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You are here: BAILII >> Databases >> United Kingdom Supreme Court >> The United States of America v Nolan [2015] UKSC 63 (21 October 2015)
URL: http://www.bailii.org/uk/cases/UKSC/2015/63.html
Cite as: [2016] AC 463, [2015] UKSC 63, [2015] 3 WLR 1105, [2016] IRLR 34, [2015] ICR 1347, [2015] WLR(D) 441, [2016] 1 All ER 857, [2016] 1 CMLR 42
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[2015] UKSC 63
On appeal from: [2014] EWCA Civ 71
JUDGMENT
The United States of America (Appellant) v Nolan (Respondent)
before
Lord Neuberger, President
Lady Hale, Deputy President
Lord Mance
Lord Reed
Lord Carnwath
JUDGMENT GIVEN ON
21 October 2015
Heard on 15 and 16 July 2015
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Appellant John Cavanagh QC Sir Daniel Bethlehem KCMG QC (Instructed by Nabarro LLP) |
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Respondent The Respondent was not represented and did not appear |
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Intervener(Advocate to the Court) Michael Beloff QC Sarah Wilkinson (Instructed by The Government Legal Department) |
LORD MANCE: (with whom Lord Neuberger, Lady Hale and Lord Reed agree)
Introduction
State immunity
3. The appellant did not rely on state immunity when the proceedings were begun. It is common ground that it could successfully have done so. Whether this would have been under the State Immunity Act 1978 or at common law is presently immaterial. The 1978 Act is under section 16(2) inapplicable to “proceedings relating to anything done by or in relation to the armed forces of a state while present in the United Kingdom”. Assuming that section 16(2) applies, there would have been immunity under common law principles, summarised by Lord Millett in Holland v Lampen-Wolfe [2000] 1 WLR 1573, 1583D-F. Littrell v United States of America (No 2) [1995] 1 WLR 82 is an example of a successful common law plea of state immunity; see also Sengupta v Republic of India [1983] ICR 221. As to why there was no plea of state immunity, it was not apparent at the outset that the duty to consult under section 188 would apply to the closure of a base, rather than the consequences for employees after its closure. The potential for this extended understanding of the duty was only highlighted by the Employment Appeal Tribunal decision on 28 September 2007 in UK Coal Mining Ltd v National Union of Mineworkers (Northumberland Area) [2008] ICR 163. By then, the Employment Tribunal held, it was too late for the plea of state immunity which the appellant sought at that stage to raise. The validity of the extended understanding of the duty remains open to debate notwithstanding a later Court of Justice decision in Akavan Erityisalojen Keskusliitto (AEK) ry v Fujitsu Siemens Computers Oy (Case C-44/08) [2009] ECR I-8163, [2010] ICR 444, [2009] IRLR 944 (“Fujitsu”).
TULCRA and EU law
4. Section 188 of TULCRA is in general terms. Subsection 1 provides:
(1) Where an employer is proposing to dismiss as redundant 20 or more employees at one establishment within a period of 90 days or less, the employer shall consult about the dismissals all the persons who are appropriate representatives of any of the employees who may be [affected] by the proposed dismissals or may be affected by measures taken in connection with those dismissals.
Subsections (2) and (3) state the aims and nature of the required consultation. Subsection (7) provides:
“(7) If in any case there are special circumstances which render it not reasonably practicable for the employer to comply with a requirement of subsections (1A), (2) or (4) the employer shall take all such steps towards compliance with that requirement as are reasonably practicable in those circumstances. …”
6. Part IV Chapter II of TULCRA gives effect to the United Kingdom’s duty under European Union law to implement Council Directive 98/59/EC and its predecessor Council Directive 77/187/EEC. As originally enacted, it did not do so fully, with the result that the Commission brought proceedings against the United Kingdom which led to a Court of Justice judgment dated 8 June 1994 in Case C-383/92 [1994] ECR I-2479, [1994] ICR 664. One flaw identified by the judgment was that TULCRA (and its predecessor the Employment Protection Act 1975) did not require consultation in circumstances where employees did not enjoy union representation recognised by the employer. The Court of Justice held that Council Directive 77/187/EEC required member states to ensure that employee representatives would be designated for consultation purposes in such circumstances. The 1995 Regulations make provision accordingly by amending section 188.
7. The Directive contains the following articles:
Definitions and scope
Article 1
“1. For the purposes of this Directive:
(a) ‘collective redundancies’ means dismissals effected by an employer for one or more reasons not related to the individual workers concerned where, according to the choice of the member states, the number of redundancies is:
(i) either, over a period of 30 days:
- at least ten in establishments normally employing more than 20 and less than 100 workers,
- at least 10% of the number of workers in establishments normally employing at least 100 but less than 300 workers,
- at least 30 in establishments normally employing 300 workers or more,
(ii) or, over a period of 90 days, at least 20, whatever the number of workers normally employed in the establishments in question;
(b) ‘workers’ representatives’ means the workers’ representatives provided for by the laws or practices of the member states.
For the purpose of calculating the number of redundancies provided for in the first subparagraph of point (a), terminations of an employment contract which occur on the employer’s initiative for one or more reasons not related to the individual workers concerned shall be assimilated to redundancies, provided that there are at least five redundancies.
2. This Directive shall not apply to:
(a) collective redundancies effected under contracts of employment concluded for limited periods of time or for specific tasks except where such redundancies take place prior to the date of expiry or the completion of such contracts;
(b) workers employed by public administrative bodies or by establishments governed by public law (or, in member states where this concept is unknown, by equivalent bodies);
(c) the crews of seagoing vessels.
…
Final provisions
Article 5
This Directive shall not affect the right of member states to apply or to introduce laws, regulations or administrative provisions which are more favourable to workers or to promote or to allow the application of collective agreements more favourable to workers.”
a) they provided until the 1995 Regulations that the consultation obligations arose if even a single redundancy was proposed;
b) they provided for consultation “at the earliest opportunity” until 1995 (when this was replaced by the Directive requirement “in good time”) and further provided (as TULCRA continues to do) for specific time limits within which consultation must occur (there being no such time limits in the Directives); and
c) they applied (and TULCRA continued until 2013 to apply) to fixed term contracts (to which the Directive under article 1(2)(a) does not apply).
Most importantly for the present appeal, TULCRA in its original and amended form and its 1975 predecessor:
d) contained and contain no express homologue of article 1(2)(b). They all exclude Crown employees and those in the police service. But they do not exclude public administrative bodies or public law establishments generally.
The present proceedings
10. The Court of Justice did not answer this question (Case C-583/10) [2013] ICR 193. It raised the issue whether Mrs Nolan’s dismissal by the appellant, which is not an EU member state, fell within the scope of Directive 98/59/EC, having regard in particular to article 1(2)(b). Having heard submissions on this point, the court on 18 October 2012 gave a judgment with two parts. First, the court held that the Directive was both by virtue of its adoption under article 100 of the former EC Treaty (now article 94 TEU) and by nature part of the legislation aimed at improving the internal market; that activities like national defence, falling within the exercise of public powers, are in principle excluded from classification as economic activity; and that, by virtue of article 1(2)(b), the dismissal of staff of a military base falls outside the scope of the Directive, whether or not the base belongs to a non-member state (para 43). Secondly, the court addressed Mrs Nolan’s submission that it should nonetheless rule on the question referred by the Court of Appeal, on the basis that TULCRA extends the provisions of the Directive in national law to cover article 1(2)(b) situations (other than in respect of Crown employment or employees and persons in the police service). The court (disagreeing on this point with Advocate General Mengozzi’s approach) declined to give any such ruling on the basis that “If the EU legislature states unequivocally that the measure which it has adopted does not apply to a precise area, it renounces … the objective [of] seeking uniform interpretation and application of the rules of law in that excluded area” (para 55). The upshot was that the Court of Justice simply declined jurisdiction. So the questions raised by UK Coal/Fujitsu and the Court of Appeal’s reference will in the present case have to be resolved, if ever necessary, domestically without further assistance from the Court of Justice.
11. Whether it will be necessary to resolve them in this case appears doubtful. The first part of the Court of Justice’s judgment lent encouragement to an argument by the appellant that, since EU law did not require or intend a foreign state to be subject to the Directive’s consultation obligations, United Kingdom law should be read in the same sense. When the matter came back before the Court of Appeal after the Court of Justice’s ruling, Mrs Nolan was prepared to concede the correctness in law of this argument and did not appear. The Court of Appeal (Moore-Bick, Rimer and Underhill LJJ) [2014] ICR 685 after hearing submissions from Mr John Cavanagh QC and Sir Daniel Bethlehem QC for the appellant nonetheless dismissed the appeal, and made an order (stayed pending any appeal to the Supreme Court) that there be a further hearing to deal with the remaining UK Coal/Fujitsu issue. The appellant duly sought permission to appeal to the Supreme Court. This was given on the basis that the appellant bear its own costs in respect of the appeal, including those of any advocate to the court who might be appointed, and do not seek any costs order in respect of any instance of the proceedings. The appeal has proceeded on that basis and The Honourable Michael Beloff QC and Sarah Wilkinson have been appointed and appeared as advocates to the court. The government, which might be expected to have an interest in the third point (vires) identified in the next paragraph, has not sought to intervene.
The issues
The first point of construction
14. Taking the first point of construction, it is a cardinal principle of European and domestic law that domestic courts should construe domestic legislation intended to give effect to a European Directive so far as possible (or so far as they can do so without going against the “grain” of the domestic legislation) consistently with that Directive: Marleasing SA v La Comercial Internacional de Alimentacion SA (Case C-106/89) [1990] ECR I-4135, Vodafone 2 v Revenue and Customs Comrs [2009] EWCA Civ 446, [2010] Ch 77, paras 37-38 and Swift v Robertson [2014] UKSC 50, [2014] 1 WLR 3438, paras 20-21. But that means avoiding so far as possible a construction which would have the effect that domestic implementing legislation did not fully satisfy the United Kingdom’s European obligations. Where a Directive offers a member state a choice, there can be no imperative to construe domestic legislation as having any particular effect, so long as it lies within the scope of the permitted. Where a Directive allows a member state to go further than the Directive requires, there is again no imperative to achieve a “conforming” interpretation. It may in a particular case be possible to infer that the domestic legislature did not, by a domestic formulation or reformulation, intend to go further in substance than the European requirement or minimum. R (Risk Management Partners Ltd) v Brent London Borough Council [2011] UKSC 7, [2011] 2 AC 34, considered below, is a case where the Supreme Court implied into apparently unqualified wording of domestic Regulations a limitation paralleling in scope that which had been implied by the Court of Justice into general wording of the Directive to which the Regulations were giving effect: see Teckal Srl v Comune di Viano (Case C-107/98) [1999] ECR I–8121 (“Teckal”). It concluded that the two had been intended to be effectively back-to-back. A reformulation may also have been aimed at using concepts or tools familiar in a domestic legal context, rather than altering the substantive scope or effect of the domestic measure from that at the European level. But that is as far as it goes.
16. Heavy reliance was placed by the appellant on the Supreme Court’s decision in R (Risk Management Partners Ltd) v Brent London Borough Council and Harrow London Borough Council [2011] 2 AC 34, in furtherance of the appellant’s case that the Regulations must be limited in scope by reference to the Directive. The Supreme Court in Risk Management applied under the Public Contracts Regulations 2006 (SI 2006/5), passed to give effect to Council Directive 2004/18/EC, similar reasoning to that adopted by the Court of Justice in Teckal.
“(a) ‘public supply contracts’ are contracts for pecuniary interest concluded in writing involving the purchase, lease [,] rental or hire purchase, with or without option to buy, of products between a supplier (a natural or legal person) and one of the contracting authorities defined in (b) below. The delivery of such products may in addition include siting and installation operations;
(b) ‘contracting authorities’ shall be the state, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities or bodies governed by public law; …”
18. The Court of Justice gave this guidance:
“50. In that regard, in accordance with article 1(a) of Directive 93/36, it is, in principle, sufficient if the contract was concluded between, on the one hand, a local authority and, on the other, a person legally distinct from that local authority. The position can be otherwise only in the case where the local authority exercises over the person concerned a control which is similar to that which it exercises over its own departments and, at the same time, that person carries out the essential part of its activities with the controlling local authority or authorities.
51. The answer to the question must therefore be that Directive 93/36 is applicable in the case where a contracting authority, such as a local authority, plans to conclude in writing, with an entity which is formally distinct from it and independent of it in regard to decision-making, a contract for pecuniary interest for the supply of products, whether or not that entity is itself a contracting authority.”
“a contract, in writing, for consideration (whatever the nature of the consideration) under which a contracting authority engages a person to provide services but does not include - a public works contract; or a public supply contract; …”
The Regulations contained a list of “contracting authorities” which included “a local authority”. Article 1 of the Directive, to which the Regulations gave effect, applied to public contracts, defined as:
“contracts for pecuniary interest concluded in writing between one or more economic operators and one or more contracting authorities and having as their object the execution of works, the supply of products or the provision of services within the meaning of this Directive.”
The Directive defined “contracting authorities” as meaning:
“the state, regional or local authorities, bodies governed by public law, associations formed by one or several of such authorities or one or several of such bodies governed by public law.”
“the basis for implying the Teckal exemption into the 2006 Regulations is to be found in their underlying purpose, which was to give effect to the Directive. The absence of any reference to the exemption in the Regulations is of no more significance than the absence of any reference to it in the Directive that was being transposed. The exemption in favour of contracts which satisfy its conditions was read into the Directive by the Court of Justice in Teckal because it was thought to be undesirable for contracts of that kind to be opened up for public procurement. This was not just a technicality. It was a considered policy of EU law. It would be odd if a significant and policy-based exemption were to apply in some member states and not others, especially as one of the aims of the Directive was to harmonise procedures. …”
“The 2006 Regulations give effect to the Directive in English law. In other words, they are the way in which English law secures the free movement of services and the opening-up to undistorted competition in relation to contracts which are to be placed by English local authorities. That being the purpose of the Regulations, they, too, cannot be meant to apply in circumstances where that purpose is not relevant because a contracting authority intends to contract with a body which is not properly to be regarded as an outside body. Although the Teckal criteria were formulated with particular reference to the predecessors of the Directive, they are simply a way of identifying situations where the authority can be regarded as obtaining the products or services which it requires in-house and, so, where there is no need to secure the free movement of services and the opening-up to undistorted competition. In my view, the criteria are an equally good indication of situations where, for that reason, the 2006 Regulations have no application. The insight of Advocate General Trstenjak in para 83 of her opinion in Coditel Brabant [2008] ECR I-8457, 8482 is instructive. To hold that the Regulations did apply in these circumstances would involve saying that the legislature intended to attach weight to competition law objectives in an area where they have no legitimate application. This would, in turn, involve inappropriate interference with local authorities’ right to co-operate in discharging their public functions.”
“As Waller LJ said in Oakley Inc v Animal Ltd (Secretary of State for Trade and Industry intervening) [2006] Ch 337, para 39, the primary objective of any secondary legislation under section 2(2) must be to bring into force laws which, under the Treaties, the United Kingdom has agreed to make part of its laws. There is nothing in the explanatory memorandum to the Regulations that was prepared by the Office of Government Commerce and laid before Parliament to indicate that it was intended to depart from the jurisprudence of the court as to the scope of the Directive. In paras 7.2-7.4 of the memorandum it was stated that the change to the legislation was necessary to implement the new public procurement Directive, that it clarified and modernised the previous texts and that the simpler and more consistent public sector text should reduce the burdens involved under the EU rules. If the Teckal exemption were to be held not to apply to the 2006 Regulations, it could only be because the purpose of the Regulations was to apply the public procurement rules to relationships that fell outside the regime provided for by the Directive. But that would not be consistent with the memorandum, and it would not be a permitted use of the power.”
23. In Risk Management, the indications were that the domestic measure was intended in the relevant respect to be no more than back-to-back with the European Directive. That cannot be said to be so in the present case. TULCRA contains no equivalent of article 1(2)(b) of the Directive. Instead, it contains specific and limited exceptions for Crown employment and employees and for certain others in public service. It is true that the remainder of the category of public workers comprised by article 1(2)(b) would have been relatively confined, comprising those engaged in the “exercise of public powers”, rather than economic functions, as the Court of Justice indicated in Scattolon v Ministero dell’Istruzione, dell’Università, e della Ricerca (Case C-108/10) [2012] ICR 740, paras 43-44. But this remaining category is nonetheless significant. Contrary to the appellant’s submission, its inclusion within the scope of TULCRA cannot have been mere oversight. The careful exclusion of several specified categories of public employee speaks for itself. The variation of the Directive scheme enables, and according to the Employment Appeal Tribunal (para 84) has in many cases enabled, cases to be brought by those representing workers in public authorities. There are also other respects in which provisions of TULCRA have given protection in the form of consultation obligations which extends or has in the past extended, clearly deliberately, beyond the European requirement. It is, as Underhill LJ observed in the Court of Appeal (para 24) well understandable that a Labour government should in 1975, with trade union encouragement, have decided to give the scheme an extended domestic application to public employees.
The second point of construction
27. I turn therefore to the second point of construction and to the additional considerations which it raises. As in the courts below, so before us the arguments advanced have been, as Slade J described them, both sophisticated and imaginative. They have also been careful and helpful in enabling the court to reach a conclusion on them. But like the courts below, I would reject them. In substance, Sir Daniel Bethlehem’s submission on behalf of the appellant is that international legal considerations should lead to the recognition by the court of a tailored exemption from TULCRA in respect of dismissals involving redundancies arising from a jure imperii decision taken by a foreign state. He does not suggest that, if TULCRA otherwise applies, the appellant enjoys any defence outside TULCRA (such as act of state, which would only here arise if the challenge was to a decision or act of the appellant in the United States). His case depends on construing TULCRA as inapplicable to what happened. His starting point is the prima facie presumption that the legislator intends to legislate consistently with, and that legislation (if reasonably capable of being so construed) should be construed consistently with, the principles of international law: Salomon v Customs and Excise Comrs [1967] 2 QB 116, Alcom Ltd v Republic of Columbia [1984] 1 AC 580 and Assange v Swedish Prosecution Authority [2012] UKSC 22, [2012] 2 AC 471, para 10.
28. Reduced to their essence, his submissions regarding international law are that:
a) the application of TULCRA to dismissals of this nature would conflict with settled international law principles that one state does not legislate to affect the jure imperii activity of another;
b) it would place the appellant in a unique position of potentially infringing United Kingdom law, by failing to consult, when the Crown in respect of British bases would have no such obligation, and when EU principles of non-discrimination would mean that other member states would also have to be regarded as having no such obligation; it would in that respect infringe either EU law or general international legal principles regarding non-discrimination.
“… the first and foremost restriction imposed by international law upon a state is that - failing the existence of a permissive rule to the contrary - it may not exercise its power in any form in the territory of another state. In this sense jurisdiction is certainly territorial; it cannot be exercised by a state outside its territory except by virtue of a permissive rule derived from international custom or from a convention. It does not, however, follow that international law prohibits a state from exercising jurisdiction in its own territory, in respect of any case which relates to acts which have taken place abroad, and in which it cannot rely on some permissive rule of international law. Such a view would only be tenable if international law contained a general prohibition to states to extend the application of their laws and the jurisdiction of their courts to persons, property and acts ‘outside their territory’, and if, as an exception to this general prohibition, it allowed states to do so in certain specific cases. But this is certainly not the case under international law as it stands at present. Far from laying down a general prohibition to the effect that states may not extend the application of their laws and the jurisdiction of their courts to persons, property and acts outside their territory, it leaves them in this respect a wide measure of discretion which is only limited in certain cases by prohibitive rules; as regards other cases, every state remains free to adopt the principles which it regards as best and most suitable.”
“The starting-point in this part of the law is the presumption that jurisdiction (in all its forms) is territorial, and may not be exercised extra-territorially without some specific basis in international law. However, the territorial theory has been refined in the light of experience and what amounts to extra-territorial jurisdiction is to some extent a matter of appreciation. If there is a cardinal principle emerging, it is that of genuine connection between the subject-matter of jurisdiction and the territorial base or reasonable interests of the state in question.”
“… this court ordinarily construes ambiguous statutes to avoid unreasonable interference with the sovereign authority of other nations. … This rule of construction reflects principles of customary international law — law that (we must assume) Congress ordinarily seeks to follow. See Restatement (Third) of Foreign Relations Law of the United States sections 403(1), 403(2) (1986) (hereinafter Restatement) (limiting the unreasonable exercise of prescriptive jurisdiction with respect to a person or activity having connections with another state); Murray v Schooner Charming Betsy, 2 Cranch 64, 118 (1804) (“[A]n act of Congress ought never to be construed to violate the law of nations if any other possible construction remains”); …
This rule of statutory construction cautions courts to assume that legislators take account of the legitimate sovereign interests of other nations when they write American laws. It thereby helps the potentially conflicting laws of different nations work together in harmony—a harmony particularly needed in today’s highly interdependent commercial world.
No one denies that America’s antitrust laws, when applied to foreign conduct, can interfere with a foreign nation’s ability independently to regulate its own commercial affairs. But our courts have long held that application of our antitrust laws to foreign anticompetitive conduct is nonetheless reasonable, and hence consistent with principles of prescriptive comity, insofar as they reflect a legislative effort to redress domestic antitrust injury that foreign anticompetitive conduct has caused. …
But why is it reasonable to apply those laws to foreign conduct insofar as that conduct causes independent foreign harm and that foreign harm alone gives rise to the plaintiff’s claim? Like the former case, application of those laws creates a serious risk of interference with a foreign nation's ability independently to regulate its own commercial affairs. But, unlike the former case, the justification for that interference seems insubstantial. See Restatement section 403(2) (determining reasonableness on basis of such factors as connections with regulating nation, harm to that nation’s interests, extent to which other nations regulate, and the potential for conflict). Why should American law supplant, for example, Canada’s or Great Britain’s or Japan’s own determination about how best to protect Canadian or British or Japanese customers from anticompetitive conduct engaged in significant part by Canadian or British or Japanese or other foreign companies?”
“Jurisdiction and immunity are two separate concepts. Jurisdiction relates to the power of a state to affect the rights of a person or persons by legislative, executive or judicial means, whereas immunity represents the independence and exemption from the jurisdiction or competence of the courts and tribunals of a foreign state and is an essential characteristic of a state. Logically the existence of jurisdiction precedes the question of immunity from such jurisdiction but the two are ‘inextricably linked’ (see Chapter IV).”
In Chapter IV, p 82, the authors go on further to explain the relationship, in this passage:
“Immunity comports freedom or exemption from territorial jurisdiction. It bars the bringing of proceedings in the courts of the territorial state (the forum state) against another state. It says nothing about the underlying liability which the claimant alleges. Immunity does not confer impunity; the underlying accountability or substantive responsibility for the matters alleged in a claim remain; immunity merely bars the adjudication of that claim in a particular court. …
As a matter of logic, the determination of jurisdiction precedes the consideration of immunity.”
“A state’s latitude to assert immunity in the face of a claim is different from the inapplicability of the law, by way of exemption or otherwise, to the impugned conduct of the foreign state in the first place. Immunity operates as a bar to the adjudicative jurisdiction of the courts of the forum state. It does not address the legislative or prescriptive jurisdiction of that state. A claim of immunity thus at some level acknowledges the forum state’s legislative competence and the putative application of the domestic law in question to the foreign state but for the assertion of immunity.”
40. Be that as it may be, Sir Daniel argues that non-discrimination is a general principle of international law. It was in terms accepted as such by the Court of Appeal in Benkharbouche v Embassy of the Republic of Sudan [2015] EWCA Civ 33, [2015] 3 WLR 301, para 61, but the context there was a claim by an individual foreign employee, asserting that section 4 of the State Immunity Act was contrary to articles 6 and 14 of the European Convention for the Protection of Human Rights and Fundamental Freedoms and/or European Union law. (This was because it only lifted a foreign state’s immunity in favour employees with contracts made in the United Kingdom or work to be wholly or partly performed there if such employees were nationals of or habitually resident in the United Kingdom.) A state cannot take advantage of articles 6 and 14 of the European Convention. Articles 1 and 2 of the Universal Declaration of Human Rights, article 26 of the International Covenant on Civil and Political Rights and article 14 of the European Convention, cited by the Court of Appeal, are likewise all provisions by states in favour of persons, not states. I will return to articles 20 and 21 of the Charter of Fundamental Rights of the European Union, which the Court of Appeal also cited.
“Although states are equal as legal persons in international law, this equality does not require that in all matters a state must treat all other states in the same way. There is in customary international law no clearly established general obligation on a state not to differentiate between other states in the treatment it accords to them. …
Nevertheless, discrimination is widely regarded as undesirable, and in some particular respects a rule of non-discrimination may exist, within limits which are not clear. …”
Oppenheim goes on to discuss some possibilities, eg multi-lateral treaties, none of which is relevant here.
“Within the scope of application of the Treaties, and without prejudice to any special provisions contained therein, any discrimination on grounds of nationality shall be prohibited.
The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, may adopt rules designed to prohibit such discrimination.”
A provision in, effectively, the same terms as the first sentence is contained in the Charter of Fundamental Rights, article 21(2). On the basis of these provisions, Sir Daniel argues that United Kingdom courts would have to recognise other member states of the European Union as enjoying like exemptions from TULCRA to those TULCRA provides for UK Crown employees. This would in principle leave non-EU states out on a limb, but the only non-EU state actually shown to be affected would in practice be or be likely to be the appellant. That would, Sir Daniel submits, be absurd and should itself lead to an implication that foreign states should enjoy the like immunity. In any event, he submits, the principle of non-discrimination operates under European Union law horizontally to protect the appellant, even though it is neither a European citizen or an EU member state; in this connection, Sir Daniel invokes the Court of Justice’s well-known if controversial jurisprudence in Mangold v Helm (Case C-144/04) [2006] All ER (EC) 383 and Kücükdeveci v Swedex GmbH & Co KG (Case C-555/07) [2010] All ER (EC) 867, both in fact cases of age discrimination.
43. Whether article 18 TFEU and/or article 21(2) of the Charter of Fundamental Rights apply in favour of member states can be left open. Whether, if they do, it would be open to a member state to rely on them horizontally as against a complainant like Mrs Nolan can also be left open. It is not clear in European law how far and when the principles in Mangold and Kücükdeveci apply in cases not involving age discrimination. The court considered such an issue in Association de médiation sociale v Union locale des Syndicates CGT (Case C-176/12) [2014] ICR 411. The domestic Labour Code excluded from calculation “holders of an accompanied-employment contract” (young persons being directed towards more stable employment or social activities), of whom the Association de médiation sociale (“AMS”), a private non-profit making organisation, employed well over 100. The result of the exclusion was that AMS counted as having only eight employees under the Labour Code, and so fell domestically below a threshold of 50 (based on the Directive 2002/14/EC) which would otherwise have triggered obligations on its part to inform and consult. The court held that the Labour Code by excluding accompanied-employees from the calculation of numbers was in breach of the Directive.
46. The second flaw is that I do not regard a non-member state as being within the protection of articles 18 and 21(2) in any circumstances. In Patmalniece v Secretary of State for Work and Pensions [2011] UKSC 11, [2011] 1 WLR 783, para 83, Lady Hale said of the then equivalent article:
“This is not a general prohibition of discrimination on grounds of nationality. Only the nationals of member states are protected. Discrimination against third country nationals is not prohibited. Indeed it is positively expected. The underlying purpose is to promote the objects of the Union and in particular the free movement of workers between the member states and the free establishment of businesses within them.”
The Court of Justice’s case law is to like effect: Vatsouras v Arbeitsgemeinschaft (AGRE) Nürnberg 900 (Joined Cases C-22/08 and C-23/08) [2009] ECR I-4585, [2009] ALL ER (EC) 747, para 52 and Martinez Sala v Freistaat Bayern (Case C-85/96) [1998] ECR I-2691, para 62. The Court of Appeal recently reached the same conclusion in Sanneh v Secretary of State for Work and Pensions [2015] EWCA Civ 49, para 106. The freedom of this country’s universities to charge unrestricted tuition fees to non-EU citizens, while having in this respect to assimilate citizens of other EU countries with British citizens, is an example of the impact of this principle.
The third point – the vires of the 1995 Regulations
“General implementation of Treaties
(1) All such rights, powers, liabilities, obligations and restrictions from time to time created or arising by or under the Treaties, and all such remedies and procedures from time to time provided for by or under the Treaties, as in accordance with the Treaties are without further enactment to be given legal effect or used in the United Kingdom shall be recognised and available in law, and be enforced, allowed and followed accordingly; and the expression “enforceable EU right” and similar expressions shall be read as referring to one to which this subsection applies.
(2) Subject to Schedule 2 to this Act, at any time after its passing Her Majesty may by Order in Council, and any designated Minister or department may by order, rules, regulations or scheme, make provision -
(a) for the purpose of implementing any EU obligation of the United Kingdom, or enabling any such obligation to be implemented, or of enabling any rights enjoyed or to be enjoyed by the United Kingdom under or by virtue of the Treaties to be exercised; or
(b) for the purpose of dealing with matters arising out of or related to any such obligation or rights or the coming into force, or the operation from time to time, of subsection (1) above;
and in the exercise of any statutory power or duty, including any power to give directions or to legislate by means of orders, rules, regulations or other subordinate instrument, the person entrusted with the power or duty may have regard to the objects of the EU and to any such obligation or rights as aforesaid. …
(3) …
(4) The provision that may be made under subsection (2) above includes, subject to Schedule 2 to this Act, any such provision (of any such extent) as might be made by Act of Parliament, and any enactment passed or to be passed, other than one contained in this part of this Act, shall be construed and have effect subject to the foregoing provisions of this section; but, except as may be provided by any Act passed after this Act, Schedule 2 shall have effect in connection with the powers conferred by this and the following sections of this Act to make Orders in Council or orders, rules, regulations or schemes.”
“The powers conferred by section 2(2) of this Act to make provision for the purposes mentioned in section 2(2)(a) and (b) shall not include power -
(a) to make any provision imposing or increasing taxation; or
(b) to make any provision taking effect from a date earlier than that of the making of the instrument containing the provision; or
(c) to confer any power to legislate by means of orders, rules, regulations or other subordinate instrument, other than rules of procedure for any court or tribunal; or
(d) to create any new criminal offence punishable with imprisonment for more than two years or punishable on summary conviction with imprisonment for more than three months or with a fine of more than level 5 on the standard scale (if not calculated on a daily basis) or with a fine of more than £100 a day.”
“A Regulation shall have general application. It shall be binding in its entirety and directly applicable in all member states.
A Directive shall be binding, as to the result to be achieved, upon each member state to which it is addressed, but shall leave to the national authorities the choice of form and methods.
A decision shall be binding in its entirety. A decision which specifies those to whom it is addressed shall be binding only on them.”
53. The ambit of section 2(2) has been considered in a number of cases. The leading authority is Oakley Inc v Animal Ltd [2005] EWCA Civ 1191, [2006] Ch 337. Since then section 2(2) has been considered by Moses LJ in R (Cukorova Finance International Ltd) v HM Treasury [2008] EWHC 2567 (Admin), [2009] EuLR 317, by Lord Hope in Risk Management [2011] 2 AC 34 (para 22 above), by the Employment Appeal Tribunal in Pothecary Witham Weld v Bullimore [2010] ICR 1008 and by Floyd J, who identified as many as 14 relevant principles in ITV Broadcasting Ltd v TV Catchup Ltd (No 2) [2011] EWHC 1874 (Pat), [2011] FSR 40.
“8. Any member state may provide that, by way of derogation from paragraphs 1 to 7, the grounds for refusal of registration or for invalidation in force in that state prior to the date on which the provisions necessary to comply with this Directive enter into force shall apply to design applications which have been made prior to that date and to resulting registrations.”
“… section 2(2)(b), from its position in section 2, from the fact that it adds something to both subsections (1) and (2), and from its very wording is a subsection to enable further measures to be taken which naturally arise from or closely relate to the primary purpose being achieved. I accept that I will be accused of adding the words ‘naturally’ and ‘closely’, but I believe that describes the context which provides the meaning of the words.”
“I do not consider that to hold that the making of these transitional provisions came within section 2(2)(a) has the effect of making section 2(2)(b) devoid of content. There is a distinction between providing something which, although it is a choice, is a choice which the implementation of the Directive requires you to make, and one which is not so required, but which has the effect of tidying things up or making closely related original choices which the Directive does not necessarily require. Section 2(2)(b) is confined by its words and context. Redefinition in the abstract is to be avoided.”
“79. My own view, provisional though it must be in the absence of any specific context relevant to this case, is this: that section 2(2)(a) covers all forms of implementation – whether by way of choice of explicit options or by way of supply of detail. Both of these are ‘for the purpose of implementing’ or ‘enabling any such obligation to be implemented’. Supplying detail required by a Directive is just that.
80. So section 2(2)(b) indeed adds more …. How much more must depend on the particular circumstances of the case – the statutory language is the guide. It says “for the purpose of dealing with matters arising out of or related to”. Whether a particular statutory instrument falls within those words must depend on what it purports to do and the overall context. One cannot put a gloss on the meaning. If Otton LJ [in R v Secretary of State for Trade and Industry, Ex p UNISON [1996] ICR 1003] was adding a gloss – ‘distinct, separate or divorced from it’ – then I do not agree with that gloss. You just have to apply the statutory language to the case concerned. And in doing so you bear in mind that the purpose of the power given by the section is European – the article10 purpose. Whether or not Otton LJ was right in the circumstances of, I … do not decide. It would not be right to do so in the absence of the affected parties.
The reference to Otton LJ’s words was to a sentence in which Otton LJ said that he was satisfied that the provision made was “related to a Community obligation, and not distinct, separate, or divorced from it” (R v Secretary of State for Trade and Industry, Ex p UNISON [1996] ICR 1003, 1014G-H).
Article 10 of the then Treaty establishing the European Community read:
“Member states shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of this Treaty or resulting from action taken by the institutions of the Community. …”
64. At the other end of a spectrum is a situation such as Lord Hope considered in Risk Management, para 24 (para 22 above). That is where a Directive, such as Directive 2004/18/EC in that case, (i) addresses an internal market competition issue, by introducing procedures for the award of public works, supply and service contracts, but does not cover a situation where (ii) public authorities contract inter se, or where (iii) a local authority exercises over the other contracting party “a control which is similar to that which it exercises over its own departments and, at the same time, that person carries out the essential part of its activities with the controlling local authority or authorities”: see Teckal (Case C-107/98) [1999] ECR I-8121, para 50. In that context, Lord Hope, with whose judgment three other members of the court agreed, considered that it would not be a permitted use of the power conferred by section 2(2) “to apply the public procurement rules to relationships [such as those in (ii) and (iii)] that fell outside the regime provided for by the Directive”: para 22 above. In agreement with Lord Hope, I consider that, where a Directive is based on an internal market competence and as a result limited in impact to internal market situations, its domestic extension to situations outside the internal market cannot be regarded as being within either section 2(2)(a) or (b) of the 1972 Act. This is so whether it is so limited by implication or expressly.
65. More difficult are intermediate situations where a Directive is limited to, or specifically excludes, a particular area of the internal market. An example of a Directive limited to a particular area of the internal market is Directive 2002/47/EC which was in issue in Cukurova [2009] EuLR 317. Directive 98/59/EC in issue in the present case is an example of a Directive with both limitations and specific exclusions which appear to fall within the internal market: It is limited by article 1(1)(a) to collective redundancies. It excludes in article 1(2)(a) limited period contracts, which might affect the functioning of the internal market competition. I say nothing on the question whether the exclusion in article 1(2)(c) of the crews of seagoing vessels operates in an area which might affect the internal market or was because this was seen as a situation, like that covered by article 1(2)(b), where the internal market was not affected.
66. In my view, provisions extending an EU regime domestically into areas not covered by or specifically excluded from the EU regime contemplated by a Directive may well fall outside both paragraphs of section 2(2). Each case would have to be considered on its own merits. Some adjustments to situations in which a Directive operates may be regarded as necessary or appropriate for the purpose of implementing or enabling the implementation of a Directive, or as being “related to” the relevant EU obligation in the sense already discussed. Pothecary [2010] ICR 1008 is an example of a case where the Secretary of State used section 2(2)(b) to provide for a reverse burden of proof in section 63A of the Sex Discrimination Act 1975 (as inserted by regulation 5 of the Indirect Discrimination and Burden of Proof) Regulations 2001 (SI 2001/2660) in cases of alleged victimisation. There was no obligation under European law to have a reverse burden in such cases. There was under the Burden of Proof Directive 97/80/EC an obligation to have a reverse burden in cases of alleged unequal treatment, but the Employment Appeal Tribunal concluded that the right not to be victimised did not form part of the principle of equal treatment, but was an ancillary right accorded by EU law to render that principle properly enforceable. On that basis, it held, unsurprisingly, that introducing a reverse burden in respect of a right which European law treated as ancillary to its prohibition of discrimination was dealing with a matter related to an EU obligation, within section 2(2)(b).
Conclusion
LORD CARNWATH: (dissenting)
Overview
77. I adopt gratefully Lord Mance’s exposition of the facts and the relevant statutory provisions.
Procedural history
79. As he has noted, an important event was the decision of the Employment Appeal Tribunal, in UK Coal Mining Ltd v National Union of Mineworkers [2008] ICR 163), given in September 2007. To explain its importance I can refer to Underhill LJ’s summary [2014] ICR 685, para 9:
“The trend of English authority until comparatively recently was to the effect that the collective redundancy provisions, even when read with the Directive, did not oblige an employer to consult about, or therefore disclose the reasons for, the underlying business decision which gave rise to a proposed collective redundancy – the paradigm case being the closure of a workplace – but only about the consequences of that decision. ... However, the decision of the ECJ in Junk v Kühnel (Case C-188/03) [2005] ECR I-885, raised a serious question whether that approach was compatible with EU law. In UK Coal Mining …, the Employment Appeal Tribunal (Elias J, President, presiding) declined explicitly to depart from the established approach (while expressing some reservations about it); but it nevertheless held that in a case where a decision to close a workplace and the consequent decision to make redundancies were ‘inextricably interlinked’ the obligation to consult about the reasons for the latter necessarily involved an obligation to consult about the reasons for the former – and thus required the employer to initiate consultations prior to the closure decision. The CJEU revisited this issue in Akavan Erityisalojen Keskusliitto (AEK) ry v Fujitsu Siemens Computers Oy (Case C-44/08) [2010] ICR 444; [2009] ECR I-8163 (‘the Fujitsu decision’); but unfortunately the effect of its reasoning is, to put it no higher, not entirely clear.”
“On the approach which it had initially taken, which involved acceptance of an obligation to consult only about the consequences for employees of the closure of the base, there had been no need for the USA to take any point on its status as a sovereign state. But the approach espoused in the UK Coal case was unacceptable to it: it did not believe that it should or could be under any legal obligation to consult with employees about a decision to close a military base, which is an act done jure imperii. …”
It was not until the remedy hearing that the USA sought for the first time to invoke state immunity; but the tribunal held that it had already submitted to the jurisdiction. That conclusion is not now in issue.
In the Court of Appeal he further submitted that in the light of the Fujitsu decision, the reasoning in UK Coal [2008] ICR 163 should not be supported, with the consequence that consultation on the business decision to close the base had not been required.
82. In the course of a detailed review of the reasoning of the Advocate General and the CJEU in the Fujitsu case, Rimer LJ (giving the judgment of the court) [2010] EWCA Civ 1223 sought an answer to what he identified as the critical question:
“… does the ECJ explain whether the consultation obligation arises (i) when the employer is proposing, but has not yet made, a strategic business or operational decision that will foreseeably or inevitably lead to collective redundancies; or (ii) only when that decision has actually been made and he is then proposing consequential redundancies?” (para 57)
He inclined to the view that the Advocate General had favoured option (ii) (para 53). But he was unwilling to venture a concluded view on the position of the court, which he considered unclear (para 59), and which could be only resolved by the CJEU itself. Notwithstanding the “USA’s express unwillingness” to support a reference, he saw it as important “not just to the disposition of this litigation but also to industrial practice generally …” (para 62).
83. Before the CJEU, as Lord Mance has noted, the case took an unexpected turn. Prompted by observations of the Commission, the court invited submissions on whether, having regard to the exclusion for public administrative bodies in article 1(2)(b), the dismissal was outside the scope of the Directive, with the result that the court would have no jurisdiction to decide the question. Its answer (in its judgment of 18 October 2012, (Case C-583/10), [2013] ICR 193) was no (for reasons to which I shall return below). Accordingly, when the appeal came back to the Court of Appeal, the issue had to be considered as one of domestic law only.
“… an issue which will in almost all other cases – albeit not in this – depend on EU law will have to be decided without the guidance of the CJEU…” (para 33)
It was further ordered that in the event of an appeal to the Supreme Court, the further hearing on the Fujitsu issue should await the outcome of the appeal.
The reasoning of the CJEU
“41. Whilst the size and functioning of the armed forces does have an influence on the employment situation in a given member state, considerations concerning the internal market or competition between undertakings do not apply to them. As the Court of Justice has already held, activities which, like national defence, fall within the exercise of public powers are in principle excluded from classification as economic activity …”
It followed that dismissal of staff of a military base did not fall within the scope of the Directive, “irrespective of whether or not it is a military base belonging to a non-member state.” (para 43)
“46. The court has already held that where, in regulating situations outside the scope of the EU measure concerned, national legislation seeks to adopt the same solutions as those adopted in that measure, it is clearly in the interest of the European Union that, in order to forestall future differences of interpretation, provisions taken from that measure should be interpreted uniformly …
47. Thus, an interpretation by the court of provisions of EU law in situations outside its scope is justified where those provisions have been made applicable to such situations by national law in a direct and unconditional way in order to ensure that internal situations and situations governed by EU law are treated in the same way …”
“53. It is true that it is in the interests of the Union to safeguard the uniformity of the interpretations of a provision of an EU measure and those of national law which transpose it and make it applicable outside the scope of that measure.
54. However, such is not the case where, as in the case in the main proceedings, an EU measure expressly provides a case of exclusion from its scope.
55. If the EU legislature states unequivocally that the measure which it has adopted does not apply to a precise area, it renounces, at least until the adoption of possible new EU rules, the objective seeking uniform interpretation and application of the rules of law in that excluded area.
56. Therefore, it cannot be stated or presumed that there was an interest of the Union that, in an area excluded by the EU legislature from the scope of the measure which it adopted, there should be a uniform interpretation of the provisions of that measure.”
The vires issue
The arguments
89. The scope of section 2(2)(b) was considered by the Court of Appeal in Oakley Inc v Animal Ltd [2005] EWCA Civ 1191, [2006] Ch 337. The Registered Design Regulations 2001 were made under section 2(2) in order to implement Directive 98/71/EC, concerning the approximation of laws relating to registered designs. Article 11(8) was a transitional provision which granted member states the option of retaining their old laws in relation to designs that were already registered. The Court of Appeal rejected an argument that the transitional provisions in the Regulations went further than permitted by the Directive. Of section 2(2)(b) Waller LJ said that the words “arising out of” and “related to” should be read in the context of section 2 itself, the primary purpose of which was to give effect to the laws which under the EU Treaties the United Kingdom had agreed to make part of its own laws. He observed:
“It seems to me that section 2(2)(b) from its position in section 2, from the fact that it adds something to both subsections (1) and (2), and from its very wording is a subsection to enable further measures to be taken which naturally arise from or closely relate to the primary purpose being achieved.” (para 39) (emphasis added)
May LJ contrasted sections 2(2)(a) and (b):
“There is a distinction between providing something which, although it is a choice, is a choice which the implementation of the Directive requires you to make, and one which is not so required, but which has the effect of tidying things up or making closely related original choices which the Directive does not necessarily require. Section 2(2)(b) is confined by its words and context ….” (para 47) (emphasis added)
“The decision to go beyond the requirements of the Directive by extending the ‘employee representative’ rights to employees in PABs (except those in Crown employment) may, as a matter of strict analysis, reflect a substantive policy choice made by the Secretary of State; but, as the judgments in the Oakley Inc case make clear, that is not in itself objectionable. In fact all that he was doing was plugging the rights created by the Regulations in cases where no trade union was recognised into the pre-existing scheme of the Act and thereby reproducing, in the case of this late-discovered lacuna in the implementation of the Directive, the selfsame decision as Parliament had already made in enacting the primary legislation in 1975 and 1992. It would indeed have been an extraordinary anomaly if the kinds of employment where the obligation to consult arose differed as between cases where a trade union was recognised and cases where it was not; and it was not only natural but right for the Secretary of State in making the 1995 Regulations to ensure that the position was the same in both cases. In my judgment this is precisely the kind of ‘closely related original choice which the Directive does not … require’ but which ‘has the effect of tidying things up’ that May LJ identifies in his judgment in Oakley Inc case.” (para 32)
91. In this court, Mr Beloff QC supports the reasoning of the Court of Appeal. Article 5 of the Directive made clear that the Directive sought to achieve minimum harmonisation only. Member states were free to enact laws more favourable to workers than those required by the Directive. Section 188, as applied to public administrative bodies, “arose out” of the obligations under the Directive in the sense of extending them further, as the UK was entitled to do by article 5, or alternatively it “related to” those because the subject matter (the right to consultation) was identical to the right to be consulted in the Directive. By the same token, the 1995 Regulations, in filling a gap in the UK legislation identified by the European court in Commission of the European Communities v United Kingdom (Case C-383/92) [1994] ICR 664 fell squarely within the scope of section 2(2)(b) of the 1972 Act under which they were made.
Discussion
93. I start from the words of Lord Hope in R (Risk Management Partners Ltd) v Brent London Borough Council [2011] 2 AC 34, para 24:
“It is true that section 2(2) of the European Communities Act 1972 is in wide terms. It does not confine any measures made under it to doing the minimum necessary to give effect to a Directive. But, if it is to be within the powers of the subsection, the measure has to arise out of or be related to an EU obligation. As Waller LJ said in Oakley Inc v Animal Ltd …, the primary objective of any secondary legislation under section 2(2) must be to bring into force laws which, under the Treaties, the United Kingdom has agreed to make part of its laws …”
96. Some limitation is necessary to ensure that the power to legislate outside the normal Parliamentary process is kept within bounds. The key, as Lord Hope said, at [2011] 2 AC 34, para 25, must lie in the context. The relationship must be one relevant to the purpose of the legislation, that is to give effect to the UK’s obligations in European law. In other words it must be a relationship derived in some way from European law, not one dictated solely by considerations of domestic law. On the other hand, as the language makes clear, the power is not confined to matters which arise directly from the European obligation – the “minimum necessary” in Lord Hope’s words, at para 24. “Related to” implies the possibility of a less direct connection.
Conclusion