, the citizens’ Directive) recognizes, implementing early case law (Raulin), a right to reside for students, however this is subject to resources and sickness insurance requirements; and maintenance aid is only available to EU students after five years of residence in the host Member State. In the latter respect, case-law has recognized the students’ right to export study grants from a Member State with which they can show a genuine link, and students and their families are entitled to claim tax relief in the home Member State for fees paid in a host State. A counter-trend element is education fees: EU students are entitled to equal treatment with host State nationals in this respect, which arguably strengthens their claim to entry. This is however in keeping with early case law pre-dating the advent of European Union citizenship (Gravier).  Beyond the prima facie contrasts, the Court’s reasoning differs in applying a similar test to claims on the entry and exit side: this is clear in cases concerning respectively maintenance loans and grants in a host State, and portable study finance.

Maintenance Loans/Portable Study Finance

Residence requirements to obtain maintenance aid or to export study finance are at best a hindrance to free movement, and may also be discriminatory. However, in order to avoid migrant students becoming an unreasonable financial burden, it is in principle legitimate for Member States to offer study finance only to students who have demonstrated a degree of integration into the paying State’s society(Bidar). In practice however what is a proportionate requirement for these purposes differs, in the Court’s case law, for host States and home States. In cases on maintenance aid in a host State, the Court has upheld a rigid five year residency rule as a necessary and sufficient means to prove integration (Förster). A fixed pre-determined requirement protects legal certainty, according to the Court.

In cases on portable study grants, the Court takes a different view. It finds all kinds of pre-determined residence requirements – three-year residence (Prinz and Seeberger), permanent residence in home State or grant limited to host State of permanent residence (Thiele Meneses), three-out-of-six-previous years (Martens), disproportionate. The same three-out-of-six rule had been the subject of an infringement proceeding in 2012 in which it was found to be a discriminatory violation of free movement of workers. Interestingly, in the relevant case (Commission v Netherlands) the rule had been considered from a right to entry perspective (entry of migrant workers in the Netherlands and equal treatment in respect of study finance).

What the court suggests in relevant cases is a more flexible approach to assessing integration: taking into account not only length of residence but also qualitative links such as nationality, educational history, family, employment, language skills and other social and economic factors. The court also corroborates its stricter scrutiny of relevant residence requirements by emphasizing the very importance of students’ and teachers’ mobility to the project of integration (art 6(e) and 165(2) TFEU), an element in whose respect the court remains silent in host State maintenance aid cases.

Genuine Links and Financial Burdens

As a result the same court that goes along with host Member States’ reluctance to support entrant students if not after years of residence, is unwilling to hinder students who wish to export entitlements. In particular, an unspoken implication of the Court’s approach is that nationality is an important alternative to residence in proving attachment, to the point that nationals may be allowed to export study finance even from home States they have barely ever entered (Thiele Meneses, involving a German national who grew up in Brazil; Martens, involving a Dutch national who had spent more time in Belgium than in the Netherlands).

Further, the court’s approach indicates that the Member States’ interest in avoiding systemic financial burdens has a different weight when opposed to claims from incoming students than when opposed to claims from outgoing students. This is confirmed in cases on tax relief in a home Member State in respect of school and university fees paid in a host Member State. A Member State can cap relevant tax relief to the same amount applicable for national fees however it cannot completely exclude tax relief for fees paid in another Member State (Schwarz and Gootjes Schwarz; Zanotti). Even if in such situation, no part of the paid fees, whether paid to public or private institutions, will accrue to the coffers of the tax-relieving State.  

Home-Coming Schemes

In a recent case concerning students-family members of frontier workers, Giersch, the Court has given a hint that may suggest a change of direction even in cases regarding students unrelated to migrant workers.  The Court has indicated that promotion of high rates of education among the resident population and promotion of the economy are legitimate State interests; and that a requirement for students in receipt of portable study finance to go back to reside and work in the paying Member State upon graduation is an appropriate means to this end. Recognition of similar home-coming requirements as legitimate restrictions to free movement of students would alter the current balance between right to exit and right to entry. By coupling the right to exit with a duty to return, similar requirements would thwart the natural evolution of a student’s right to leave a Member State into the right to enter and become integrated in another one. This may result into an impediment to free movement of workers. While any conclusion would be premature, it seems likely that the Court would take a highly contextual approach in assessing proportionality of similar requirements (the hint came in a case regarding Luxembourg, a Member State with an unusually low rate of highly educated residents, and a unusually high non-resident working population).

IMPLICATIONS

The asymmetry that emerges in student mobility case law could be articulated, with the necessary adaptations, also in other fields.  This asymmetry has two implications that warrant further research. A first implication is in terms of the financial burden of free movement. Who bears the brunt of free movement in this sense, between home and host States, depends in the case of students. For instance, Member States that are large recipients and moderate senders of EU migrant students may find free movement lucrative: sending Member States will pay for study finance, and the host Member State will gain in fees. An example to explore comes to mind: the United Kingdom, which in 2012 sent about 17,000 students to other EU/EEA/EU candidate countries, and received about 200,000 from other EU/EEA/EU candidate countries (Eurostat data). This in turn suggests further reflection on the nature and reach of transnational solidarity in the EU: on what kind of affiliation model does it really depend (D. Thym) and to what extent should it be tied to the nature of the involved social benefit (F. De Witte) rather than to the position of the involved individual. A second implication is in terms of the meaning of European Union citizenship and its relation to nationality. European Union citizenship is often considered a threat and a weakening factor for the rights and the image of national citizenship (according to Gareth Davies, ‘residence is the new nationality’ in light of European Union citizenship). In this sense it is one of the more ‘federalist’ achievements of the integration project. Actually at least as regards free movement of students, European Union citizenship rather reinforces national citizenship. It makes rights tied to national citizenship exportable and thus extends the reach of national citizenship across its national borders. The flip side of this implication is that renouncing European Union citizenship or losing it would have the effect of shrinking national citizenship back within its original boundaries. 

Further Reading

Francesca Strumia, ‘Individual Rights, Interstate Equality, State Autonomy: European Horizontal Citizenship and its (Lonely) Playground in Trans-Atlantic Perspective’

 (forthcoming in Dimitry Kochenov (ed) EU Citizenship and Federalism: the Role of Rights,

CUP 2015)

Floris De Witte, ‘Who Funds the Mobile Student? Shedding Some Light on the Normative Assumptions Underlying EU Free Movement Law’ (2013) 50 C.M.L.Rev. 203

Daniel Thym, ‘The Elusive Limits of Solidarity: Residence Rights of and Social Rights for Economically Inactive Union Citizens’ (2015) 52 C.M.L.Rev. 17

Gareth Davies, ‘“Any Place I Hang my Hat” or Residence is the New Nationality’ (2005) 11 E.L.J. 43

Barnard & Peers: chapter 13

Photo: Francesca Strumia

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No more "Faber" fortunae suae: the EU consumer’s status after Faber v Hazet

Luigi Lonardo, PhD candidate, King's College London

Background

Are buyers of retail goods "consumers" even when they do not claim this status? According to the findings of the First Chamber of the Court of Justice in case C-497/13 Faberthe answer is yes.- Purchasers are consumers, whether they know it or not,provided they conclude the contract not for business or professional reasons.

The Court has ruled that a national judge is required to investigate on its own motion whether, in relation to a contract, the purchaser is a 'consumer'. Therefore, the protection of EU consumer law applies independently from the party's reliance on this status. Moreover, if a lack of conformity in a product becomes apparent within six months from the delivery, this is presumed to have existed at the time of delivery. The conclusions reached by the Court are in line with the high standard of consumer protection in EU law and confirm the case law which tends to lighten the burden of proof of the consumer. This should come as good news for millions of European purchasers. However, the Court could have adopted a more nuanced approach that would have led to a more balanced outcome.

The Court was asked to interpret Directive 1999/44 on consumer goods and related guarantees("the Directive"). In particular, it was asked to interpret Article 5(2), which grants Member States freedom to provide that, in order to benefit from his rights, the consumer must inform the seller of a lack of conformity of the goods within two months from discovering it, and Article 5(3), which provides that any such lack of conformity which becomes apparent within six months of delivery of the goods shall be presumed to have existed at the time of delivery - and the presumption can be rebutted.

The facts of the case

In May 2008 Faber bought from Hazet garage a second-hand car which, in September of the same year, caught fire and was completely destroyed. In January 2009, Ms Faber informed by telephone the seller’s garage that she was holding it liable. It is disputed if Faber had informed Hazet garage of the accident before this date. The seller denied liability.

Ms Faber therefore started proceedings against Hazet garage. Two facts are noteworthy: Faber did not rely on her consumer status, and at this stage a technical investigation to ascertain the cause of the fire could not take place as the car had been scrapped in the meantime. The Dutch court rejected Faber's claims on the grounds that she only informed Hazet more than three months after the accident – too late, under Dutch law (Article 7:23 Netherlands civil code). 

The Gerechtshof (Regional Court of Appeal) Arnhem-Leeuwarden, before which the dispute was brought on appeal, decided to refer questions to the Court of Justice for a preliminary ruling.

The questions referred and the judgment

Following the opinionof Advocate General Sharpston, the Court dealt with the seven questions asked by the referring court by dividing them into two sets:

1.      Can a national court examine by its own motion whether a purchaser is a consumer?

2.      When and how should the consumer's duty to inform the seller of a lack of conformity of the goods be exercised?

As a preliminary remark, it is noticed that the Court expressed its views on the Directive even though the dispute in the main proceeding was between private parties. It did so because national Courts are required to interpret domestic law in the light and purpose of the "applicable directive" (para 33). In the present case, the Dutch law was a direct implementation of Directive 1999/44.

1.      A court can inquire the consumer status ex officio

In the contract at issue, the Dutch judges were in doubt on the provisions applicable, because it was not known whether it was concluded with a consumer. The Court ruled that the status of consumer can be examined by the national court on its own motion even though the party has not relied on that status (para 48). What's more, this status can be declared by a court even in appeal proceedings where the purchaser had not raised any complaint against the judgment of the court of first instance.

The Court considered that "in the absence of harmonisation of procedural rules, the detailed procedural rules governing actions for safeguarding an individual’s rights under EU law are a matter for the domestic legal order of the Member States, provided, however, that they are no less favourable than those governing similar domestic actions (principle of equivalence) and do not make it in practice impossible or excessively difficult to exercise the rights conferred on consumers by EU law (principle of effectiveness)". It reasoned as follows.

On the principle of equivalence (para 38): the ordinary task of judges is to assign a legal classification to the situation brought before them. This, the Court argues, is not in itself the exercise of a discretion, but simply the legal reasoning of a judge. Since Dutch courts are required to classify matters of law and facts eg according to procedural rules, the same should happen for the definitions of EU law (para 39). The principle of effectiveness would only need to be considered if there was no principle of equivalence. However, the Court expresses its view on it (para 41). It refers to the established principle that national law must ensure that it is not too difficult for EU citizens to exercise the rights conferred on consumers by EU law. This principle is justified, in the Court's view, "on the idea that the consumer is in a weak position vis à vis the seller or supplier".

2.      Provisions on communications and burden of proof of the consumer

The Court then analysed Article 5(3) of the Directive: lack of conformity of a product is presumed when it becomes apparent within six months of the delivery. The Court considered that the system of liability established by the Directive is necessary because it would be impossible for the consumer to prove that a lack of conformity existed at the time of delivery (para 54). Hence, "[i]n view of the nature and importance of the public interest underlying the protection which Article 5(3) of Directive 1999/44 confers on consumers, that provision must be regarded (…) as a rule of public policy. It follows that where, under its domestic legal system, it has a discretion as to whether to apply such a rule of its own motion, the national court must of its own motion apply any provision of its domestic law which transposes Article 5(3)" (para 56).

Furthermore, it is asked what the purchaser has to prove when the lack of conformity is communicated within two months. In light of the travaux préparatoires of the Directive, the provision that the consumer must inform the seller of the lack of conformity ‘does not establish a strict obligation to carry out a detailed inspection of the good’. Furthermore, crucially, "[t]he consumer is required to prove only that the lack of conformity exists. He is not required to prove the cause of that lack of conformity or to establish that its origin is attributable to the seller" (par 70).

  

Comments

·         Is the consumer so weak?

Nowhere does the Directive say that judges can establish on their own motion whether the directive applies a case pending before them. The Court based its decision to allow national judges to establish on their own motion the status of consumer also on the principle of effectiveness. That is, the assumed weakness of consumers (see para 59 of the AG opinion), as affirmed in the case law on various consumer directives (Mostaza Claro, Rampion and Gordard). However, in Duarte Hueros AG Kokottintroduced a sensible distinction. One issue is the consumer at the stage of bargaining: at this time he or she deserves protection. After the conclusion of the contract, it is a different issue: here there is no particular reason to consider the consumer as the weaker party anymore. This view is of particular interest because it is extremely equilibrated. Possibly, since it is more nuanced, it is even to be preferred to the reasoning of the court. It would avoid oversimplifying the position of the consumer and would lead to different conclusions.

AG Sharpston, who shares Kokott's view that "the two sets of consumers are not in the same position" (para 60),  argues nonetheless that the consumer is weaker even after the contract is concluded because there is asymmetry of information. In other words, it is easier for the seller to prove the cause of a lack of conformity. Therefore a rule of public policy that creates the obligation to investigate is justified. Moreover, she adds, the rationale also applies any time there is the need to protect a weaker party (eg in case of workers). The Court did address this possible distinction, but limited itself to acknowledging that "In a field in which, in a number of Member States, the rules of procedure allow individuals to represent themselves before the courts, there would be a real risk that the consumer, particularly because of a lack of awareness, would not be able to satisfy" the requirements of claiming consumer status. While this argument may be appealing, it is a policy choice that is rather sweeping: first, not in all Member States it is possible for individuals to represent themselves in matter of consumer law. Second, if this is the ratio, why is there no difference when the individual is actually assisted by a lawyer, as the referring Dutch court had expressly asked?

·         A high standard of consumer protection is ensured because the consumer only has to prove the existence of the lack of conformity

The consumer has very little to prove indeed: only the existence of a lack of conformity, not the causes, nor that such a lack is imputable to the seller. Of course, the presumption can be rebutted but this means that the onus is on the seller/supplier. While the Court assumed that the European Union legislator decided to apportion the burden of proof in these terms for solid reasons, it is questionable whether the continuous extensive interpretation given by the CJEU will preserve the fair apportionment provided for by the consumer Directives. Indeed in a recent judgment,Boston Scientific, the Court had already reached a similar conclusion of presumption of defect. Even though that case was about defective products (not any general lack of conformity) and more specifically about medical devices implantable in the human body, the outcome is the same. The high standard of protection is therefore ensured – possibly at the expense of the sellers/producers- by lightening the burden of proof for the consumer. The risk of the conveyance, then, is on the producer or seller/supplier[1].

  

A further element is worth noting: some European Union legal systems foresee the opportunity of a technical report to ascertain, for example, the causes of defects or lack of conformity in products. If the consumer does not need to prove these, however there is no need to summon an expert- ie to pay for its work. Legal action will therefore be smoother and easier to start.

Conclusion

The Decision reaffirms the high level of consumer protection in EU Law which the Court has expressed in its recent case law. In particular, the Court has found that a court is required to investigate on its own motion whether a purchases is a consumer, independently from him or her relying on this status. Therefore EU consumer law automatically applies to the buyer who purchases goods for private use – on the ground that the purchaser is a "weak" party, worthy of protection.. As explained in Faber, for example, these rights imply that a consumer should simply inform the seller of the lack of conformity of a product within two months of its discovery- the communication needs not to be burdensome for the consumer. Moreover, as far as the burden of proof, the consumer is only required to prove the existence of the lack of conformity of a good that is has purchased, if this lack appears within six months from delivery.

Photo credit: Daily Telegraph

Barnard & Peers: chapter 23

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[1]               See Maria Castellaneta, "The company shall pay for the damages occurred within 6 months", Il Sole 24 Ore, Friday 5^th June, 46.

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