Is Uber a taxi service? Socio-legal reflections on the ECJ decision and beyond  

Serena Natile – Postdoctoral Researcher at King’s College London and Associate Lecturer at Kent Law School, University of Kent

Just before the holiday break, the Court of Justice of the European Union (ECJ) in its first ruling on the gig economy decided that the global digitally-enabled taxi company, Uber, is a transportation and not an information service and can be regulated by Member States (MS). This judgement has raised important questions regarding the regulation and social implications of digital platforms according to EU law and beyond. While the ECJ’s decision created more grounds to protect workers’ rights in the sharing economy and contributed to the debate on the allocation of EU/MS competences within the digital domain, it also offers useful insights to reflect on the social role of digital platforms more generally.

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‘One for all, all for one': the sweeping notion of defects in product liability case Boston Scientific

Luigi Lonardo, LLM in EU Law, King’s College London

The Court of Justice of the European Union’s (CJEU) first ruling on what is a ‘defective product’[1] will likely not be the last one, since it was highly ambiguous to say the least. The judgement is doomed to have broad repercussions indeed on European product liability litigation and consumer protection law.

The Court found that, with reference to medical devices implantable in the human body, “a product is defective within the meaning of Article 6 of Directive 85/374[2] (“the Directive”) “if products belonging to the same group or forming part of the same production series have a potential defect. In other words, there is no need to prove the defect in each individual case, if other products in the same batch have a potential defect. Moreover, the Court stated, under Article 9 of the same Directive, the producer is liable for the damages caused by a surgical operation necessary to replace a defective product.

Even if limited to implantable medical devices, such a definition may nonetheless surge compensation claims against producers and insurers for two reasons. First it simplifies what the claimant has to prove. Second it resorts to ill-defined concepts that may lead national courts to request further clarifications and plaintiffs to try action by taking advantage of the indiscriminate wording of Boston Scientific.

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A First Step towards the Localisation of the Harmful Event in Financial Torts? Case Comment on C-375/13 Kolassa v Barclays Bank

Giorgio Risso
PhD Candidate, University of Genoa, Department of Law – Visiting PhD student, King’s College London, The Dickson Poon School of Law 

Introduction

On 28 January 2015, the Court of Justice of the European Union (CJEU) decided on the application of EU conflict of jurisdiction rules over prospectus liability.[1] More specifically, the judgment concerns the application of Articles 5(1)(a) and (3) and 15(1) of the Brussels I Regulation.[2] This comment will only look at the issues related to Art. 5(3), since the correct localisation of harmful events in financial torts is at the heart of recent and intensive discussions (also from the perspective of a recast of Rome II Regulation). Continue reading

Case C-435/12 ACI Adam v Stichting de Thuiskopie

Justin Koo, PhD Candidate, The Dickson Poon School of Law, King’s College London

The claimants in this case were importers of data media storage devices such as CDs. By virtue of Article 16c(2) of the Auteurswet (Dutch copyright law), the claimants were responsible for the payment of remuneration to authors. This payment has the effect of offsetting the costs of the private copy exception under Article 16b given that the imported media storage devices facilitate acts of private copying. However, the claimants contended that the remuneration payable to the defendants incorrectly takes into account copying from unlawful sources. In other words, the importers were being forced to pay compensation for illegal acts that should not fall within the private copy exception under Article 16b.

On appeal to the Hoge Raad der Nederlanden (Supreme Court of the Netherlands), the case was stayed and three questions referred to the Court of Justice of the European Union (CJEU).[1] In short, the first question asked whether private copying from unlawful sources fell within the scope of the private copy exception under Article 5(2)(b) of the Information Society Directive. In terms of the second question, the Dutch Supreme Court essentially asked what the role of the three-step test under Article 5(5) of the Information Society Directive is. The CJEU in addressing both questions together, posed the question whether reading Article 5(2)(b) and Article 5(5) of the Information Society Directive together would preclude national legislation that does not distinguish between the sources (lawful or unlawful) from which a private reproduction is made. With this in mind, the significance of the case was not about the determination of the levy to be paid but rather, the scope and application of the private copy exception.

In simple form, Article 5(2)(b) does not expressly address whether the source of the reproduction must be lawful in order to come within the exception. As such it was unclear whether copying from unlawful sources could also be included in the scope of the private copy exception. From a preliminary perspective, the exceptions and limitations provided by Article 5 of the Information Society Directive must be interpreted strictly following the decision in Infopaq.[2] Furthermore, their implementation into domestic law must be in accordance with the three-step test, as provided under Article 5(5) and emphasised under Recital 44 of the Information Society Directive. Following this established reasoning, the interpretation of Article 5(2)(b) must be understood to preclude the making of private copies from unlawful sources.

In respect to the strict interpretation of the exceptions and limitations, this can be aligned to the aim of establishing a smooth functioning internal market. Therefore, adopting a broad interpretation of the private copy exception as in the case of Article 16c of the Dutch copyright law could be detrimental to the proper functioning of the internal market.  This is because it could allow Member States to have varying forms of copyright protection not envisaged by the Information Society Directive. Furthermore, tolerating private copies made from unlawful sources would run counter to the Information Society Directive’s aim to establish a high level of protection and foster creation and investment in copyright works. Moreover, it would likely influence further acts of piracy and counterfeiting. This is because the toleration of copies made from unlawful sources could be indirectly seen as toleration of the unlawful sources.

In terms of the application of the three-step test, making private copies from unlawful sources would fail that test in at least two regards. Firstly, allowing private copies to be made from unlawful sources would conflict with the normal exploitation of the work because persons would be inclined to make a personal copy from a cheaper illegitimate copy rather than from a legal copy. This could negatively impact on the demand for legitimate versions of authors’ works. Secondly, tolerating private copying from unlawful sources may prejudice the legitimate economic interests of the author because he would be effectively unable to rely on his exclusive right of reproduction in cases of private copying. In other words, authors would be forced to tolerate the reproduction infringements that accompany private copying even where the source is an unlawful one. Thus allowing, private copying from unlawful sources would undermine the effectiveness of the exclusive right of reproduction.

With this in mind, Articles 16b and 16c of the Dutch copyright law have to distinguish between the lawful and unlawful sources of private copying in order to be compliant with Article 5(2) (b) of the Information Society Directive. The implication of this is that the inclusion of compensation for copying from unlawful sources would not be fair on the grounds that copying from unlawful sources does not fall within the scope of the private copy exception.[3] As such the claimants were right in contending that the private copy levy they were being charged was unfair and excessive.

What Now

From this case it is made clear that the private copy exception only applies to copies made from lawful sources. Therefore, making copies from unlawful sources amounts to an infringement of the exclusive right of reproduction provided by Article 2 of the Information Society. However, the more pertinent lessons to be learned from this case relate more generally to the implementation of the exceptions and limitations found under Article 5 of the Information Society Directive. It would appear that Member States do not have much leeway in transposing and interpreting the twenty-one exceptions and limitations provided. Member States do not have the freedom to expand the scope of the exceptions provided. Rather, they only have the freedom to restrict the scope of the exceptions especially in regards to new technologies.[4] Furthermore, there must be coherent and consistent application of the exceptions across Member States. As a result, it can be inferred that the wording of the exceptions provided under Article 5 are not just prototypes but perhaps ready-made provisions to be implemented verbatim.

On the one hand this strict interpretation may be good in terms of legal certainty. However, from a different perspective this development of narrow exceptions may be cause for concern given the broad and far reaching interpretations given to the exclusive rights.

 


[1] Only the first two questions are looked at in this article.

[2] Case C-5/08 Infopaq International A/S v Danske Dagblades Forening [2009]

[3] This position was suggested in the earlier Advocate General Opinion of Trstenjak on Case C-467/08 Sociedad General de Autores y Editores (SGAE) v Padawan SL [2010] para 78

[4] See Recital 44 of the Information Society Directive

Solution outsourced? – Case comment on C-458/12 Lorenzo Amatori

Julian Emanuel Titze

LLM student, King’s College London

 

A transfer of undertaking providing for the continuity of employment relations is usually in the interest of employees. This was, however, not the case in the preliminary ruling Amatori handed down by the CJEU on 6th March 2014. In its first judgment on transfer of undertakings after the highly contested ruling in Alemo-Herron[1] last year, the Court clarified the freedom of action Member States enjoy to define a transfer beyond the Acquired Rights Directive[2]. Upon the particular facts of Amatori, the application of this finding seems to be in conflict with the purpose of the Directive.

 

The facts of the case concern an outsourcing operation by Telecom Italia. The liberalization of the telecommunication market in Italy resulted in increased competitive pressure. As the incumbent, Telecom Italia carried out a reorganisation in 2010 to drive down costs.[3] It decided to formally split its IT operations department and outsource part of them. The operation of the software and testing services was bundled and transferred to a subsidiary company called ‘Shared Service Center’. The innovation and design operations were kept in the mother company and continued to collaborate with the outsourced employees.

Lorenzo Amatori and other claimants sought a declaration from the Tribunale di Trento that the transfer could not be relied on and their employment with Telecom Italia continued. On 20th September 2012 the Italian court decided to stay its proceedings and make a preliminary reference to the CJEU to ask the Court whether the Acquired Rights Directive 2001/23 precluded national legislation such as article 2112 of the Italian Civil Code. It provides for the continuity of employment relations without the employee’s consent in the case of a transfer of an economic entity that retains its identity. It allows the transferor to identify a functionally autonomous economic entity for the purpose of the transfer.

The question arose whether the Directive precluded defining a transfer without the need to identify a functionally autonomous economic entity existing before the time of the transfer. Linked to this issue is Member States’ freedom of action in the context of a partial minimum harmonization in the area. The application of implementing measures is particularly problematic where a transfer of undertaking is to the material detriment of an employee.

Having revisited the notorious notion of a transfer of undertaking (I), the case revealed the ambiguous nature of a transfer for employees (II).

 

I) The notion of a directive transfer revisited

The Court explained that an economic entity to be transferred must have been independent before the transfer, whereas the transferor’s control over the transferee is immaterial to fall within the scope of the Acquired Rights Directive.

 

A) Independence of the economic entity before the transfer

The CJEU’s point of departure is to recall its previous case law on the notion of a business transfer under Article 1 of the Directive. There must be an economic entity that retains its identity (Spijkers[4] criteria). In addition, the object of this transfer must be a stable economic entity with a sufficient degree of functional autonomy.[5] As can be deduced from Art. 6(1) of the Directive, this autonomy need not be preserved in the transferee’s organizational structure, i.e. a transfer cannot be avoided by a reorganization following the transfer.[6]

However, “the use of the word ‘preserved’ in the first and fourth subparagraphs of Article 6(1) means that the independence of the entity transferred must, in any event, exist before the transfer” (Amatori paragraph 34). If a transferor bundles specific operations ad hoc in order to source them out, it is doubtful whether this will be the case. The present case is therefore likely to fall outside the scope of the Directive. Was there not a differing provision in Italian law, this would be a new way to avoid the application of the transfer guarantees. Arguably, the transferee doesn’t have the economic advantage of taking over a business as a going concern in such a case. Nevertheless, this seems to be an easy way to circumvent the guarantees of the Directive in Member States other than Italy.

 

B) Control over transferee immaterial

Unsurprisingly, the Court rejected the claimants’ argument that there cannot be a transfer of an undertaking where the transferor exercises control over the transferee, notably a subsidiary. As the Court had decided before, the companies in question may well be part of the same group.[7] The emphasis of the Court on the formal separation of distinct legal personalities aims to avoid abuse and guarantee the safeguard of the rights of employees. However, this line of reasoning sits uncomfortably with the CJEU’s functional notion of an employer in the Heineken[8] case and does not sound very convincing, where a transfer is to the material detriment of an employee[9].

 

II) The ambiguous nature of a transfer for employees

The Court makes it clear that Member States are free to adopt a wider concept of a transfer than the Directive. Upon the particular facts of the main proceeding, its application of this finding appears to be in conflict with the objective of the directive.

A)     A partial minimum harmonisation

Having indicated that services bundled ad hoc to be outsourced are not covered by the Directive, the CJEU analyses whether a national law such as article 2112 Italian Civil Code is compatible with the Directive. By not requiring functional autonomy before the transfer, Italian law essentially adopts a broader notion of a transfer than the directive.

The Court refers to the preamble of the Directive providing for the protection of employees by appropriate measures. “Therefore, the mere lack of functional autonomy of the entity transferred cannot, in itself, prevent a Member State from ensuring in its national law for the safeguarding of employees’ rights after the change of the employer” (paragraph 39). To support this finding the Court refers to Article 8 of the directive allowing for regulations more favourable to employees than the directive itself (minimum harmonisation). Moreover, it refers to the fact that Article 4(1) of the Directive doesn’t harmonise the general protection against dismissal in national law, but merely excludes a dismissal on the ground of a transfer itself (partial harmonisation).

This is an important finding for the UK. Its TUPE Regulation[10] also adopts a broader notion of a business transfer. The legal effects of a transfer are not only attached to a ‘directive transfer’ under Art 3(1)(a), but also beyond the scope of the directive to service provision changes under Art 3(1)(b). The contested recourse in Alemo-Herron to the transferee’s freedom to carry out a business under Article 17 of the Charter of Fundamental Rights has been interpreted as changing the nature of the harmonisation of business transfers from “floor to ceiling”[11]. This threw some doubts on the compatibility of the TUPE regulation. Amatori now makes it clear that Member States remain free to adopt a wider concept of a business transfer than the Directive. However the Court should have explained this distinction in the judgment. Arguably, it is based on the fact that the notion of a transfer discussed in Amatori defines the scope of application of the directive, whereas Alemo-Herron concerned the interpretation of its legal effects. It is unfortunate that the Court decided to deal with the case without a written opinion of an Advocate General. Upon closer examination Amatori contains new questions of law that should have been further analysed.

In summary, if the Tribunal di Trento finds that the outsourced services were not functionally autonomous before the transfer – as indicated by the CJEU – the Directive doesn’t preclude the tribunal from attaching the legal effects of a business transfer to this operation. It should be noted that in any case, the Italian courts should verify if article 2112 Italian Civil Code is really intended to deviate from the directive or if its interpretation should be modified in line with the interpretation of the CJEU.

 

B) An application of the Directive in conflict with its purpose

In order to approve of Member States’ freedom of action to adopt a broader notion of a transfer, the Court refers to the need of protecting employees from the risks of business transfer. With reference to Rask[12] the Court recalls that the aim of the Directive is to “ensure that the employee is protected in his relations with the transferee to the same extent as he was in his relations with the transferor under the legal rules of the Member State concerned” (paragraph 41). No reference is made to the most recent ruling on the directive in Alemo-Herron. In that judgment, the Court suggested for the first time that the objective of the Directive was not only protecting employees concerned by a transfer, but to ensure “a fair balance between the interests of those employees (…) and those of the transferee”[13]. It can be inferred that the Court’s Ninth Chamber doesn’t seem to endorse such a re-interpretation of the objective of the Directive.

Unfortunately, it did not take into account the characteristics of the corporate transfer at hand. Upon the particular facts of the main proceeding, the assumption that a wider transfer notion under Italian law was in line with employee protection was mistaken. In fact, Mr. Amatori sought to defend himself against an outsourcing transfer materially undesirable for him.

In Member States like Italy where collective agreements are legally binding on the parties, employers such as Telecom Italia use transfer arrangements in a purposeful way to modify the employment conditions of their employees.[14] This can be done by transferring staff to a (subsidiary) company bound by a less generous collective agreement. If the wording of Art 3(3) of Directive 2001/23 seems to allow such practice, the Court’s ruling in Scattolon has created a heated debate whether the purpose of the Directive precludes any overall deterioration of collective agreement provisions. A preliminary reference[15] by the Austrian Supreme court in the proceeding between the Austrian Trade Union Federation and Austrian Airlines about the continued effect of a defunct collective agreement of the transferor could clarify matters.

The underlying contradictions about the purpose and effect of the Acquired Rights Directive that surfaced in Alemo-Herron remained undiscussed in Amatori. It is to be hoped that the preliminary reference by the Austrian Supreme Court will give rise to an extended Advocate General’s opinion engaging with corporate practice and the rationale of the Directive. For the time being, Amatori exemplifies that the extending the scope of a transfer is ambiguous for employees. If the legal consequences of a transfer can include a deterioration of collectively agreed work conditions, a closer scrutiny of transposing regulation will be warranted. The Court must double-check whether Member States’ regulations going beyond the directive are “more favourable to employees” (Article 8 of the Directive) upon the particular facts of a case. In the absence of legally binding collective agreements under UK law, this should not be a problem for the compatibility of the British TUPE regulation.

 


[1] C-426/11

[2] Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses

[3] See http://2010annualreport.telecomitalia.com/sren/Internalstakeholders/Industrialrelations.html

[4] C-24/85

[5] C-108/10 Scattolon

[6] C-466/07 Klarenberg

[7] C-234/98 Allen

[8] C-242/09 Albron Catering

[9] This is the case where the transferee is subject to a collective agreement binding on the employee that is less generous than one concluded with the transferor, cf. II B)

[10] Transfer of Undertakings (Protection of Employment) Regulations (SI 2006 No. 246) transposing the Acquired Rights Directive into UK law

[11] Prassl J, ‘Freedom of Contract as a General Principle of EU Law? Transfers of Undertakings and the Protection of Employer Rights in EU Labour Law Case ’ 42 Industrial Law Journal 434

[12] C-209/91 – the very first case applying the directive to outsourcing

[13] C-426/11, [25]

[14] http://eulawradar.com/case-c-45812-lorenzo-amatori-transfer-of-undertakings-and-telecom-italia/ with reference to the concerns of the Italian judge in the main proceeding