Discrimination (General)

From Max-EuP 2012

by Jürgen Basedow

1. Concept and object

Since 1980 the European Court of Justice (ECJ) has constantly acknowledged the general principle of equality as a fundamental principle of Union law. According to the court, this principle ‘requires that comparable situations may not be treated differently unless difference of treatment is objectively justified’, ECJ Joined Cases 66/79, 127/79 and 128/79 – Salumi Vasanelli [1980] ECR 1237 para 14. Prohibitions of discrimination are considered by the court as a specific expression of the general principle of equality, ECJ Case 810/79 – Überschär [1980] ECR 2747 para 16. The equality principle overarches and connects a great number of specific prohibitions of discrimination which in part are already contained in the founding treaties and which have multiplied in secondary Union law in more recent times. In accordance with their political thrust, one can distinguish prohibitions of discrimi- nation which are related to the internal mar- ket (see 3. below), to the protection of competition (see 4. below) and to social policy (see 5. below).

Equal treatment and non-discrimination theoretically require at least three persons. The first one is the addressee who has to comply with the equality principle or the prohibition of discrimination. The second one is its beneficiary; the acts of the first person are related to this second person. The third person is the benchmark of such acts: to the extent that the third person’s circumstances equal those of the second, the second and the third person must be treated alike. Without such a benchmark, equal treatment or discrimination are excluded as a matter of logic. It follows that the prohibition of discrimination is logically rooted in public law and the precepts of distributive justice (iustitia distributiva) as elaborated by Aristotle.

2. Discrimination and private law

As opposed to public law, private law is primarily concerned with relations between two persons: think of contract or marriage, of the relation between a tortfeasor and the victim, or the owner and the trespasser. This is the domain of commutative justice (iustitia commutativa) but not of distributive justice.

The prohibition of discrimination is therefore basically foreign to private law. It is not a traditional principle of private law and, for reasons of logic, may become significant for private law relations only where a third person joins the other actors and provides for a benchmark. This may occur, however, fairly often in private law relations and in particular in standardized contracts. The seller of goods or services will often assume that a prospective customer will treat him in the same way as other comparable competing suppliers. Likewise, the purchaser of goods or services may suppose that the potential supplier will make an offer to him on the same basis as made to similar prospective buyers. Discrimination occurs where these presumptions turn out to be wrong, whether the customer discriminates against a supplier or the supplier discriminates against a purchaser.

In general, the law does not intervene in such cases. This is due to three main reasons. First, a duty to enter into a contract is considered a very substantial interference with individual liberty. The freedom of contract is in particular the freedom to decide on the conclusion of a contract, including the right to choose the contracting partner (freedom of contract). Secondly, contracts are generally made because they are beneficial to both sides; where a party refuses to make a contract, it follows that it does not consider the contract in question as beneficial. Where that contract is nevertheless beneficial to an average contracting party, another person willing to conclude that contract will emerge on the market. Competition therefore is the best protection for suppliers and purchasers, respectively, from discrimination by the other market side. Competition disciplines market actors in their behaviour, and direct state intervention would therefore be redundant. Thirdly, a contract concluded under compulsion usually raises considerable problems for the parties as well as for the judiciary and the legal system as a whole. The discrimination directed against a person seeking a contract is not limited to its outright refusal. Rather, if the contract is imposed discrimination will continue in the form of detrimental terms and conditions as well as numerous possible harassments during the performance of the contract. Private law can fight those practices only ex post at a considerable passage of time. Public law regulation is more efficient, but for practical reasons is limited to specific economic sectors such as telecommunications or electricity supply. In either context the costs of enforcement are exorbitant. It follows that prohibitions of discrimination with private law effects can be approved only by way of exception. Yet quite to the contrary, the development of Union law has been characterized by a considerable increase in the number of such prohibitions.

3. Specific market-related prohibitions of discrimination

The founding treaties of the European Community were primarily aimed at economic objectives. They were to be attained by the establishment of a common market, initially approved only for coal and steel in 1951, cf Art 1 ECST, later in 1957 for all goods and services, Art 2 EEC. The Single European Act of 1986 reinforced this objective: ever since, the activities of the Community comprise measures with the aim of progressively establishing the European internal market, Art 3(3) EU/14 EC. This objective is defined as ‘an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of this treaty’. Put in other words, the origin of goods, services, capital or persons within this internal market shall be without relevance. To the extent that Member States (see below) or private market actors (see 4. below) put into effect regulations that give weight to that origin, it is up to Union law to correct such discrimination.

The prohibition of any discrimination on grounds of nationality laid down in Art 18 TFEU/ 12 EC is therefore of fundamental significance for the establishment of the internal market. Goods and services of foreign suppliers shall have access to the domestic market under the same conditions which are available for domestic suppliers. This general principle has been specified in various provisions of the treaty, see eg Art 36 s 2 TFEU/30 s 2 EC in respect of discriminatory restrictions of import and export. In this context, further prohibitions of discrimination may be mentioned which relate to special policy areas, see eg Art 40(2)(2) TFEU/34(2)(2) EC in the field of agriculture or Arts 92 and 95 TFEU/72 and 75 EC in transport policy. Other examples are the prohibitions of discriminatory duties under Arts 110–112 TFEU/90–92 EC.

The prohibition of discrimination on grounds of nationality has received specific expression in the fundamental freedoms. Thus, the prohibition of quantitative restrictions on exports and all measures having equivalent effect (Art 35 TFEU/ 29 EC) ‘concerns national measures which have as their specific object or effect the restriction of patterns of exports and thereby the establishment of a difference in treatment between the domestic trade of a Member State and its export trade, in such a way as to provide a special advantage for national production or for the domestic market of the State in question’, ECJ Case C-302/88 – Hennen v Stichting ICOVA [1990] ECR I-4625 para 17. The equal treatment of domestic and foreign supplies and services is also safeguarded by the freedom of establishment and the freedom to provide services (free movement of services); accordingly, the Court of Justice has characterized the provisions of Arts 49 TFEU/43 EC and 56 TFEU/49 EC as ‘specific instances’ of the principle of equal treatment, ECJ Case 3/88 – Commission v Italian Republic [1989] ECR 4035 para 8. To the extent that these special prohibitions do not apply because of specific exceptions, eg for the protection of intellectual property, the general prohibition of discrimination on grounds of nationality will control, ECJ Joined Cases C-92/92 and C-326/92 – Phil Collins [1993] ECR I-5145 para 27.

The prohibition of discrimination on grounds of nationality has initially only been applied to restrictions enacted or operated by Member States. Its effect in legal relations between private persons is not quite clear. While it is now beyond question that the said provisions of the treaty directly accord individual rights, it is still doubtful to what extent the beneficiaries may invoke these rights as against other private persons, ie whether the said prohibitions of discrimination have direct effect in private law. Such effect has been affirmed, beyond the actions of public authorities, for ‘rules of any other nature aimed at regulating in a collective manner gainful employment, self-employment and the provision of services’, ECJ Case C-438/05 – International Transport Workers’ Federation/Viking [2007] ECR I-10779 para 33. This extension is grounded in the fact that the collective entities in question, in particular trade unions and sport associations, hold and exercise the power to regulate in certain areas which makes them comparable to a national legislator. Where a discriminating party lacks such power, there is however no room for the application of Art 18 TFEU/12 EC.

4. Competition-related prohibitions of discrimination

It is, among others, the purpose of effective competition to deprive attempts of private persons to discriminate against other private persons of their effects. He who attempts to discriminate will lose customers; the anticipation of this consequence will have a disciplinary effect on him. The single customer will usually not be harmed by the rejection because he will find other suppliers in the market providing equivalent alternatives. This is a fundamental difference between private law relations and relations between private persons and the state, relations which usually are without alternative. Again, this gives evidence of the exceptional character that prohibitions against discrimination have in private law as opposed to public law.

The disciplinary effect of competition is lacking where single undertakings acquire positions of power which enable them to act in the market without having regard to their competitors and the reactions of the other market side. The application of ‘dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage’ is explicitly laid down in Art 102(2)(c) TFEU/82 (2)(c) EC as a prohibited abuse of a dominant position. Equal treatment is also prescribed in some economic sectors by rules which do not specifically require a dominant position because this prerequisite can generally be said to be fulfilled in the respective sector due to its structure as a natural monopoly. This applies to network economies such as energy and transport, or communication. For example, the operator of an electricity transmission grid shall be responsible under Art 9(e) Dir 2003/54, for ‘ensuring non-discrimination as between system users or classes of system users, particularly in favour of its related undertakings’.

The prohibition of ‘dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage’ equally applies where competing undertakings agree on such discriminatory practices, see Art 101(1)(d) TFEU/81(1)(d) EC; in this context it does not matter whether one of the undertakings is dominant or whether they can be said to be collectively dominant. However, many cartels generate such a collective market dominance; otherwise they would perhaps not be agreed upon or would not survive over a long period of time. Here again, an essential precondition of the prohibition of discrimination becomes visible, ie the fact that the discriminating person is vested with a position of power which spares the trouble of taking the reactions of the other market side and of competitors into account. Since block exemption regulations legalize such positions of power, they also contain specific prohibitions of discrimination, the breach of which may trigger the withdrawal of the exemption, see eg Art 6(1)(d) Reg 1400/2002 on the motor vehicle sector.

A much more comprehensive prohibition of discriminations had been laid down in the European Community on Coal and Steel under Art 4(b) and Art 60 ECST. Without requiring market dominance, Art 4(b) prohibited ‘measures or practices discriminating among producers, among buyers or among consumers, specifically as concerns prices, delivery terms and transportation rates …’. This prohibition was not limited to discrimination on grounds of nationality, but extended to every kind of unequal treatment. The ultimate consequence of such a far-reaching prohibition of discrimination would be the suppression of every kind of competition as relates to price or contractual terms since every competitive initiative of a market actor, in particular a price cut, must be offered to and benefit all customers indiscriminately which will often make it unaffordable, especially for smaller competitors. This is incompatible with the concept of competition in the EC Treaty (Treaty on the Functioning of the European Union (TFEU)). When the treaty on the European Coal and Steel Community ended after 50 years and the sectors covered by that treaty were subject to the general rules of the EC Treaty, the Member States were right to not prolong the previously formulated prohibition.

5. Socio-political prohibitions of discrimination

Present Union law contains a number of prohibitions of discrimination which are not linked to the establishment and functioning of the internal market. They have been laid down in several directives and are applicable to cross-border and purely domestic fact situations alike. Their historical background is Art 119 EEC (157 TFEU/ 141 EC). This provision requires ‘each Member State [to] ensure that the principle of equal pay for male and female workers for equal work or work of equal value is applied’. The provision was meant to prevent Member States with a higher percentage of female employment from profiting from the lower pay for women which was widely practised in the early years of the Community. Irrespective of the wording, the Court of Justice declared the provision as directly applicable in a case involving the employment contract between a flight attendant and the Belgian State Airline SABENA, ECJ Case 43/75 – Defrenne v SABENA [1976] ECR 455 para 21/24. The first Council Directive 75/117 on this matter, which had been adopted shortly before but was not yet implemented, was thereby transposed into primary Union law. Both occurrences served as a start for a development leading to a comprehensive prohibition of discrimination in employment matters (discrimination (employment law)).

This prohibition is not meant to prevent distortions of competition in the markets for goods and services. It rather aims at a European social model which builds upon the equal treatment of men and women. It may therefore be characterized as a socio-political prohibition of discrimination. This direction of legal development was further reinforced by the Treaty of Amsterdam. It has empowered the Council in Art 19 TFEU/13 EC to take ‘appropriate action to combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation’. Several directives have been adopted on this basis; some of them relate to employment (discrimination (employment law)), others concern the access to goods and services in general (discrimination (contract law)). Further prohibitions of discrimination are contained in Art 21 of the Charter of Fundamental Rights which is designed to become part of binding Union law under Art 6 EU. Article 21 is to be applied by the institutions of the Union and by the Member States when they are implementing the law of the Union, see Art 51(1) of the Charter. If this includes the application to private law relations as insinuated by the Court in its judgment on insurance tariffs (ECJ Case C-236/09 – Test-Achats [2011] ECR I-0000), the principle of freedom of contract will be not only called into question by some fragmentary directives, but will also be challenged in substance by not less than 17 prohibited criteria of discrimination. To forestall that development, Union law, which has traditionally not distinguished between public law and private law, will have to acknowledge the independence of private law in a free society. Accordingly, Art 21 of the Charter must be limited to vertical relations between individuals and undertakings on the one side and the Union and the Member States on the other in the implementation of the law of the Union. In private law relations its effect should however be confined to an indirect application within the framework of the general principles of private law.

Literature

Götz Hueck, Der Grundsatz der gleichmäßigen Behandlung im Privatrecht (1958); Ernst-Joachim Mestmäcker, ‘Das Verbot von Preisdiskriminierungen im Recht der Europäischen Gemeinschaft für Kohle und Stahl’ in Institut für ausländisches und internationales Wirtschaftsrecht an der Johann-Wolfgang-Goethe-Universität Frankfurt am Main in connection with the Institute for International and Foreign Trade Law of the Georgetown University Law Center Washington, DC (eds), Kartelle und Monopole im modernen Recht, vol 1 (1961) 309; Jan Busche, Privatautonomie und Kontrahierungszwang (1999); Franz Jürgen Säcker, ‘Europäische Diskriminierungsverbote und deutsches Zivilrecht’ [2004] Betriebsberater, supplement 6; Gabriele Britz and Matthias Jestaedt, ‘Diskriminierungsschutz und Privatautonomie’ (2005) 64 Veröffentlichungen der Vereinigung der Deutschen Staatsrechtslehrer (VVDStRL) 298, 355 ff; Takis Tridimas, The General Principles of EC Law (2nd edn, 2006) ch 2; Stefan Leible and Monika Schlachter (eds), Diskriminierungsschutz durch Privatrecht (2006); Michael Coester, ‘Diskriminierungsschutz im Privatrechtssystem’ in Festschrift Claus-Wilhelm Canaris, vol I (2007) 115; Jan H Jans, ‘The Effect in National Legal Systems of the Prohibition of Discrimination on Grounds of Age as a General Principle of Community Law’ (2007) 34 Legal Issues of European Integration 53; Jürgen Basedow, ‘Der Grundsatz der Nichtdiskriminierung im europäischen Privatrecht’ (2008) 16 ZEuP 230; Monika Schlachter (ed), The Prohibition of Age Discrimination in Labour Relations (2011).

Retrieved from Discrimination (General) – Max-EuP 2012 on 27 January 2022.

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