England and Wales Court of Appeal (Civil Division) Decisions

IN THE HIGH COURT OF JUSTICE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
HHJ PETER CLARK (1078 & 1657)
HHJ McMULLEN QC (2508)
UKEAT/0095/08/RN & UKEAT/0433/07/dm

		Royal Courts of Justice Strand, London, WC2A 2LL
		14/12/2009

LORD JUSTICE MUMMERY :

I. Introduction

1. These three connected appeals, which are all about teachers' fixed-term employment contracts, were ordered to be heard together. They arise from two employment tribunal (ET) decisions and three Employment Appeal Tribunal (EAT) decisions. The tribunal decisions were in test cases for unfair dismissal and wrongful dismissal and for declarations as to permanent status brought by British teachers against their former employer, the Secretary of State for Children, Schools and Families (the Department, for short). The claims are consequent on the Department's dismissal of the teachers on the termination of their employment contracts. That occurred at the end of a series of contracts for fixed terms of varying lengths, totalling at least nine years in most cases. The Department had seconded the claimants to teaching posts in the network of European Schools established in this country and in other countries in the European Community (EC). The teaching posts were subject to a maximum of 9 years duration by virtue of regulations in force at the Schools.
2. The cases raise some unprecedented and, to my mind, difficult points of law. The legal setting is (a) domestic contract law and employment protection legislation (the Employment Rights Act 1996); (b) the EC Directive on Fixed-Term Contracts in 1999 and its transposition into domestic law by the Fixed-Term Regulations in 2002; and (c) international treaties between the European Communities and Member States establishing the European Schools, and the regulations made under them governing teaching posts in those schools.
3. The appellants, Mr JR Fletcher and Mr KP Duncombe, are two of the claimant teachers. They were employed by the Department to work in the European Schools, Mr Fletcher being seconded to a teaching post at a European School in this country and Mr Duncombe to a teaching post at a European School in Germany. In the ET and in the EAT the facts of their cases were treated as raising legal issues relating to both their employment rights and to those of other similarly-placed claimants. Save for Mr Duncombe's unfair dismissal claim, the cumulative effect of the current tribunal decisions is a rejection of the Department's grounds for denying legal liability to the claimants.
4. The Department's hard line on all of the claims is that the period of secondment to the European Schools was, and is, validly limited to a maximum of nine years. That feature was dictated by "the Nine Year Rule" embodied in the Schools' internal regulations. The Department's case is that the Nine Year Rule is objectively justified under the EC Directive on Fixed-Term contracts (if applicable); that the employment contracts terminated by effluxion of time at the end of the period allowed under the Nine Year Rule; that the teachers concerned were then excluded from further service in the European Schools; and that the teachers were not entitled to make against the Department any statutory claim under the 1996 Act for unfair dismissal or any contract claim for wrongful dismissal.
5. If the Department's case is correct, the Nine Year Rule, which the Department did not make (though it is reflected in the teachers' employment contracts, which it did make) means that British teachers at European Schools are compelled to leave their posts without legal redress for their dismissal at the end of the permitted maximum period. That is so, even where there is no suggestion that the post held is redundant, or that there is anything unsatisfactory about the conduct or capability of the teacher. The Department's position is that its hands are tied, reducing it to a helpless and blameless state in this matter. It is caught in the middle of a situation, which is not of its own making: on one side are the aggrieved teachers; on the other side are the Board of Governors of the European Schools and their inflexibility on the application of the Nine Year Rule. That Board, not the Department, made the Nine Year Rule restricting the length of employment. It is the application of that rule in the Schools that is the root of the teachers' grievances about loss of employment without fair reason or just redress. The Department denies legal responsibility for the claimants' predicament.
6. If the court is inclined to reject its primary submissions, the Department says that the court should consider making a reference to the Court of Justice under Article 234 of the Treaty on questions of interpretation of EC law arising out of the 1999 Directive.
7. In the cases of those teachers seconded to work in the European Schools overseas the Department has some other arguments for saying that the teachers are not entitled under English domestic law to remedies for either wrongful dismissal or for unfair dismissal from extra-territorial employment. The Department rests much of this part of its case on the principles laid down by the House of Lords in Lawson v. Serco [2006] ICR 250 (Serco.)

II. Overview of issues and tribunal proceedings

8. The unique aspects of the origin, status and staffing of the European Schools have created a very unusual employment law environment. The Schools were established by the EC and the Member States for the education of the children of staff working in EC institutions. The Schools form a group located in various countries in the EC, including this country. They are staffed by teachers seconded from different member states. The Schools are neither emanations of the EC itself nor of the Member States. Although the teachers seconded to them are subject to the Nine Year Rule, the seconding Member States did not make that Rule.
9. The dismissal of the British teachers has produced a cluster of employment law issues on the territorial limits of the 1996 Act and of the fixed-term contracts legislation; the objective justification of fixed-term contracts under legislation for the protection of workers from the abuses of successive fixed-term contracts; the impact of the international treaty governing the Schools; and the effect of the internal school regulations made under that treaty.
10. Out of a total of 227 such teachers 164 are potentially affected by the issues in these cases. The number is not large, but the issues, particularly those relating to employment protection for employees working abroad, potentially affect a large and growing number of workers.
11. The crunch question is whether, as the Department argues, the British teachers in the European Schools have only fixed-term employment contracts with an objectively justified maximum 9 years duration applied in the Schools; or whether, as the teachers claim, their employment contracts have been converted by the Fixed-Term Regulations into contracts under which they become permanent employees of the Department. Permanent employee status would, they say, entitle them either to continue working in the European Schools, or, if they are prevented from doing so, to legal redress against the Department for unfair dismissal and wrongful dismissal.
12. Two different legal regimes potentially govern the legal position of the teachers. The outcome of the main issue largely turns on which regime applies. That depends on the scope of each regime and, if the teachers fall within the scope of both regimes, which of them, if either, takes priority in the determination of their employment rights.
13. The first is the Schools regime. It consists of the specific legal instruments creating the constitution and government of the European Schools: the Schools Convention 1994 made between the Member States of the EC and the Communities themselves and the Staff Regulations made by the Board of Governors of the European Schools in 1996 defining the terms on which staff are seconded to the Schools. The Staff Regulations include the Nine Year Rule at the core of the controversy. The Board of Governors is unwilling to modify or suspend it. The Department says that it is powerless to change it, though that is not fully accepted by the teachers.
14. The second is the EC Fixed-Term Contracts regime. The claimants' case is that it is of general application to employment in the EC. It consists of the Fixed-Term EC Directive 1999/70/EC of 28 June 1999 and the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002 made under section 45 of the Employment Rights Act 2002 (not, it should be noted, under section 2 of the European Communities Act 1972). The main target of the 1999 Directive and the implementing Regulations was prevention of the abuse by employers of successive fixed-term contracts.
15. Broadly stated, the principal issue is whether the employment contracts between the teachers and the Department fall within the scope of the Directive and the Fixed-Term Regulations; and if they do, whether the Nine Year Rule is justified on objective grounds; and, if it is not justified, whether the Schools Convention and the Staff Regulations regime override or displace the Directive and the Fixed-Term Regulations.
16. The ET and the EAT accepted the claimants' contentions that the Directive and the Fixed-Term Regulations apply to them, that the Nine Year Rule is not objectively justified, and that, as regards the claimants' employment rights, the Directive and the Regulations regime prevail over the Schools Convention and the Staff Regulations. The Department appeals against those rulings. It also seeks to introduce on the appeal a brand new argument about the scope of the EC legislation on fixed-term contracts. The Department now says that the fixed-term legislation has no application at all in these cases, and that the issues of objective justification and competing priority, which were argued at length by, and decided against, the Department in the tribunals below, do not necessarily arise for decision on the appeals.
17. If, however, the Department were to lose the appeals on all of its primary arguments about the applicability of the fixed-term legislation, secondary questions would arise affecting claimants in the position of Mr Duncombe i.e. those seconded to European Schools outside Great Britain. Are they entitled to claim compensation for wrongful dismissal and unfair dismissal on the expiration of their secondment at the end of 9 years? The ET and the EAT both accepted the Department's contention that no claim under the 1996 Act for unfair dismissal can be made, as the unfair dismissal provisions of the 1996 Act do not have extra-territorial effect in the case of those teachers who work in the Schools outside Great Britain. However, on the wrongful dismissal point, the EAT reversed the decision of the ET and held that a wrongful dismissal claim was possible and remitted the matter to the ET. That aspect of the appeals raises points on the construction and effect of the Directive and on the territorial application of the Regulations; on the English law choice of law and exclusive jurisdiction clause in the employment contracts; and on the impact of Serco rulings on the extent of statutory employment protection for those employed to work outside Great Britain.
18. The court is mindful throughout of the possibility that, in order to decide any particular issue in the appeals, it may be necessary to make a reference to the European Court of Justice under Article 234 of the Treaty of questions on the interpretation of EC law identified by the Department.

III. Facts and law

A. Facts and proceedings

19. The European Schools, to which Mr Duncombe and Mr Fletcher were seconded, are international institutions. They were established under an international treaty between the European Communities as separate legal persons and the several Member States. The Convention defining the Statute of the European Schools 1994 (the Schools Convention) replaced earlier statutes, protocols and agreements dating from 1957.
20. The staff in the Schools are multi-national. Instruction is multi-lingual. The Schools operate their own syllabus. The Member States, not the Schools themselves, employ most of the teachers at the Schools, and second their teachers to the Schools. In the case of most Member States the secondments are from teachers centrally employed by the State in the national education system. That is not so with the UK, where teachers are usually employed locally, either by the local authority or by the governing body of the school, rather than centrally by the State. The Regulations for Members of the Seconded Staff of the European Schools 1996 (the Staff Regulations) were made by the Board of Governors under the Schools Convention and laid down the terms on which staff are seconded to the Schools.
21. Mr Fletcher was, from 1 September 1998 until 31 August 2008, employed as a teacher at the European School in Culham, Oxfordshire. After a 2 year probationary period he was offered employment for a further period of 3 years from 1 September 2000. This was followed by a fixed term contract for a further 4 years. Exceptionally he was then given an additional 1 year contract expiring on 31 August 2008.
22. His initial offer letter referred to the Nine Year Rule and to the fact that, after the 2 year probationary period, the maximum term was a further 7 years and that there was no right of re-appointment on its expiry. It was expressly agreed in paragraph 14 of the letter of appointment that-

"This agreement shall be governed by English law and the English court shall have exclusive jurisdiction in all matters regarding it."

23. In his complaint to the ET Mr Fletcher sought a declaration that his was a permanent post and that the Nine Year Rule should not apply to it. He succeeded in the ET (judgment entered in the register on 13 December 2007), which rejected the Department's arguments both on the effect of the Fixed- Term Regulations and on its defence of objective justification of the Nine Year Rule. The ET declared that he was a permanent employee of the Department pursuant to the Fixed-Term Regulations. The EAT (HHJ McMullen QC presiding and handing down judgment on 30 September 2008) dismissed the appeal by the Department, which now appeals to this court.
24. Mr Duncombe was, from January 1996 until August 2005, a teacher in the European School at Karlsruhe, Germany. On 5 August 2005 he was offered a 10^th and final year from 1 September 2005. The initial offer letter referred to the Nine Year Rule and, as in the case of Mr Fletcher, there was an English law choice of law and jurisdiction provision (paragraph 15).
25. His complaint against the Department was of wrongful and unfair dismissal on the expiry of his fixed-term contract. Both claims failed in the ET at a pre-hearing review on preliminary jurisdictional issues (reasons entered in the register on 18 June 2007). It was held that he did not have the right to bring the claims. His case turned on whether he had the right to be treated as a permanent employee rather than being on a fixed-term contract which expired at the end of August 2006.
26. In the EAT (judgment of HHJ Peter Clark sitting alone and handing down judgment on 12 December 2007) Mr Duncombe's appeal against the ruling on unfair dismissal failed at a preliminary hearing as raising no question of law which had a reasonable prospect of success. He appeals from that decision. Subsequently Mr Duncombe won his appeal to the EAT (HHJ Peter Clark and 2 lay members) on his claim of wrongful dismissal. By order of 24 April 2008 the claim for wrongful dismissal was remitted to a differently constituted ET. The EAT gave the Department permission to appeal from that decision. It involved consideration of the EAT judgment of Elias P in the case of Bleuse v. MBT Transport Ltd [2008] IRLR 264 (Bleuse). The claimants had raised the Bleuse point for the first time in the EAT. It had not been raised earlier, as Bleuse was not decided until after the ET decision and after the EAT preliminary hearing of the unfair dismissal appeal.

B. Schools Convention 1994 and Staff Regulations

27. Under the Schools Convention the Board of Governors is made up of representatives of the European Commission, the Contracting States, the Staff Committee and the Parents' Association. Article 12(1) conferred power on the Board of Governors to make the Staff Regulations. Article 26 provided that the Court of Justice should have sole jurisdiction in disputes between the Contracting Parties relating to the interpretation and application of the Convention.
28. Articles 28 and 29 of the Staff Regulations on the length of secondment to the Schools established the Nine Year Rule. It operates in this way. Staff have an initial probationary period of 2 years. If that is satisfied, it is followed by an extension of the secondment for a further 3 year period. The secondment is then renewable for a further 4 year term. The total period of secondment "may not be more than nine years," save that, in special cases, duly justified in the School's interest, a further 1 year extension may be granted. Service is terminated on the expiry of the period of secondment.

C. Fixed-Term Directive 1999/70/EC and Fixed-Term Regulations

29. The Directive was issued by the Council under Article 249 of the Treaty. It required Member States to put into effect the Framework Agreement on fixed-term work annexed to it. The purpose of the Framework Agreement relevant to these appeals was the prevention of abuse arising from the use of successive fixed-term employment contracts or relationships, as opposed to employment on an indefinite basis: see recitals 14 and 17 of the Directive. (There was another purpose: to improve the quality of fixed-term work by the application of the principle of non-discrimination as between those employed on such contracts and those employed on an indefinite basis. Discrimination considerations do not feature in these cases.)
30. Clause 5 of the Annexed Framework Directive (Measures to prevent abuse) provided that-

"1. To prevent abuse arising from the use of successive fixed-term employment contracts or relationships Member States…shall, where there are no equivalent legal measures to prevent abuse, introduce in a manner which takes account of the needs of specific sectors and/or categories of workers, one or more of the following measures-

(a) objective reasons justifying the renewal of such contracts or relationships;

(b) the maximum total duration of successive fixed –term employment contracts or relationships;

(c) the number of renewals of such contracts or relationships.

2. Member States …shall, where appropriate, determine under what conditions fixed-term employment contracts or relationships:

(a) shall be regarded as 'successive';

(b) shall be deemed to be contracts or relationships of indefinite duration."

31. It was, of course, open to Member States to maintain or introduce more favourable provisions for workers than those set out in the Framework Agreement: clause 8.
32. The Fixed-Term Regulations implementing the Directive into domestic law were made under section 45 of the Employment Act 2002, which provided that-

"(1) The Secretary of State shall make regulations –

……….

(b) for the purpose of preventing abuse arising from the use of successive periods of fixed-term employment.

………..

(4) Without prejudice to the generality of this section, the regulations may make any provision in relation to employees which appears to the Secretary of State to be necessary or expedient-

(a) for the purpose of implementing Council Directive 99/70/EC on the framework agreement on fixed-term work in its application to terms and conditions of employment."

33. Regulation 8 of the Fixed -Term Regulations was made to give effect to clause 5 of the Annex to the Directive. It is at the heart of the present dispute-

"(1) This regulation applies where-

(a) an employee is employed under a contract purporting to be a fixed-term contract, and

(b) the contract mentioned in sub-paragraph (a) has previously been renewed, or the employee has previously been employed on a fixed-term contract before the start of the contract mentioned in sub-paragraph (a).

(2) Where this regulation applies then…the provision of the contract mentioned in paragraph (1)(a) that restricts the duration of the contract shall be of no effect, and the employee shall be a permanent employee, if-

(a) the employee has been continuously employed under the contract mentioned in paragraph (1)(a), or under that contract taken with a previous fixed-term contract, for a period of four years or more, and

(b) the employment of the employee under a fixed-term contract was not justified on objective grounds-

(i) where the contract mentioned in paragraph (1)(a) has been renewed, at the time when it was last renewed;

(ii) where that contract has not been renewed, at the time when it was entered into."

34. The claimants have been employed under successive fixed-term contracts and they have the necessary continuous employment. The sole question for the ET on the Fixed-Term Regulations was whether the employment of the claimants under fixed-term contracts was justified on objective grounds. It was common ground that the burden of establishing objective justification was on the Department. The ET heard evidence, including oral evidence from the Department, and made findings that agreed with the claimants' case that the Department's objective justification plea failed.
35. Regulation 9(5) is also relevant to the arguments on the effect of Regulation 8.

"An employee who considers that, by virtue of regulation 8, he is a permanent employee may present an application to an employment tribunal for a declaration to that effect."

IV. Fixed–term or indefinite contract issue

A. Scope of Directive and Regulations.

36. The first and fundamental point taken on behalf of the Department by Mr Jonathan Crow QC (who did not appear in any of the tribunals below) is new. He says that neither the Directive nor the fixed-term Regulations, on their proper construction, bite on these cases at all. They are, quite simply, not engaged by the facts. The claimants' employment contracts reflecting the Nine Year Rule fall outside their scope. The consequence is that there is no requirement on the Department to justify the fixed-term contracts. The claimants are unable to argue that their fixed-term contracts with the Department became permanent contracts by virtue of the Directive or the Regulations.
37. If the Department's fresh point is correct, I agree that that is the end of the case. The other issues decided in the tribunals would not arise. If, however, the new point fails and the other points on the fixed-term contracts legislation do arise, the Department says that (1) the claimants' employment contracts reflecting the Nine Year Rule are objectively justified within Regulation 8; and, in any case, (2) the Schools Convention and the Staff Regulations override any relevant provision in the fixed-term legislation. The ET erred in law in its rejection of the objective justification defence advanced by the Department.
38. This court would not normally allow a new point to be taken at such a late stage in litigation. There are, however, special circumstances for allowing an amendment to the grounds of appeal to raise a new point. These were realistically recognised by Mr Nigel Giffin QC, who appears for the claimants. He naturally complained about the lateness of the application to amend, the lack of explanation for that lateness and its radical departure from the case as previously advanced by the Department since 2003. But, subject to reserving his position on the costs implications of the amendments, he did not see much point in contesting it, even at this advanced stage of the litigation. After all these are test cases brought to determine the employment rights of teachers in the positions of Mr Fletcher and Mr Duncombe. The point does not require any further evidence or findings of fact in order to decide it. It is a pure point of law, which is logically anterior to the points of justification and legislative priority argued and decided in the tribunals below. If correct, the new point would dispose of the appeals. If it is not decided now, it would have to be decided in a future case brought by other teachers at a later date. It would be preferable to have the legal questions answered now. Mr Giffin QC had notice of the application and was fully prepared to respond to the new point, which would not substantially add to the estimated length of the hearing. The claimants' position still is that the Fixed-Term Regulations clearly applied to their employment contracts under which they were seconded to the Schools with the result that the Department was required to show objective justification for the use of a succession of fixed-term contracts over a period of nine years.
39. In those circumstances it would not be in accordance with the overriding objective to refuse permission to amend even at this late stage. Permission was accordingly granted by the court at the hearing for the Department to make the necessary amendments to its grounds of appeal.
40. The Department asserts that the new point is founded on a proper analysis of the true purpose of the fixed-term contracts legislation. As can be gathered from the preamble to the Framework Agreement, employment for an indefinite period is regarded as the norm: it is referred to as "the general form of employment relationship between employers and workers." Such contracts "contribute to quality of life of the workers concerned and improve performance" and "The use of fixed term contracts based on objective reasons is a way to prevent abuse."
41. There are, however, circumstances in certain sectors, occupations and activities in which fixed-term employment contracts suit the needs of both employers and workers. Fixed-term contracts are not inherently objectionable. They are not prohibited as such. No requirement was imposed by the Directive on Member States to introduce legislation converting all successive fixed-term contracts into employment of indefinite duration. The purpose of the legislation was to deal with abuse arising from the use of successive fixed-term employment contracts, which purport to engage workers for fixed-terms, but in reality the case is one of permanent employment. The legislation only applies, it is submitted, to situations where the true nature of the employment is permanent, but it has been dressed up and disguised to give it the appearance of a fixed-term contract. Particular emphasis is placed on the reference in Regulation 8(1)(a) to a contract "purporting to be a fixed-term contract" as demonstrating the point that it applies only to contracts which pretend to be something that they are really not i.e. fixed-term contract in form, but indefinite contract in substance.
42. Turning to the particular cases of teachers seconded to work in European Schools, the Department says that they are not caught by the purpose or language of the legislation. It is not a case of permanent employment in the guise of a fixed-term contract: their secondment was not, and could not be, permanent, because of the Nine Year Rule. Employment at the European Schools was expressly subject to the Staff Regulations. That was made clear in advertisements for the position. It was re-iterated in interview and in the employment contract itself. The employment was meant to be finite, just as it would be if the appointment were simply for a single fixed-term of 9 years. Such an appointment would take the case outside the fixed-term legislation, there being no succession of fixed- term contracts: there would be only one fixed-term contract.
43. It is further submitted that no abuse of the kind to which the legislation is directed is involved in the succession of the 2, 3 and 4 year periods at the European Schools. The teachers' complaints are not really about the abusive use of successive fixed-term contracts at all. Their real complaints are about something different - the finite nature of the appointment and the termination of their secondment to the European Schools forcing them to leave after 9 years. But that would have been the case if they had been appointed for a single, fixed period of 9 years, and they could not have mounted any claim about that under the fixed-term contracts legislation. The claimants' real aim was to extend their secondment to the Schools rather than to secure continued employment with the Department.
44. According to the Department it is not even in a position to extend the period of secondment. Although the Department employs the claimants, it does not run the European Schools where they teach on terms governed by the Staff Regulations. The Department cannot force the Schools or their Board of Governors to accept the seconded teachers beyond the maximum period set in the Staff Regulations. Indeed, there was some evidence that the Department had made some attempts, without success, to persuade the Board of the Schools to suspend the Nine Year Rule.
45. The Department points to the three options available in the Framework Agreement annexed to the Directive for achieving its objective of preventing abuse: objective justification; definition of the maximum total duration of successive fixed-term contracts; or limitation of the number of renewals. It cannot be the case, it is said, that either the claimants' employment contracts or the Nine Year Rule reflected in them are inconsistent with the options available under the fixed-term legislation.
46. The new point is very attractively put by Mr Crow QC. It has all the allure of any elementary argument that would, at one fell swoop, effectively dispose of all the issues. To assess the soundness of the point, which is completely contrary to what was previously accepted, but would provide the Department with a way of avoiding the need for objective justification of the fixed-term contracts, I must examine the Directive and the Regulations on fixed-term contracts more closely.
47. The critical question is whether Regulation 8 applies to the claimants' employment contracts so as to convert them into permanent contracts, if they are not objectively justified as fixed-term contracts. Accepted canons of construction require the relevant part of the text of the Regulations to be read in its ordinary and natural meaning, conditioned, of course, by its particular context and its evident purpose.
48. It is not suggested by the Department that the Regulations have in some relevant way failed to implement the Directive or that the construction put on them by the claimants is inconsistent with the Directive. If that were the case, it would become necessary to construe the Regulations, if it is possible to do so, so as to be consistent with the Directive. In the circumstances of this case, however, arguments based on the Directive do not have the same significance as they would have had if the Regulations were defective. Although that means that the Regulations apply to the claimants' cases regardless of the position under the Directive, I do not think that in fact any grounds have been advanced for holding that the application of the Directive, rather than the implementing Regulations, would lead to a different result.
49. In what respects do the employment contracts of Mr Duncombe and Mr Fletcher not satisfy the conditions of Regulation 8? They seem to fit the conditions neatly: the relevant contracts under which they were employed purported to be fixed-term contracts; there were previous fixed-term contracts; and the employees were continuously employed under fixed-term contracts for 4 years or more since 10 July 2002. The contrary arguments of the Department concentrate on the language and purpose of the Regulation.
50. The first argument is the linguistic point on Regulation 8 that the contract must be one "purporting to be" a fixed-term contract. It is also stressed that, on the purposive approach, the expressed policy of the Directive is to target abuse and that the Directive and the Regulations require the presence of "abuse" in the form of successive fixed-term contracts being used to disguise the reality of an indefinite employment relationship. There was no abuse here, as indicated, for example, by the fact that the claimants would have had no claim if there had been a single contract for a 9 year term.
51. On the linguistic argument I am unable to accept that the ordinary and natural meaning of the expression "purporting to be" fixed-term contracts in Regulation 8(1)(a) is that that condition is only satisfied when the need for the employee for the duration of the contract is a false pretence, so that the contract is pretending to be something that it is not, in which case the contractual document would be a sham. In my view, a contract can properly be described as one "purporting to be" a fixed-term contract if it in fact says that it is and provides for a fixed term. In ordinary language "purport" used of a document includes being, or conveying that it is, what it professes to be, whether or not it may turn out to be something else. (In this case, if the Regulations apply and there is no objective justification for a fixed-term, the contract will not take effect as a fixed-term contract: it will become a permanent contract.)
52. Take the example of a document "purporting to be" a contract for services, saying that it is that kind of contract. It may, however, be possible to argue that, on its true construction, it is really a contract of service. Whether that argument succeeds or fails, the contractual document is still accurately described as one "purporting to be" a contract for services.
53. On the "abuse" point, it is accepted that one of the principal purposes of the Regulations and of the Directive, to which they give effect, was to target abuse by use of successive fixed-term contracts. It does not, however, necessarily follow that the Regulations require the claimants to demonstrate that the use of the fixed-term contracts in their particular cases was an abuse. The scheme of the Regulations is that a succession of fixed-term contracts has to be objectively justified by the employer, not that the employee has to establish an abuse by the employer in a particular case.
54. On the hypothetical single 9 year term point taken by the Department, it is irrelevant that the Regulations would not apply if the Department had, instead of a succession of contracts, offered a single contract for a fixed-term of 9 years. That did not in fact happen. And it would not have happened, as it would not have been consistent with Articles 28 and 29 of the Staff Regulations. The claimants in fact had successive contracts of fixed-terms of 2, then 3, then 4 years in length (plus an exceptional 1 year making 10 years in all) as envisaged in the Staff Regulations. The important point is that the successive short fixed-term contracts are not the same, either in terms of value or job security, as a single 9 or 10 year contract. No sensible reason has been suggested for treating what in fact happened as if it were something quite different in fact and law.
55. It is also irrelevant to the construction of the Regulations that the claimants wish to go on teaching at the Schools to which they were seconded and which they were employed to do, rather than just continuing to be employed by the Department. Their wish or motive cannot affect the meaning of Regulation 8.
56. In short, I conclude that the new neat point is not the correct construction of the fixed-term contract legislation. The parties and the tribunals below were right to proceed on the basis that the real question for decision was one of objective justification rather than scope of application. I have sufficient confidence in this conclusion on the scope of the Regulations/ Directive to reject the Department's suggestion that the court should consider referring to the Court of Justice a question on the interpretation of the Directive in the context of the claimants' secondment to the Schools and the Nine Year Rule applied at them.

B. Objective justification

57. The Department argued the case in the ET with evidence on the basis that Regulation 8 applied and that the employment of the claimants under contracts reflecting the Nine Year Rule was justified on objective grounds. When the Department lost that point in the ET it did not appeal it to the EAT. The appeal dismissed by the EAT (HHJ McMullen QC) was only concerned with the question whether the use of fixed-term contracts was required to give effect to Treaty obligations.
58. On these appeals the Department resurrects the objective justification issue, contending that the ET took the wrong approach in law and submitting that, on a proper approach, the Nine Year Rule reflected in the claimants' employment contracts was justified on a number of grounds.
59. The claimants' response is that there was no legal misdirection in the ET decision and that its findings and conclusion on the evidence could not possibly be described as perverse. They also argue against the Department's attempts to show justification (1) by reliance on the existence of the Nine Year Rule as an employment feature of all the European Schools, and (2) by the legal argument that the use of the Nine Year Rule was justified because it was bound by the Staff Regulations to comply with it. They also contend that the EC obligation in the Directive not to allow successive fixed-term contracts applied and prevailed over a subsidiary measure of the Schools Convention and the Staff Regulations made under it. That treaty did not even lay down the Nine Year Rule, which is to be found in the Staff Regulations made for the Schools by the Board of Governors. The claimants take the strongest objection to some of the Department's submissions on the ground that they introduce into the appeals fresh evidence not before the ET and new points for which permission to appeal has not been granted.

ET decision

60. The crucial passage in the ET's decision on this point (paragraph 22) concluded that the Department had failed to satisfy the burden of proof on it. The ET stated that it considered in turn the three grounds relied on by the Department and reached the following conclusions-

"21. ……..

(i)Turnover of Staff

Neither the Board of Governors …or the Respondent have indicated what level of turnover in staff was desirable nor submitted any statistics to demonstrate what turnover there is in European Schools or what might be anticipated with and without the 9 year rule. Mr Carr submitted that the more favourable financial terms teachers in European Schools enjoyed meant staff turnover would be limited. The Respondent had produced a schedule showing the number of teachers employed by the Respondent in European Schools, the number who left and the number leaving due to the 9 year rule, each on a year by year basis from 1993 to 2007. The schedule gives no analysis as to why staff left but it does show there is turnover in staff who are not subject to the 9 year rule.

No evidence has been put before the tribunal to demonstrate why a prescribed turnover is beneficial and hence justified. The turnover caused by the 9 year rule is unconnected to the specific requirements of any particular school and its operation can cause difficulties for students when teachers are obliged to leave. Difficulties are created for schools losing experienced teachers they may prefer to retain and then having recruitment problems. The reliance by the Board of Governors and Respondent on the turnover point is however totally undermined by the practice of employing teachers on local terms. Where a school wishes to retain a teacher but cannot do so because of the nine year rule, or where seconded teachers cannot be recruited to replace teachers completing their 9 year period, schools will continue to employ them on local terms. As a consequence there is less turnover in practice than envisaged and simply a change in status of the teacher in question on less favourable terms of employment. In the absence of any evidence to support justification based on turnover of staff and in the light of the evidence that turnover is not enforced in practice due to the use of teachers on local terms, the Tribunal do not consider that turnover was a justified reason for the 9 year rule.

(ii) Constant renewal of staff bringing in new ideas and fresh thinking

There was no evidence to support any suggestion that new staff had any or any better new ideas than existing staff. Any suggestion that younger staff would have new ideas, in contrast to older staff, would be otiose and untenable. No evidence was put before the Tribunal as to what new ideas were being put forward, by whom and what action was taken, if any, as a consequence. The Claimant's evidence was that the European School system was slow to change because of its structure compiled from all parts of the EU. This was further evidenced by a failure of the Board of Governors transparently to consider the Fixed Term Directive and make changes to implement its terms relating to the 9 year rule or to substantiate its grounds for maintaining the 9 year rule to establish that it was appropriate and necessary. Any need for new ideas could in any event be achieved by other means e.g. by staff development courses as appropriate. The Tribunal was not satisfied therefore that the Respondent or the Board of Governors …established that the need for new ideas amounted to justifiable grounds for the 9 year rule.

(iii) Enrichment of the national system

Again no evidence was put before the Tribunal to establish in what way the national system was being enriched after the 9 year rule was implemented. The Respondent accepted it took no steps to further this in the UK. The teacher completing employment with a European School ended up unemployed in the UK. In any event teachers returning to the national system were accepted by Mrs Charles as being a drop in the ocean without harnessing their experience. There were a number of options open to the affected teacher which included trying to obtain a teacher's post in the UK in the national system, trying to obtain a teacher's position in an international school, leaving the profession altogether or retiring. Apart from the first of these options no benefit can be gained from the teacher pursuing the other options. Evidence was given on the Claimant's side (which the Tribunal accepted) that teachers leaving European Schools did have difficulty finding teaching posts in the national system in the UK. This is not surprising given the fact they have been outside the national curriculum for 9 years or more. Although the Respondent relied on evidence that some teachers did find teaching posts, there was no evidence what these jobs were or how long it took to secure such positions. It was plain on the evidence thatUK teachers were at a serious disadvantage compared to teachers employed by other EU states. Even where a teacher did obtain a teaching post in the UK national system, there was no evidence before the Tribunal that they did disseminate their experience either formally or informally. No evidence of enrichment of the national system was proven. The Tribunal did not consider the Respondent,[or] Board of Governors…could rely on this therefore as a justification for the 9 year rule."

61. The Department's existing grounds of appeal do not challenge those conclusions of the Tribunal on the evidence before it. The ET's findings are relevant to the appeal as showing the basis on which the case was fought out by the parties on the evidence in the ET.
62. The ET went on to reject legal points taken by the Department on the justification issue. The ET rejected the Department's submission that the Nine Year Rule was justified, as it formed part of the Staff Regulations made pursuant to the Schools Convention to which the UK was party and which give effect to international treaty obligations.

Department's submissions

63. The first point taken by the Department on the appeal is on the legal nature of the test of objective justification. The Department criticises the ET for apparently drawing a distinction between factual and legal justification, when it ought to have applied the single unitary test laid down in Regulation 8(2)(b) whether the employment of the claimants under a fixed-term contract could be justified on objective grounds. It should have made a global assessment of the effect of all the factual, legal and contextual factors cumulatively.
64. Secondly, it is argued that the court's scrutiny of the arguments on justification should not have been so intense. It is relevant that the contractual arrangements to be justified do not offend against the very policy of the Regulations, only their wording, and that they were, on the Nine Year Rule point, involuntary, rather than a commercial choice by the employer.
65. The Department re-visits the "abuse point" discussed earlier, saying that the inclusion of the Nine Year Rule in the contracts did not involve an abusive use of a succession of fixed-term contracts and thereby offend against the fundamental purpose of the fixed-term legislation. They only technically fall within the letter of Regulation 8. As the Department's compliance with the Nine Year Rule was obligatory under the Schools Convention, it was not the kind of abuse the legislation was designed to prevent.
66. Thirdly, the ET's approach to its finding that the Nine Year Rule was not "factually" justified is criticised. Permission is sought to advance a contention not advanced in the EAT: that the ET was wrong in principle to treat the question of objective justification as one of evidential evaluation for them as a tribunal of fact. It was not the function of the ET to conduct an evidential investigation into the question whether a policy of the Board of Governors underlying employment in the Schools could be proved to have been successful in the UK in practice in achieving the intended objectives. The question was one of principle, not one of evidence or empirical fact. Justification was not about the success of the policy in practice, but about the use of objective and transparent criteria.
67. The case of Adeneler v.Elinikos Organismos Galaktos (Case C-212/04) [2006] IRLR 716 was cited for a statement of the legal test for justification-

"74. More specifically, recourse to fixed-term employment contracts solely on the basis of a general provision of statute or secondary legislation, unlinked to what the activity in question specifically comprises, does not permit objective and transparent criteria to be identified in order to verify whether the renewal of such contracts actually responds to a genuine need, is appropriate for achieving the objective pursued and is necessary for that purpose."

68. The Department submits that the ET and the EAT misunderstood and misapplied that decision by treating the Nine Year Rule as a general provision which could not be justified when it was in fact a job-specific provision tailor-made for the specific features of employment as a teacher in the European Schools and was specifically linked to that activity.
69. On the grounds of justification the Department submits that the cumulative and overall effect of all the reasons for the inclusion of the Nine Year Rule in the claimants' contracts was compelling in favour of justification. The Nine Year Rule could not be described as a general or abstract provision which was incapable of providing justification in individual cases. Even if not part of English law, it was a fact and a factor to be taken into account. It pursued legitimate policy objectives to which it was rationally connected and it was proportionate to them. It is asserted that the Nine Year Rule commands the support of a significant majority of the parties to the Schools Convention. To abandon it would introduce a significant element of inconsistency in the EC. The integrity of the Nine Year Rule could not be impugned solely by reference to the experience of some British teachers and the evidence did not support the conclusion that its consequences were necessarily and generally damaging.
70. Turning to the application of the Adeneler test as a matter of principle, not of evidence, the Department says that the Nine Year Rule is justified. It reflects a legitimate policy in the desirability of achieving a reasonable turnover of staff and an appropriate level of cross-fertilisation of ideas and experience between the European Schools and the national education systems of the various Member States. In placing a finite limit on the period of secondment the Nine Year Rule imposes a structured rotation of staff rationally connected to the attainment of those objectives. The objectives were pursued in a proportionate manner as the period was not an unreasonably short time.
71. The European perspective of the justification exercise is emphasised. The ET focused on evidence from the British teachers and from the Department. But, as the Nine Year Rule operates across all the Member States, in the majority of which it is said to enjoy significant support, its integrity could not be impugned solely by reference to evidence of the British experience about its operation and effects.
72. This court is asked, in particular, not to uphold the ET's conclusions on the damaging consequences of the Nine Year Rule as to disruption to the family lives and careers of the teachers who accepted appointments knowing full well about the Nine Year Rule. In particular, the ET's observation that the Nine Year Rule could cause problems at the School with the students was based on insufficient evidence.
73. It is also submitted that, in assessing justification, the ET erred in not treating the Staff Regulations and the Nine Year Rule as part of English domestic law or part of EC law, by which the Department was bound. The ET wrongly failed to take that relevant factor into account. The Staff Regulations had the force of law in the UK by virtue of the European Communities Act 1972 under which the Schools Convention had been designated as one of the Community Treaties. As a result the obligations arising under the Schools Convention were to be given legal effect in the UK without further enactment. The Staff Regulations contained the Nine Year Rule which was a restriction imposed under the Schools Convention on the employment of teachers in the European Schools.
74. The claimants' objection that the Department could not avoid its obligations under the Directive and the Regulations by relying on the Schools Convention was met with the response that the Directive was irrelevant. Rather than prohibiting the Nine Year Rule, it gave Member States a choice as to how to prevent abuse arising under successive fixed-term contracts. That did not give rise to any conflict or incompatibility between the Directive and the Nine Year Rule. It is also contended that, as the EC was party to the Schools Convention, it forms an integral part of EC law and that no contradiction exists between EC law and the Nine Year Rule.
75. Finally, the Department enlists common sense, which I would agree is almost invariably a powerful argument. The court is pointed to the common sense of an international body determining the terms of engagement of its own staff and of the Department's position in treating the Board of Governors established under a free standing international treaty as the body best placed to determine what is in the interests of the Schools generally, having regard to both students and staff and the constraints of their budgets.

Conclusions

76. So many criticisms have now been made against the ET's decision on objective justification, which was not appealed to the EAT, that there is a danger of burying the basic point that the only question for this court is whether there was an error of law in the ET's decision on the objective justification issue.
77. In my judgment, the Department's full scale onslaught on the ET's decision is an impermissible attempt to subvert and re-open the whole basis on which both sides fought the case in the ET and to challenge the ET's findings of fact and conclusions by introducing new evidence and taking new points for which permission has not been and should not be granted. On those grounds alone I would dismiss the Department's appeal against the ET's decision on objective justification.
78. In those circumstances I will state my conclusions on the Department's detailed complaints briefly. For a start it is impossible to say that the ET's decision was perverse. The ET were entitled to hold that the inclusion of the Nine Year Rule in the employment contract was not objectively justified by the evidence that was adduced in the ET. It would be unjust to allow the Department to mount a case for an appeal and for a re-hearing by adducing fresh evidence on the appeal which could have been, but was not adduced, at the ET hearing. I would not grant permission for the Department to amend its grounds of appeal or to adduce fresh evidence on the appeal.
79. Next there was no error of law in the ET's approach to objective justification. The Directive and the Regulations expressly require objective justification of fixed-term contracts. The burden of justification is on the employer, in this case the Department. What must be justified is the application of the Nine Year Rule. It is the application of that Rule which results in the fixed-term contracts falling within the Directive and the Regulations. The obligation of the Department as employer to justify the Rule cannot be discharged simply by asserting as a fact that the Rule exists and applies. Further, the argument that the Department had no choice in the matter of the Rule, as it was part of the Staff Regulations and/or is binding as an international treaty obligation, does not excuse the Department from having to justify the Rule or provide a justification for it. Like every other employer the Department is bound by the employment law obligations imposed by the Directive and implemented in the Fixed-Term Regulations.
80. As for the legal status of the Schools Convention itself I am not persuaded that a Member State is legally entitled under EC law to rely on the obligations contracted in a treaty to justify non-compliance with, and to opt out of, EC obligations under a Directive making important general changes in employment law for the protection of employees in the member states of the EC. The Schools Convention did not itself lay down the Nine Year Rule.
81. I agree with Mr Giffin QC that the Schools Convention is a subsidiary convention in the EC law hierarchy. Neither it nor the Staff Regulations made under it trump or override inconsistent provisions in the Directive. On the matter of fixed-term contracts the Directive and the Regulations implementing them take precedence in English law.
82. As for the Staff Regulations and their status I also agree with Mr Giffin QC that they cannot be relied on as part of EC law or as part of English law to justify the Nine Year Rule. The Staff Regulations, which can be changed without the agreement of the EC or of the Member States, are not part of English law, or of EC law. Indeed, I even doubt whether they are law at all in any meaningful sense, save in the internal locality of the Schools themselves.
83. I would dismiss the Department's appeal on the objective justification point without the necessity of a reference to the Court of Justice of a question whether the secondment by the Department of teachers to the European Schools on the terms of the Nine Year Rule required by Articles 28-29 the Staff Regulations is objectively justified for the purposes of clause 5(1)(a) of the Framework Directive annexed to the Fixed Term Directive.

V. Wrongful dismissal and unfair dismissal

General

84. The territorial limits of the unfair dismissal provisions in s94(1) of the 1996 Act and of the Fixed-Term Regulations are central to the arguments about Mr Duncombe's claims for unfair dismissal and wrongful dismissal from his post at the European School in Karlsruhe and the jurisdiction of the ET to determine them.
85. In the ET Mr Duncombe lost on both claims. The main ground of decision was that the Fixed-Term Regulations had no extra-territorial application so as to convert his fixed-term contract into an indefinite contract. Their scope was held to be subject to the same implied territorial limitations as were applied by the House of Lords in Serco to the scope of the unfair dismissal provisions in s94(1) of the 1996 Act.
86. In the EAT Mr Duncombe's appeal on the unfair dismissal claim failed at a preliminary hearing on which judgment was given on 12 December 2007 on the ground that it had no reasonable prospect of success. On 24 April 2008, however, his appeal on the claim for breach of contract succeeded on a ground that was not argued before the ET (the Bleuse point). The EAT granted the Department permission to appeal to this court.
87. The decision of the House of Lords in Serco and of the EAT in Bleuse are the basis of the arguments on the appeals to this court on the developing domestic law principles of territoriality and jurisdiction in the enforcement of employment law rights.

The Serco principles

88. The issue in Serco was the implied territorial scope of s94(1) of the 1996 Act giving employees the right not to be unfairly dismissed. The legislation contains no express territorial limitation on its application and no express provision about what connection an employee or his employment must have with Great Britain. The crucial question formulated by Lord Hoffmann, who gave the lead speech concurred in by other members of the Appellate Committee, was this-

"1. …. what connection between Great Britain and the employment relationship is required to make s94(1) the appropriate choice of law in deciding whether and in what circumstances an employee can complain that his dismissal was unfair? The answer to this question will also determine the question of jurisdiction, since the employment tribunal will have jurisdiction to decide upon the unfairness of the dismissal if (but only if) s94(1) is the appropriate choice of law."

89. On the construction of s94(1) there was no dispute that its scope must have implied territorial limits, though it was not a straightforward matter to say what they are, because, as Lord Hoffmann said-

"6. …..Employment is a complex and sui generis relationship, contractual in origin but, once created, having elements of status and capable of having consecutive or simultaneous points of contact with different jurisdictions."

90. Lord Hoffmann's general approach was that the question formulated by him involved principles rather than rules-

"23. In my opinion the question in each case is whether s94(1) applies to the particular case notwithstanding its foreign elements. This is the question of construction of s94(1) and I believe that it is a mistake to try to formulate an ancillary rule of territorial scope, in the sense of a verbal formula, such as s196 used to provide, which must itself then be interpreted and applied…..Of course this question should be decided according to established principles of construction giving effect to what Parliament may reasonably be supposed to have intended and attributing to Parliament a rational scheme. But this involves the application of principles, not the invention of supplementary rules. "

91. He explained that the emphasis in an unfair dismissal case should be on the factual position about whether the employee was working in Great Britain at the time of dismissal rather than, as in the earlier authorities, on the original contract itself: see paragraphs 25 to 28. He regarded the question of whether, on given facts, a case falls within the territorial scope of s94(1), as one of law, though it is a question of degree on which the decision of the primary fact finder is entitled to considerable respect: paragraph 34.
92. With those general principles in mind Lord Hoffmann turned from his discussion of the position of peripatetic workers, for whom the concept of a "base" may help to locate the workplace, to the problem relevant here - that of expatriate workers. He described their position as "rather more difficult", the concept of a base is of no help in their case.
93. The starting point on s. 94 territoriality is that -

"36. The circumstances would have to be unusual for an employee who works and is based abroad to come within the scope of British labour legislation. But I think that there are some who do."

94. Lord Hoffmann helpfully identified some of the characteristics that the unusual cases would ordinarily have: paragraphs 37 to 40. In summary the position is that (1) it would be very unlikely that someone working abroad would be within the scope of s94(1), unless he was working for an employer based in Great Britain; (2) working for a business carried on abroad by a company based in Great Britain would not attract British law merely on account of British ownership; (3) the fact that the employee happened to be British, or even that he was recruited in Great Britain should not itself be sufficient to take the case out of the general rule that the place of employment is decisive - something more is necessary; (4) that something more may be provided by the fact that the employee is posted abroad by a British employer for the purposes of a business carried on in Great Britain (e.g the foreign correspondent on the staff of a British newspaper); (5) another example would be an expatriate employee of a British employer, who is operating within what amounts to an extra-territorial British enclave in a foreign country (e.g a person working in a military base abroad) in circumstances where, although there is a local system of law, the connection between the employment relationship and the United Kingdom was overwhelmingly stronger; and (6) there may be other instances of an employee working abroad coming within the scope of s94(1), but they would have to have equally strong connections with Great Britain and British employment law.
95. The areas of contention on the appeals by Mr Duncombe and the Department are whether the Serco principles on the limits to the territorial reach of s94(1) apply to the Fixed-Term Regulations at all; if they do, whether Mr Duncombe's case is unusual enough for his right to claim an indefinite contract and unfair dismissal to be unaffected by the fact that he worked outside Great Britain throughout the contract; and, if his case is not one of the unusual Serco cases, whether he can rely instead on the Bleuse principle (see below) entitling him to an effective remedy for the protection of a directly effective EC right changing the fixed-term contract into an indefinite contract, that right being derived from the Directive and implemented in the Regulations.

The Bleuse principle

96. The Bleuse point was first taken in the EAT on Mr Duncombe's wrongful dismissal appeal. It had not been taken in the ET or at the EAT's preliminary hearing of the unfair dismissal appeal. Bleuse was not decided by the EAT until after those decisions were given. Bleuse was decided on 21 December 2007. Mr Duncombe succeeded on the Bleuse point in the EAT.
97. There is fundamental disagreement about the application and correctness of the Bleuse principle. Mr Giffin QC submits that the Bleuse principle is applicable to Mr Duncombe's claims for wrongful dismissal and for unfair dismissal, that it is in line with decisions of the Court of Justice and that it is correct. Mr Crow QC submits that it is distinguishable from this case, as Bleuse was concerned with directly effective EC rights in the Working Time Directive, whereas the Fixed-Term Directive gave Member States a choice in modes of implementation and was not directly effective. Alternatively, he says that, if Bleuse cannot be distinguished, the decision is not binding on this court and is, in any event, wrong. Mr Crow also comments on the fact that the EAT in Bleuse reached its decision having heard the arguments on one side only (the employee). The employer had been barred from the proceedings, did not appear and was not represented.
98. In Bleuse the employer was a company registered in the United Kingdom. Throughout his employment the employee, who was a German national living in Germany, worked mainly in Germany and Austria, but never in this country. He was employed by the British company through an Austrian citizen based in Austria. His contract contained an English choice of law and English jurisdiction clause. When the contract came to an end he took advice about recovery of money which he alleged was wrongfully withheld from him. On advice from his Austrian lawyer (Dr Frankenstein) that English was the applicable law he began proceedings in the ET. Some of his claims, such as unfair dismissal, ran into time problems. One of his claims related to his right to receive holiday pay. That right derived from the Working Time Directive 2003/88/EC, which was transposed into domestic law by the Working Time Regulations. Mr Bleuse alleged that there had been a failure on the part of his employer to provide holiday pay under the Regulations and in breach of contract.
99. The ET declined jurisdiction in relation to his holiday pay, because he was not based in the UK. It was argued on his behalf in the appeal to the EAT that the ET decision had denied him an effective remedy in respect of his directly effective EC rights under the Working Time Directive. It was submitted that the courts had to construe the statutory rights to give effect to the EC rights and Serco was distinguished as a case concerned only with purely domestic rights.
100. In the part of his judgment on the rights derived from EC law, Elias P noted that there was no express territorial limitation on the scope of the Working Time Regulations. Any limitation had to be implied. He accepted the submission that English law, in the form of the Working Time Regulations, was the relevant domestic law for giving effect to the directly effective rights under the Directive. He noted that English law was the proper law of the contract. That brought in its train the statutory rules relating to the contract. Whether the employee could take advantage of it depended on the proper reach of the statutory provision in issue. On that question Elias P said this-

"56. It follows in my judgment that at least in circumstances where either English law is the proper law of the contract, or where it provides the body of mandatory rules applicable to the employment relationship by virtue of Article 6(2) of the Rome Convention, an English court properly exercising jurisdiction must seek to give effect to directly effective rights derived from an EU Directive by construing the relevant English statute, if possible, in a way which is compatible with the right conferred.

57. In this case, absent any question of EU rights, I would accept that there is no reason to think that the territorial reach of these Regulations would be any different to the limitation found in the Employment Rights Act as interpreted in Serco. However, in my judgment the implied limitation that might otherwise be deemed to be appropriate must be modified to ensure that directly effective rights can be enforced by the English courts. That is so even if on an application of the Serco principles the base would not be in Great Britain. The scope of the provision must be extended to give effect to the directly effective rights under EU law. That law operates as part of the system of domestic law and must be given effect accordingly. I accept the argument …that if this were not done it would mean that the principle of effectiveness would not be satisfied: there would be no effective remedy for the breach of the EU right."

101. That judgment focused on directly effective EC rights in the Directive, on the construction of the provisions of domestic law in the form of the implementing Regulations and on the need to give effect to those rights so as to be compatible with the right to holiday pay derived from the Directive: see also paragraphs 58 and 59.

A. Wrongful dismissal claim

102. It is common ground between the parties that, in order to bring a wrongful dismissal and his unfair dismissal claim, Mr Duncombe has to show that the effect of Regulation 8 is to convert his fixed-term contract into an indefinite contract of employment. That is so in the case of Mr Fletcher and other teachers seconded to Schools in Great Britain. Does the same apply to teachers seconded to teach in Schools outside Great Britain? And if not, why not?
103. On this question Mr Crow QC says that there are three issues: the territorial scope of application of Regulation 8 of the Fixed-Term Regulations applying the Serco principles; whether, irrespective of territorial application, Regulation 8 forms part of Mr Duncombe's employment contract; and whether, if Mr Duncombe is unable to bring a wrongful dismissal case in reliance on the application of Regulation 8 or its incorporation into his contract, he can succeed by relying on the Directive and the Bleuse principle.

(1) Territorial scope

104. The Department says that the Serco principles of implied limitation on legislative territoriality and jurisdiction of the right not to be unfairly dismissed also apply to the Fixed-Term Regulations; that Regulation 8 does not apply to Mr Duncombe's case; and that his fixed-term contract expired without ever becoming the permanent contract on which he bases his claims.
105. The fact that Mr Duncombe worked outside Great Britain in Karlsruhe throughout his contract is, the Department says, determinative. None of the unusual or exceptional categories identified by Lord Hoffmann in Serco fits his case. There was no error of law in the conclusion reached by the ET and by the EAT on that point.
106. The contrary argument of Mr Giffin QC was described as hopeless. The Serco residual category of employees working abroad, but having an employment relationship of equally strong connections with Great Britain and with British employment law as the earlier categories of posted employee and employees in British enclaves abroad, simply does not fit the facts of Mr Duncombe's case.
107. Mr Duncombe's post at the School in Karlsruhe was not as a departmental administrative official posted to work abroad for the Department, or for the purpose of a business carried on by the Department in Great Britain. The Department does not carry on any undertaking of running schools in the United Kingdom, or the European Schools abroad. The European School in which he worked is an international institution, not a British enclave, and his engagement was subject to the Staff Regulations made by the Board of Governors of the School pursuant to a power conferred by an international agreement.
108. I agree with Mr Crow QC that, if the Serco principle of limited territoriality governs the application of the Regulations, Mr Duncombe cannot escape it by the argument that there was no significant connection between his employment and the legal system of the country where he worked and that therefore the United Kingdom was the only country with whose legal system and employment law there was a connection. The absence of a connection with the legal system of the host country is not, without more, one of the unusual circumstances contemplated by Lord Hoffmann as an exception to the normal rule of limited territorial application.
109. Mr Giffin QC accepts that on Serco principles it is not enough that Mr Duncombe was recruited by the Department in Great Britain and that the contractual choice of English law does not affect the Serco principles: a contractual provision cannot extend the territorial application of the Regulations, if they are in fact limited in the same way that Serco said that s94(1) is limited.
110. I conclude that if, which is disputed, the Serco principles apply to the Regulations in the same way as they apply to s94 (1) there is no error of law in the ET's decision. On applying the Serco principles to its findings of fact, the ET was entitled to find that this case is not one of the unusual or exceptional cases contemplated by Lord Hoffmann in which a person who works outside Great Britain can rely on the extra-territorial application of British employment law.
111. I will briefly return to the Serco principles when considering the statutory unfair dismissal claim below. For the moment I am only dealing with the common law wrongful dismissal claim.

(2) Contract claim

112. The submissions of Mr Giffin QC on this point were described as seeking to bypass the effect of Serco by a "beguilingly simple argument" which begs the question.
113. Mr Giffin's case, which was rejected by the ET and the EAT, is that, even if Mr Duncombe fails to bring himself within one of the Serco exceptions, he still has a cause of action in contract for wrongful dismissal based on his fixed-term contract having become a permanent contract by virtue of Regulation 8.
114. The argument is simple and I for one find it beguiling. By express choice of the parties the contract is governed by English law. Regulation 8 is a statutory part of the English employment law. It applies to all fixed-term employment contracts governed by English law. That application is regardless of where the contracts governed by English law are to be performed. The effect of Regulation 8 was to make an important change in substantive employment law. It did so by providing that, in the prescribed circumstances, a fixed-term contract transmuted into a permanent contract. The fact that the contract was to be performed by Mr Duncombe working outside Great Britain did not prevent that change in the law and that change in his contract from taking place.
115. On that approach the Serco principles are irrelevant. What is relevant is that Mr Duncombe has a contract with the Department to which, even though he is seconded to work overseas, English employment law, which includes the Regulations, expressly applies. There is no express provision in the Regulations or in the contract itself limiting its application territorially. The result is that his fixed-term contract was converted into a permanent contract. The secondment to the post in, and his working in the European School in, Karlsruhe made no difference to the application of the Regulation in order to determine the terms of his contract.
116. The Department objects that to say that Regulation 8 is part of the English law of contract does not answer the true questions and they are: in relation to which contracts is Regulation 8 a relevant part of English law? And what is the territorial application of Regulation 8? Those questions take you back to where you started on the application of Regulation 8, that is to the very principles in Serco which the claimants seek to side step by this argument.
117. In my view, this is not a convincing answer to the submission that this is simply a case of an employment contract affected by a change in the law applying to all employment contracts that satisfy the prescribed conditions. Working in Great Britain is not one of the conditions. This result does not infringe any territoriality principle, if what is sought to be enforced is a common law claim for breach of a contract governed by English law. There is no potential statutory obstacle to jurisdiction, as in the case of s94 (1) of the 1996 Act. The English law governing the contract now includes the provisions of the Fixed-Term Regulations. They affect only the substantive law and the duration of the contract. No assumption of an extra-territorial jurisdiction involving relevant foreign element is involved. The fact of Mr Duncombe performing the English contract outside Great Britain is irrelevant to his contractual rights for breach of contract.
118. I should briefly comment on some of the other points made in argument. I agree with Mr Giffin QC that a point relied on by the EAT in rejecting his submission is erroneous. The EAT said that the conversion of a fixed-term contract to a permanent contract under Regulation 8 was contingent upon the making of a declaration under Regulation 9(5) of the Regulations (see paragraph 35 above) and no claim for breach of contract could be made without it. That required an application to the ET and would involve having to address the Serco principles in relation to the jurisdiction of the ET to make the declaration.
119. With respect to the EAT that reasoning is rightly criticised by Mr Giffin QC as putting the cart before the horse. There is nothing in Regulation 8 itself to make its operation dependant on the making of a declaration. The jurisdiction is permissive ("may"). A declaration can only be made under Regulation 9(5) where Regulation 8 has already operated to convert the contract from a fixed -term into a permanent one ("applicant who considers he is an employee"). In my judgment, Regulation 8 operates without more to change the terms of the fixed term contract in the prescribed circumstances. The evident purpose of Regulation 9(5) is to create an additional statutory remedy for an authoritative ruling before a contract has come to an end, or is alleged to have come to an end. It throws no light on the territorial scope of application of the Regulations in a case where the cause of action is based on a contract governed by English law.
120. Another point that has been criticised is the view of the ET that the remedy under the Regulations was dependent upon the statutory rights in the 1996 Act, to which reference was made in the Regulations, and so the territorial scope of the Regulation 8 right should be the same as the statutory unfair dismissal right in s94(1). With respect, the jurisdiction to entertain an action for breach of contract and the availability of a remedy for breach of a contract modified by the operation of the Regulations is not conditioned by the 1996 Act. The remedies are those available at common law. They would be available for breach of a contract governed by English law, even though the contract was to be performed abroad. I would also add that even the limited jurisdiction of the ET to entertain claims for breach of contract does not exclude contract claims made by employees who worked outside Great Britain.
121. In my judgment, it is not legally correct to treat the Regulations, as the ET did, as a gloss on the 1996 Act on the basis that the principal remedy provided is by reference to the unfair dismissal provisions of the 1996 Act. The right to indefinite employment created by Regulation 8 is also enforceable in appropriate cases through all the usual contractual causes of action and remedies for a contract governed by English law and the additional declaratory remedy under Regulation 9(5).

(3) The Directive and the Bleuse principle

122. As Mr Giffin QC has succeeded on the contract point he does not need the further argument in the form of the Bleuse principle, which is based on the Directive coupled with the principle of effectiveness. I must, however, deal with it at some point. It was the basis on which the EAT allowed Mr Duncombe's appeal on the wrongful dismissal claim. Moreover, the Bleuse principle is, as explained below, critical on the unfair dismissal appeal. It is convenient to deal with the Bleuse principle at this point, following the order in which the parties dealt with it in their written and oral submissions. Some degree of overlap with the later discussion of the point cannot be avoided.
123. The EAT accepted loyally, though with some hesitation, the correctness of the Bleuse principle and its application on the basis that the rights relied on by Mr Duncombe derived from the Directive and that, within the jurisdiction of the courts of the proper law of the contract, effect must be given to them under the EC principle of effectiveness.
124. The Department contests the correctness of the Bleuse principle and its application to the Directive in Mr Duncombe's case. On a general level the Department says that it would be wrong in principle to hold that the combination of the principle of direct effect, even if it applied (which is disputed), and of the principle of effectiveness requires a Member State to ensure that an individual is entitled to bring an action in any national court, regardless of considerations of territoriality and because of the danger that no court will accept jurisdiction. It is submitted that there is no guarantee of enforcement of rights in all circumstances.
125. More specifically the Department says that the Fixed-Term Directive, unlike the Working Time Directive in Bleuse, does not confer any directly effective rights: the terms of clause 5 of the Framework Directive do not satisfy the requirements for direct effect, being unclear, imprecise and conditional. In terms the Directive conferred a choice on the Member State of one or more of three different specified measures, which it could then implement and so give effect to its choice once it has made it. The Directive itself does not define with sufficient precision any relevant unconditional right. That appears to be accepted on behalf of Mr Duncombe, as Mr Giffin QC is relying, first, on the fact that the Directive has direct effect as against the Department, as an emanation of the State, and, secondly, on the fact that parts of the Directive became directly effective when the United Kingdom made its choice of the options and exercised its discretion by making the implementing Regulations.
126. Those arguments are misconceived according to the Department, being unsupported by the EC case law, which requires the content of the right to be determined with sufficient precision in the Directive alone. Reliance on direct effect against the Department involves a misapplication of the concept which was developed in the context of a different situation in which a member state had failed to transpose a directive fully or had failed to do so sufficiently promptly. If the concept of direct effect is extended to cover the situation in the present case, the result would be to ignore the well established requirements of unconditionality and precision for a Directive to have direct effect. Neither is the case here.
127. Further, the Directive did not even impose an obligation on a member state to extend any rights of domestic law to people like Mr Duncombe working outside the United Kingdom. The UK's obligations under the EC Treaty are limited to guaranteeing EC rights to those within its jurisdiction. There is no obligation to make those rights available to people working outside the UK. There is no requirement on the UK to provide for the extra-territorial operation of EC law.
128. The Department submits that, if the court is in any serious doubt on the points on direct effect, it ought to consider referring questions of interpretation of EC law to the Court of Justice.
129. As for the principle of effectiveness, it is said that it does not assist Mr Duncombe, because teachers working overseas cannot invoke the Directive, as it does not confer any rights on them. The Directive does not stipulate that its provisions must enure for the benefit of overseas employees. This is yet another point on which, rather than make up its own mind, the court ought to make a reference if in any serious doubt about it.
130. Although many of the points made on behalf of the Department on the Bleuse point are correct as general propositions about the doctrine of direct effect and the principle of effectiveness, I do not agree that they show that the Bleuse principle is wrong, or that it does not apply to Mr Duncombe's case. In my judgment, when the UK made its choice in enacting the Regulations, the discretion of the United Kingdom was exhausted and the relevant parts of the Directive became directly effective for the purpose of engaging the principle of effectiveness. Under that principle there is an obligation on the part of the Member State to make rights under the Directive effective by providing an effective domestic law forum for enforcement. That can be done by modification, if necessary, to the extra-territorial or other limitations, which are otherwise a barrier to the enforcement of the EC right. That is necessary when considerations of state immunity would be an obstacle to enforcement in another forum.
131. For the above reasons, if it were necessary to do so, I would apply the Bleuse principle to Mr Duncombe's wrongful dismissal claim.

B. Unfair dismissal claim

132. The arguments about the application of the Serco principles and the Bleuse principle to Mr Duncombe's appeal against the ET and EAT ruling against him on unfair dismissal cover much of the same ground as have been discussed on his wrongful dismissal claim.

(1) Territorial scope

133. What matters in the case of unfair dismissal is not the territorial scope of the Regulations, but the territorial scope of s94(1). For the reasons given above Regulation 8, as a piece of English law, applies to Mr Duncombe's contract which is governed by English law. The result is that it is no longer a fixed- term contract. It has been changed into a permanent one. But that is not enough to entitle him to succeed in a claim against the Department. An unfair dismissal claim has to be brought in the ET via the statutory provisions in the 1996 Act. They are subject to the implied territorial limitations discussed in Serco.
134. As in the wrongful dismissal claim, the Department's case on the Serco principles is that a teacher in the position of Mr Duncombe, who only held a post in a European School outside Great Britain, is not entitled to claim unfair dismissal under s94 (1) of the 1996 Act: that is, unless he can bring himself within one of the unusual cases that are exceptions to the usual case that a person who works overseas cannot bring an unfair dismissal case in the ET.
135. In contending that there was an error of law in the decision of the ET on unfair dismissal, Mr Giffin QC faces similar difficulties to those that face him in the wrongful dismissal claim. He stresses that this country is the only one with which, and with the employment law of which, Mr Duncombe has any connection. That did not prevent the ET accepting the Department's contention that his employment was firmly rooted in the European School in Karlsruhe and that was determinative on the territoriality point. Mr Giffin QC submits that that was an error of law. The ET failed to deal with two points that he had made.
136. First, Mr Duncombe's employment had no relevant connection with the system of law of the country (Germany) in which the European School at Karlsruhe is located. There was no system of international employment law applicable in the enclave of the European School. Of the national systems of employment law that might be regarded as applicable, the British system was the only sensible answer. The tribunals below failed to address the implications of there being no significant connection between the employment and the local system of the country where the school was located. The majority of the links were with the British system of employment law. Mr Giffin QC adds that, unless state immunity were waived, it simply would not be possible to take proceedings against the Department in the German Courts.
137. Secondly, he submits that the sole relevant undertaking of the Department (government and administration) is in Great Britain and Mr Duncombe was employed for the purpose of that undertaking. The Department was employing him to fulfil obligations undertaken by the United Kingdom, as part of its government functions, to other member states pursuant to the Schools Convention. It was not employing him to work at the School in Karlsruhe for the purpose of a German branch of its business.
138. In my judgment, although the ET could have said more about these points, Mr Giffin has not shown that there was any error of law on the part of the ET in its self direction and application of the Serco principles to the unfair dismissal claim. It cannot possibly be said that the ET's decision was perverse.

(2) Bleuse principle

139. Mr Giffin QC has to fall back on the Bleuse principle which is discussed above both generally and in the context of the wrongful dismissal claim. I have held that, if necessary (which it is not), Mr Duncombe could rely on the Bleuse principle for his wrongful dismissal claim.
140. As for unfair dismissal Mr Giffin QC accepts that the right not to be unfairly dismissed is not a right derived from EC law. He argues nevertheless that it is necessary that Mr Duncombe should have that right in order to enforce his rights to indefinite employment in this case.
141. The argument is developed along the lines summarised above and reinforced by EC authorities. Once the UK had exercised its choice about which anti-abuse options to adopt, clause 5 of the Directive became directly effective, Mr Duncombe has the right not to suffer the abuse of successive fixed-term employment contracts through their use without objective justification; and an effective remedy for enforcement should be available to vindicate that EC right and the right to be treated as a permanent employee and protected against the loss of his job solely on the basis of an unlawful time limit on their contracts: see AG Kokott at paragraph 120 in Impact v. Minister of Agriculture and Food (C-286/06) [2008] IRLR 552-

"While the Framework Agreement does not place the member states under any general obligation to convert fixed-term employment relationships to employment relationships of indefinite duration, it would be contrary to the protective purpose of the Framework Agreement if the workers concerned were to lose their jobs immediately solely on the basis of an unlawful time limit on their employment contracts."

142. The right not to be unfairly dismissed rather than the contractual right to notice is the relevant remedy and sanction for misuse of fixed-term contracts: see the opinion of AG Kokott in the Angelidaki cases (C-378/07 – C-380/07 – 4 December 2008) at paragraph 90-

"Even though the Framework Agreement…places the emphasis in clause 5 on the prevention of abuse, nonetheless, Member States are obliged to provide for appropriate sanctions to address cases of actual misuse. In that regard, although it is incumbent on Member States…to define and shape the relevant sanctions, it must be ensured, nonetheless, that infringements of Community law are penalised under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the sanction effective, proportionate and dissuasive."

143. Against that the Department submits that Mr Duncombe's claim for unfair dismissal is weaker than his arguments on wrongful dismissal. It receives no support from the EC principle of effectiveness taken together with the Fixed- Term Directive. His success on the point in his wrongful dismissal claim does not help him, because here he has the additional difficulty that the remedy of unfair dismissal sought by Mr Duncombe does not derive from or give effect to any obligation under EC law. The Department says that what Mr Duncombe is seeking is the benefit of a remedy which is not otherwise available to him and was not established for any EC reason. It adds that the Fixed-Term Directive does not require a member state to introduce into its domestic law measures relating to dismissal for loss caused by a breach of its requirements.
144. On this quite difficult point the court does not have the benefit of any decision of the tribunals below. They gave their decisions on the unfair dismissal point before Bleuse was decided. In Bleuse itself Elias P did not have the benefit of full arguments from both sides. For Mr Duncombe it is accepted that that was a more straightforward case, as the claim for holiday pay was derived from a directly effective Working Time Directive. Although the fixed-term contract provisions are derived from EC law, the unfair dismissal right is not.
145. Despite the many objections made by the Department I am persuaded that the Bleuse principle applies to the case of unfair dismissal as to the case of wrongful dismissal. The principle of effectiveness in EC law is fundamental and forceful. I would go so far as to say that it requires that the implied territorial limitation in domestic law, as identified in Serco, on the right not to be unfairly dismissed should be modified to permit such a claim to be made where that is necessary for the effective vindication of a right derived from EC law.
146. The only reason why Mr Duncombe was dismissed was that his fixed-term contract expired. Under the Regulations made to implement the Directive he had a fixed-term contract, which was changed by Regulation 8 into a permanent contract. That right, which is derived from the implementation of EC law, is not effective, if he is dismissed because his fixed-term contract has expired. The statutory remedy for dismissal for an impermissible reason is a claim for unfair dismissal. The only reason for denying him that remedy for this dismissal is that he worked outside Great Britain. If he does not have that remedy, he will have no remedy anywhere for the denial of his EC derived right. It is necessary for him in such circumstances to have that remedy, if that EC right is to have any effect.
147. I would allow Mr Duncombe's appeal on the unfair dismissal point on the ground that the ET erred in law in holding that he could not bring an unfair dismissal claim against the Department, because he worked outside Great Britain. I make it clear that I do so on the Bleuse point that was not argued before the ET or the EAT.

VI. Result and summary

148. I would dispose of the three appeals in the following way.
149. I would dismiss the Department's appeal in the case of Fletcher. The Department's new argument on the scope of the Fixed-Term Directive and Regulations is not a good ground for interfering with the ET's findings in favour of Mr Fletcher that he was a permanent employee. There was no error of law in the ET's finding that the Fixed-Term Regulations applied to make Mr Fletcher a permanent employee of the Department and there was no perversity or other error of law in its conclusion that his fixed-term contract was not objectively justified.
150. In the case of Duncombe I would dismiss the Department's appeal on the wrongful dismissal claim and uphold the EAT decision to allow Mr Duncombe's appeal from the ET, though not for quite the same reasons. Serco principles do not limit the territorial scope of application of the Regulations in contract cases. The Regulations apply to all relevant contracts governed by English law, irrespective of where the employee works and performs the contract. If, however, the Serco principles do apply to the Regulations, the Bleuse principle also applies to the rights derived from the Directive via the Regulations.
151. I would allow Mr Duncombe's appeal on his claim for unfair dismissal. The Serco principles do not limit the territorial scope of application of the Regulations to relevant contracts governed by English law, but they do apply to the claim for unfair dismissal under s94(1) of the 1996 Act. As the ET rightly held Mr Duncombe does not fall within any of the Serco exceptions to territorial jurisdiction. However, his appeal succeeds on a ground (the Bleuse point), which was not argued before the ET, or at the preliminary hearing in the EAT, the case of Bleuse having been decided after those decisions were made.
152. It is not necessary, in order to decide the appeals, to refer to the Court of Justice any question on the interpretation of EC law.

Lord Justice Maurice Kay:

153. I agree.

Lord Justice Jacob:

154. I also agree.