New Appeal: Did the State correctly transpose EU Directive 2008/94/EC (protection of employees in the event of their employer’s insolvency)?

In this determination, Glegola v Minister for Social Protection & Ors, the Supreme Court granted the State leave to appeal against the Court of Appeal’s order that the State pay Glegola damages under the Francovich principles, for the State’s failure to correctly transpose EU Directive 2008/94/EC (protection of employees in the event of their employer’s insolvency) into Irish law.

 

Background

The Employment Rights Commissioner awarded Glegola €16,000 against her former employer, Metro Spa Ltd, for unfair dismissal. Metro had no assets and had been struck of the companies register for failure to file returns. Glegola applied to the High Court for a number of orders: an order restoring Metro to the register; an order to wind up Metro; and an order under s 251 of the Companies Act 1990, which she believed would entitle her to recover her compensation from the Social Insurance Fund established under the Protection of Employees (Employers’ Insolvency) Act 1984, as required by EU Directive 2008/94/EC. The High Court (Charleton J) granted those orders.

When the Department of Social Protection refused to sanction payment from the Social Insurance Fund, Glegola issued judicial review proceedings in the High Court seeking a number of orders:

(i) First, that the Declaration under section 251 was sufficient to trigger the provisions of Article 2(1)(b) of the Directive, which it was claimed had direct effect. Accordingly, the State was obliged to make the payment from the Fund as described.

(ii) In the alternative, that the State had failed to fully transpose into Irish law the said Article in failing to have in place a procedure whereby, as part of the statutory scheme applicable to a petition to wind up a company by the court, a petitioner could, in the alternative, apply for an Order of the type envisaged by the said Article 2(1)(b) of the Directive.

(iii) And, finally, if the argument last mentioned was well-founded, she contended that in accordance with the decision of the Court of Justice in Francovich & Bonifaci v Italy (Joined Cases C-6/90 and C-9/90), she was entitled to an award of damages against the State in an amount equivalent to the said debt.

The High Court refused to grant those reliefs. Glegola appealed to the Court of Appeal, which held that the State had failed to correctly transpose the Directive into Irish law and awarded Glegola damages against the State under the Francovich principles. The State applied to the Supreme Court for leave for a further appeal.

 

Supreme Court

The State is seeking that the Court set aside the decision of the Court of Appeal and restore the orders of the High Court. It did not request that the Court make a reference to the CJEU but suggested that the Court may be required to do so of its own accord to enable it to give final judgment. The Court determined that the State had raised issues of general public importance and certified the following questions, whether:

1 (a) The Court of Appeal erred in deeming Article 2(1)(b) to be mandatory notwithstanding the disjunctive wording of Article 2(1) and/or the reference in Article 2(1) to insolvency as a concept “…as provided for under the laws, regulations and administrative provisions of a Member State”

(b) The Court of Appeal erred in failing to interpret Article 2 as requiring as a condition precedent the “opening of proceedings” which is solely based on insolvency law of Member States.

2 (a) The Court of Appeal erred in law in failing to distinguish between a “clear cut” breach of EU law and Ireland’s implementation of Directive 2008/94/EC by way of a requirement of insolvency consistent with Irish company law’s definition on insolvency.

(b) The Court of appeal erred in law in awarding Francovich damages on the basis that a wrongly held interpretative view (even if objectively and reasonably held) by a Member State equates to a “manifest breach”.

(c) The Court of Appeal erred in law and/or in fact in its determination that the applicants were guilty of a manifest and grave disregard of its discretion by reference to the “clarity” of Article 2(2) when it is not clear, but opaque.

(d) The Court of Appeal erred in law and/or fact in its determination that the appellants were guilty of a manifest and grave disregard of its discretion by reference to certain obiter comments by the High Court in Re David Joinery Ltd notwithstanding the specific lack of any jurisprudence from the Court of Justice of the European Union on the issue.

(e) The Court of Appeal failed to accord any or any proper weight to the rationale for Francovich damages, i.e. a balancing exercise between protecting rights afforded under EU law with Member States’ right to exercise legislative discretion in implementing EU Directives.

(f) The Court of Appeal failed to accord any or any proper weight to the distinct lack of any or any pertinent jurisprudence from the Court of Justice on the ambit of Article 2 of Directive 2008/94/EC.

(g) The Court of Appeal failed to accord any or any proper weight to the nebulous wording of Directive 2008/94/EC and Article 2 in particular.

(h) The Court of Appeal failed to accord any proper weight to the lack of Commission proceedings against Ireland.

 

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