Order of 6 July 2010

Reasons:

A.

I.

1

The complainant is a company in the automotive supply industry. It has more than 1,200 employees at its production site in the Land Schleswig-Holstein. On 18 February 2003, the company concluded a fixed-term employment contract with the plaintiff in the initial proceedings for the period beginning 19 February 2003 and ending 31 March 2004. The fixed term was not based on objective reasons (sachgrundlos befristet). […] Overall, the complainant concluded 56 fixed-term contracts with previously unemployed persons during that period to handle peaks in demand. Of these 56 new employees, 13 had reached the age of 52, including the plaintiff in the initial proceedings. According to the complainant, the additional employees were hired on the basis of the Act on Part-Time Work and Fixed-Term Contracts (Teilzeit- und Befristungsgesetz –TzBfG) for the specific purpose of avoiding actions seeking the conversion of a fixed-term contract into a permanent contract. Such actions had been brought in the past against the complainant and those that were successful had caused problems for the complainant in its personnel planning.

2

Shortly after being hired, the plaintiff asserted the invalidity of the fixed term set forth in his contract. He claimed that the fixed-term contract concluded on the basis of § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts was incompatible with Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP (OJ L 175/43) and with Council Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation (OJ L 303/16). By judgment of 11 March 2004, the Lübeck Labour Court (Arbeitsgericht) rejected the plaintiff’s application for a declaration that the employment relationship would continue. […] The appeal on points of fact and law (Berufung) was rejected by the Schleswig-Holstein Higher Labour Court (Landesarbeitsgericht) by judgment of 22 June 2004. […] The plaintiff challenged this judgment in his appeal on points of law (Revision) before the Federal Labour Court (Bundesarbeitsgericht). The appeal on points of law was successful.

II.

3

1. In its original version of 21 December 2000 (Federal Law Gazette, Bundesgesetzblatt – BGBl I p. 1966), § 14 of the Act on Part-Time Work and Fixed-Term Contracts reads as follows:

4

(1) An employment contract may be concluded for a fixed term if this is justified by objective reasons. (…)

5

(2) Employment contracts concluded for a fixed term without objective reasons are permissible for a duration not exceeding two years; (...). Concluding a fixed-term employment contract pursuant to the first sentence of this provision is not permissible if the employee had a previous employment relationship, either fixed-term or permanent, with the same employer. (...)

6

(3) A fixed-term employment contract does not require objective reasons if the employee has reached the age of 58 at the start of the fixed-term contract. Concluding a fixed-term employment contract is not permissible if there is a close link to a previous permanent employment contract with the same employer. In particular, it must be assumed that such a close link exists if the two employment contracts are separated by a period of less than six months.

7

(4) (...)

8

In December 2002, the legislator expanded the scope of application of § 14 of the Act on Part-Time Work and Fixed-Term Contracts (First Act for Modern Labour Market Services, Erstes Gesetz für moderne Dienstleistungen am Arbeitsmarkt of 23 December 2002, BGBl I p. 4607): From 1 January 2003 to 31 December 2006, the age limit for concluding a fixed-term contract without objective reasons was lowered from 58 to 52 years. A fourth sentence was inserted into § 14(3) of the Act on Part-Time Work and Fixed-Term Contracts to this end.

9

[…]

10

This amendment was part of the legislator’s labour market reforms. It was aimed at reducing the statistically higher unemployment rate among older people by removing barriers to their re-entry into the labour market. […]

11

The legislator considered the unequal treatment of older employees that would result from this provision to be justified, given the employment policy objective of improving older people’s opportunities of securing a job. […]

12

2. a) Art. 19(1) of the Treaty on the Functioning of the European Union (TFEU; former Art. 13(1) of the Treaty establishing the European Community – EC Treaty) authorises the Council, within the limits of the powers conferred upon the EU, to enact legislation to combat discrimination, including discrimination based on age. The provision does not contain a direct prohibition of discrimination ([…]). Art. 19(1) TFEU reads as follows:

13

Without prejudice to the other provisions of the Treaties and within the limits of the powers conferred by them upon the Union, the Council, acting unanimously in accordance with a special legislative procedure and after obtaining the consent of the European Parliament, may take appropriate action to combat discrimination based on sex, racial or ethnic origin, religion or belief, disability, age or sexual orientation.

14

By contrast, Art. 21(1) of the Charter of Fundamental Rights of the European Union contains a prohibition of age-based discrimination that is directly applicable. In its amended version of 12 December 2007 (OJ C 303/1; BGBl 2008 II p. 1165), the provision reads as follows:

15

(1) Any discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation shall be prohibited.

16

(2) Within the scope of application of the Treaties and without prejudice to any of their specific provisions, any discrimination on grounds of nationality shall be prohibited.

17

During the period in question here, the Charter of Fundamental Rights had not yet become binding. Its status only became equal to that of the Treaties upon entry into force of the Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community of 13 December 2007 (Treaty of Lisbon – OJ C 306/10; BGBl 2008 II p. 1038) (Art. 6(1) first sentence of the Treaty on European Union – TEU).

18

b) The purpose of Directive 1999/70/EC is to put into effect the framework agreement on fixed-term contracts concluded between European employers’ associations and labour organisations (Art. 1 Directive 1999/70/EC). According to the agreement, which is annexed to the Directive, fixed-term workers are protected by the principle of non-discrimination and abuse arising from the use of successive fixed-term employment contracts must be prevented (cf. in detail §§ 4 and 5 of the Annex to Directive 1999/70/EC). In 2000, the German legislator enacted the Act on Part-Time Work and Fixed-Term Contracts in order to incorporate this directive into German law.

19

Directive 2000/78/EC serves to prevent discrimination, including age-based discrimination. Art. 1 of Directive 2000/78/EC states that the purpose of the directive is to lay down a general framework for combating discrimination, including on the basis of age, in employment and in occupational fields, with a view to putting into effect in the Member States the principle of equal treatment. The principle of equal treatment is defined as a prohibition of direct or indirect discrimination (Art. 2 Directive 2000/78/EC). The scope of application of the Directive extends to employment and working conditions in a Member State, regardless of whether cross-border constellations are involved(Art. 3 Directive 2000/78/EC). Art. 6(1) of the Directive provides that differences of treatments on grounds of age may be justified. The provision reads as follows:

20

Article 6 – Justification of differences of treatment on grounds of age

21

(1) Notwithstanding Article 2(2), Member States may provide that differences of treatment on grounds of age shall not constitute discrimination, if, within the context of national law, they are objectively and reasonably justified by a legitimate aim, including legitimate employment policy, labour market and vocational training objectives, and if the means of achieving that aim are appropriate and necessary.

22-26

[…]

27

The Directive had to be implemented by 2 December 2003 (Art. 18(1) Directive 2000/78/EC). The Member States could make use of an additional period of three years until 2 December 2006 to implement the provisions on age-based discrimination (Art. 18(2) of Directive 2000/78/EC). If they intended to make use of the additional period for implementation, they were required to inform the European Commission. Any Member State that chose to use this additional period had to make annual reports to the Commission on the steps it was taking to tackle age-based discrimination and on its progress towards implementation of the Directive. The Federal Republic of Germany made use of the additional period for implementation. The extended period for implementation ended on 2 December 2006.

28

3. a) The Court of Justice of the European Communities (now the Court of Justice of the European Union) held, in its judgment of 22 November 2005 in the Mangold case (C-144/04, European Court Reports – ECR 2005, p. I-9981), that Community law, and more particularly Art. 6(1) of Directive 2000/78/EC, must be interpreted as precluding a provision of national law such as § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts. The Court of Justice found that it is the responsibility of the national court to guarantee the full effectiveness of the general principle of non-discrimination in respect of age, setting aside any provision of national law that may conflict with Community law, even where the period prescribed for implementation of that Directive has not yet expired.

29

In its reasoning, the Court of Justice found that such a provision did pursue the legitimate objective of promoting the vocational integration of unemployed older workers. According to the Court of Justice, however, the provision goes beyond what is necessary and appropriate, since the age of the worker concerned is the only criterion and there is no regard for any other consideration linked to the structure of the labour market in question or the personal situation of the person concerned.

30

The fact that the period prescribed for implementing Directive 2000/78/EC into domestic law had not yet expired when the contract was concluded did not alter the Court of Justice’s conclusion in this regard. First, the Court had already found that, during the period prescribed for implementation, Member States must refrain from taking any measures liable seriously to compromise the achievement of the result prescribed by that Directive. In the present case, the Federal Republic of Germany chose to have recourse to an additional period of three years pursuant to Art. 18(2) of Directive 2000/78/EC. The reporting obligations vis-à-vis the Commission imply a duty on the part of the Member States to take concrete steps to bring its legal system closer to the goal prescribed by the Directive. Such obligation would be rendered toothless if Member States were permitted during the period allowed for implementation of the Directive to adopt measures that are incompatible with this objective. Secondly, the Court of Justice found that the principle of non-discrimination on grounds of age must be regarded as a general principle of Community law. The Court of Justice substantiated the existence of this new principle by referring to the recitals of Directive 2000/78/EC, which, in turn, make reference to various international instruments and the constitutional traditions common to the Member States.

31

According to the Court of Justice, the national provision at issue falls within the scope of Community law, given that § 14(3) of the Act on Part-Time Work and Fixed-Term Contracts is a measure implementing Directive 1999/70/EC and that the fourth sentence was inserted into that provision in 2002.

32

b) After the constitutional complaint was lodged, the question of whether the principle of non-discrimination on grounds of age precluded a national provision was again raised before the Court of Justice in the cases Palacios (Judgment of 16 October 2007, C-411/05, ECR 2007, p. I-8531), Bartsch (Judgment of 23 September 2008, C-427/06, ECR 2008, p. I-7245) and Kücükdeveci (Judgment of 19 January 2010, C-555/07, NJW 2010, p. 427). In its Kücükdeveci decision, the Court of Justice confirmed its decision in Mangold with regard to the general principle of Community law that precluded any discrimination on grounds of age, making reference to Art. 21(1) of the Charter.

III.

33

In its judgment of 26 April 2006, which is challenged in the present proceedings, the Federal Labour Court held that the employment relationship between the parties had not ended with the end of the contractually fixed term on 31 March 2004. In its reasoning, the Federal Labour Court found that the complainant could not invoke § 14(3) of the Act on Part-Time Work and Fixed-Term Contracts as justification for the fixed-term contract at issue. While the constituent elements of the provision had been met, the provision was incompatible with Community law and could thus not be applied by the national courts. The Federal Labour Court held that this followed from the Court of Justice’s Mangold decision.

34-37

[…]

38

The Federal Labour Court also rejected the contention that § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts should be applied to fixed-term agreements made before 22 November 2005 on the grounds of protecting legitimate expectations under Community or national law. […]

IV.

39

The complainant asserts a violation of its rights under Art. 2(1), Art. 12(1) in conjunction with Art. 20(3) (see 1. below) and Art. 101(1) second sentence of the Basic Law (Grundgesetz – GG) (see 2. below).

40

1. The complainant asserts a violation, in two different respects, of its freedom of contract following from Art. 2(1) and Art. 12(1) in conjunction with Art. 20(3) of the Basic Law. The complainant claims that, firstly, a violation follows from the fact that the Federal Labour Court mainly based its decision regarding the inapplicability of § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts on the Court of Justice’s Mangold decision. The complainant contends that the Mangold decision, if understood in the way the Federal Labour Court understood and applied it, manifestly exceeds the competences of the Court of Justice. […]

41

Moreover, according to the complainant, a violation of its freedom of contract under Art. 2(1) and Art. 12(1) in conjunction with Art. 20(3) of the Basic Law follows from the fact that the Federal Labour Court did not sufficiently protect legitimate expectations, as mandated by constitutional law, and rejected the appeal on points of law. […]

42

2. The complainant also asserts a violation of its right to its lawful judge under Art. 101(1) second sentence of the Basic Law. The complainant claims that the Federal Labour Court violated its duty of referral under Art. 234(3) of the EC Treaty (now Art. 267(3) TFEU) in an arbitrary manner by untenably exceeding its margin of assessment. […]

V.

43

The Second and Sixth Division of the Federal Labour Court and the Second and Sixth Division of the Federal Social Court (Bundessozialgericht) submitted statements in the present proceedings.

B.

44

The constitutional complaint is admissible.

I.

45

As an act of German public authority, the judgment of the Federal Labour Court can be admissibly challenged in constitutional complaint proceedings (§ 90(1) of the Federal Constitutional Court Act, Bundesverfassungsgerichtsgesetz – BVerfGG). The Federal Constitutional Court’s duty to act as guardian of the Basic Law applies vis-à-vis all acts of German public authority; in principle, this includes those that give domestic effect to Community and EU law (cf. Decisions of the Federal Constitutional Court, Entscheidungen des Bundesverfassungsgerichts – BVerfGE 89, 155 <171>; 123, 267 <329>), implement Community and EU law (cf. BVerfGE 113, 273 <292>; 118, 79 <94>; Federal Constitutional Court, Judgment of the First Senate of 2 March 2010 ‑ 1 BvR 256/08, 1 BvR 263/08, 1 BvR 586/08 ‑, NJW 2010, p. 833 <835>) or execute it. Whether and to what extent the review of the constitutionality of such acts by the Federal Constitutional Court is limited is a question that must be answered when assessing the merits of the constitutional complaint, insofar as there are unresolved questions in this respect, as is the case here.

II.

46-47

[…]

C.

48

The constitutional complaint is unfounded.

I.

49

The complainant’s freedom of contract under Art. 12(1) and Art. 2(1) of the Basic Law has not been violated on the grounds that the challenged judgment of the Federal Labour Court is based on an impermissible development of the law by the Court of Justice of the European Union.

50

1. a) Both private autonomy as guaranteed by Art. 2(1) of the Basic Law and the freedom to practise one’s occupation under Art. 12(1) of the Basic Law encompass the right to enter into and shape employment relationships, including subjecting them to a time limit by mutual agreement (regarding the design of employment contracts in general, cf. Federal Constitutional Court, Order of the Second Chamber of the First Senate of 23 November 2006 ‑ 1 BvR 1909/06 ‑, NJW 2007, p. 286). […]

51

[…]

52

The relevant ordinary law provision for the present constitutional complaint proceedings is § 14 of the Act on Part-Time Work and Fixed-Term Contracts in the version in force from 1 January 2003 to 31 December 2006. Pursuant to § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts, the general requirement that fixed-term contracts require objective reasons could be set aside if the employee had reached the age of 52 at the start of the fixed-term contract. However, this exception may not be applied to the detriment of the complainant if it violates Community law (now EU law).

53

b) EU law can only be effective if it supplants conflicting domestic law of the Member States. Nevertheless, the precedence of application of EU law does not render a conflicting domestic law void. Rather, domestic law can continue to apply when and insofar as it concerns an area of law that is outside the scope of relevant EU law. However, within the scope of application of EU law, conflicting domestic law is generally inapplicable. As the EU could not exist as a community of law if the uniform effectiveness of EU law in the Member States were not guaranteed, this precedence of application follows from EU law (cf., foundationally, CJEU, Judgment of 15 July 1964, C-6/64, Costa/ENEL, ECR 1964, p. 1251 para. 12). The precedence of application corresponds to the constitutional authorisation of Art. 23(1) of the Basic Law, according to which sovereign powers can be transferred to the European Union (cf. BVerfGE 31, 145 <174>; 123, 267 <402>). In authorising the transfer of sovereign powers, Art. 23(1) of the Basic Law also permits their direct exercise within the domestic legal order insofar as this is provided for in the Treaties and required by them. The provision thus lays down a commitment to ensure the effectiveness and enforcement of EU law that corresponds to the precedence of application of EU law.

54

c) aa) Unlike the supremacy of federal law, as provided for by Art. 31 of the Basic Law for the German legal order, the precedence of application of EU law cannot be comprehensive (cf. BVerfGE 73, 339 <375>; 123, 267 <398>).

55

As an independent source of law, EU law remains reliant on the transfer of powers and authorisation provided for in the Treaties. An extension of the powers of EU institutions requires a treaty amendment, which the Member States must effectuate and take responsibility for according to their respective constitutional rules (cf. BVerfGE 75, 223 <242>; 89, 155 <187 f., 192, 199>; 123, 267 <349>; cf. also BVerfGE 58, 1 <37>; 68, 1 <102>; 77, 170 <231>; 104, 151 <195>; 118, 244 <260>). The principle of conferral applies (Art. 5(1) first sentence and Art. 5(2) first sentence TEU). The Federal Constitutional Court is therefore entitled and required to review acts of institutions and bodies of the EU as to whether these acts evidently exceed the EU’s competences, whether they concern competences in the domain of Germany’s constitutional identity, which cannot be transferred to the EU (Art. 79(3) in conjunction with Art. 1 and Art. 20 of the Basic Law) (cf. BVerfGE 75, 223 <235, 242>; 89, 155 <188>; 113, 273 <296>; 123, 267 <353 f.>), and, where necessary, to find that acts exceeding the EU’s competences are inapplicable for the German legal order.

56

bb) While the Federal Constitutional Court must review substantiated ultra vires challenges regarding acts of EU institutions and bodies, the Treaties confer upon the Court of Justice of the European Union the mandate to interpret and apply the Treaties and to ensure uniformity and coherence of EU law (cf. Art. 19(1) subpara. 2 TEU, Art. 267 TFEU). It is imperative that the respective judicial mandates be exercised in a coordinated manner.

57

If any Member State could readily invoke the authority to decide, through its own courts, on the validity of EU acts, this could undermine the precedence of application accorded to EU law and jeopardise its uniform application. Yet if the Member States were to completely refrain from conducting any kind of ultra vires review, they would grant EU institutions exclusive authority over the Treaties, even in cases where the EU adopts a legal interpretation that would essentially amount to a treaty amendment or an expansion of its competences. Although cases where EU institutions exceed their competences are exceptionally possible, it is to be expected that these instances remain rare due to the institutional and procedural safeguards enshrined in EU law. Nevertheless, where they do occur, the constitutional perspective might not perfectly match the perspective of EU law, given that, even under the Lisbon Treaty, the Member States remain the ‘masters of the Treaties’ and the EU has not evolved into a federal state (cf. BVerfGE 123, 267 <370 f.>). In principle, certain tensions are thus inherent in the design of the European Union; they must be resolved in a cooperative manner, in keeping with the spirit of European integration, and mitigated through mutual respect and understanding.

58

cc) The ultra vires review may only be exercised in a manner that is open to European law (cf. BVerfGE 123, 267 <354>).

59

(1) The European Union sees itself as a community of law. In particular, it is bound by the principle of conferral and the fundamental rights, and must respect the constitutional identities of the Member States (cf. in detail Art. 4(2) first sentence, Art. 5(1) first sentence, Art. 5(2) first sentence, Art. 6(1) first sentence and Art. 6(3) TEU). Under the German legal order, the precedence of application of EU law must be recognised. Moreover, it must be guaranteed that the Federal Constitutional Court exercises the powers of review granted to it under constitutional law with restraint and in a manner that is open to European law.

60

For the ultra vires review in the present case, this means that the Federal Constitutional Court must in principle take into account the Court of Justice’s decisions as binding interpretations of EU law. Before finding that an act is ultra vires, the act in question must be referred to the Court of Justice of the European Union in preliminary ruling proceedings pursuant to Art. 267 TFEU, so as to allow the Court of Justice to interpret the Treaties and rule on the validity and interpretation of said act. As long as the Court of Justice has not yet had the opportunity to decide the questions of EU law raised in a given case, the Federal Constitutional Court may not find that the provisions of EU law in question are inapplicable in respect of Germany (cf. BVerfGE 123, 267 <353>).

61

Furthermore, the Federal Constitutional Court may only conduct an ultra vires review if it is evident that acts of EU institutions and bodies are not in keeping with the competences transferred to the EU (cf. BVerfGE 123, 267 <353, 400>). The Court may only hold that an act evidently violates the principle of conferral where EU institutions and bodies have exceeded the limits of their competences in a manner that specifically runs counter to the principle of conferral (Art. 23(1) of the Basic Law); in other words, it must be established that the violation of competences is sufficiently serious (regarding the phrase ‘sufficiently serious’ as an element of EU liability law cf., e.g., CJEU, Judgment of 10 July 2003, C-472/00 P, Fresh Marine, ECR 2003, p. I-7541 para. 26 f.). This means that the challenged act manifestly exceeds EU competences and has a considerable impact on the principle of conferral and on the extent to which respect for the legal order, as part of the rule of law, is upheld ([…]).

62

(2) The Court of Justice’s mandate to ensure that the law is observed in the interpretation and application of the Treaties (Art. 19(1) subpara. 1 second sentence TEU) does not limit the Court of Justice to ensuring adherence to the Treaty provisions. The Court of Justice is not barred from developing the law by way of jurisprudence, provided that such jurisprudence is limited in methodological terms. The Federal Constitutional Court has always explicitly recognised this power (cf. BVerfGE 75, 223 <242 f.>; BVerfGE 123, 267 <351 f.>). In particular, this is not precluded by the principle of conferral and the structure of the European Union as an association of sovereign states. Rather, when exercised within the limits set in this respect, judicial development of the law can help delineate the competences and legislative powers of the EU legislator, especially in a supranational structure, in a manner that is in line with Member States’ responsibility for the Treaties.

63

Individual passages of EU primary law expressly provide that EU institutions are to act in accordance with the general principles common to the laws of the Member States (Art. 6(3) TEU; Art. 340(2) and (3) TFEU). In this context, it is incumbent upon the Court of Justice to ensure that the EU acts lawfully and in accordance with the constitutional traditions common to the Member States. This is based on both written primary and secondary law and the unwritten general principles derived from the constitutional traditions of the Member States, with additional consideration of the international treaties concluded by the Member States ([…]). The need to develop fundamental rights protection that was equivalent to the protection afforded by the Basic Law that was raised by, among others, the Federal Constitutional Court (cf. BVerfGE 37, 271 <285>), was only possible from the 1970s onwards, through the development of the law by means of the critical comparative law method (cf., foundationally, CJEU, Judgment of 17 December 1970, C-11/70, Internationale Handelsgesellschaft, ECR 1970, p. 1125 para. 4; CJEU, Judgment of 14 May 1974, C-4/73, Nold v Commission, ECR 1974, p. 491 para. 13).

64

However, judicial development of the law is not the same as law-making, which involves political leeway; instead, it is subject to conditions set out in statutory law or international treaties. These legal bases provide the reasons and limits for such development of the law. In particular, judicial development of the law is called for in cases where programmes must be given specific shape, gaps must be closed, contradicting assessments must be reconciled or the specific circumstances of the individual case must be taken into account. Judicial development of the law goes beyond these limits if it amends clearly recognisable legislative decisions set out in – or possibly even expressed in the wording of – the law or in the Treaties, or if it creates new rules without a sufficient connection to the existing legal framework. This is impermissible, especially in cases where jurisprudence sets the political course, makes decisions that go beyond the individual case, or where judicial development of the law results in structural shifts in the system of constitutive division of power and influence.

65

One essential limitation on judicial development of the law at the EU level is the principle of conferral (Art. 5(1) first sentence and Art. 5(2) first sentence TEU). This principle is significant in light of the highly federalised and cooperative structure of the EU, which in many respects is similar to a state as regards the scope of its competences and its organisational structure and procedures, but is not actually a federal state. The Member States have only transferred limited sovereign powers to the EU. Blanket authorisations and the competence to create its own competences run counter to the principle of conferral and would undermine the Member States’ responsibility with regard to European integration (Integrationsverantwortung) enshrined in constitutional law (cf. BVerfGE 123, 267 <352 f.>). This is not limited to an expansion of EU competences made on its own authority to areas relating to the Member States’ constitutional identity or areas in which the democratic process in the Member States is especially important (cf. BVerfGE 123, 267 <357 f.>), but such acts exceeding the EU’s competences are especially significant in these areas.

66

(3) The Federal Constitutional Court must exercise its ultra vires review with restraint so as not to harm the supranational principle of integration. Whenever the Federal Constitutional Court examines an ultra vires challenge, it must also rule on a legal view adopted by the Court of Justice; in doing so, it must ensure that the role and status of the independent supranational jurisdiction are upheld. Firstly, this means that the EU’s own judicial decision-making methods – which the Court of Justice considers binding on itself and which take account of the ‘nature’ of the Treaties and their particular objectives (cf. CJEU, Opinion 1/91, EEA Agreement, ECR 1991 I-6079 para. 51) – must be respected. Secondly, the Court of Justice must be granted a certain margin of error. It is therefore not for the Federal Constitutional Court to substitute the Court of Justice’s interpretation with its own when faced with questions of interpretation of EU law, even if the application of accepted methodology, within the established boundaries of legal debate, would allow for different views. Moreover, where the Court of Justice adopts interpretations of the Treaty foundations, these must be accepted if they do not result in major shifts in the division of competences, are limited to a given case and either do not adversely affect fundamental rights or do not preclude domestic compensation for such adverse effects.

67

2. Based on these standards, the Federal Labour Court did not fail to recognise the scope of the complainant’s freedom of contract under Art. 12(1) of the Basic Law. The challenged judgment is compatible with the Constitution to the extent that it found that § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts was inapplicable.

68

With regard to the underlying case-law of the Court of Justice, it is not evident that the judicial development of the law by the Court of Justice amounts to an ultra vires act that would result in the inapplicability of the principles of law concerned – a finding that can only be made by the Federal Constitutional Court (cf. BVerfGE 123, 267 <354>). It is irrelevant in this respect whether the outcome in the Mangold case can be achieved through recognised methods of legal interpretation and whether deficiencies that might exist in this regard are manifest. In any case, the decision of the Court of Justice does not exceed the sovereign powers transferred to the EU by domestic acts of approval in a manner that would amount to a manifest and structurally significant violation of the principle of conferral.

69

a) In its Mangold decision, the Court of Justice concluded that a national law provision such as § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts conflicts with Community law and must be set aside (CJEU, Judgment of 22 November 2005, C-144/04, ECR 2005, p. I-9981 para. 77 f.). Two reasons were given for this finding, although their relationship to one another remains unclear ([…]). The Court of Justice held that, firstly, the provision at issue conflicted with Art. 6 of Directive 2000/78/EC and, secondly, that it conflicted with a general principle of Community law precluding discrimination on grounds of age.

70

[…]

71

b) It cannot be found that the decision of the Court of Justice amounts to a sufficiently serious violation of the principle of conferral. There is no structurally significant shift in the division of competences to the detriment of the Member States that results from either the broadening of the scope of application of Directive 2000/78/EC to a framework that serves to reintegrate older long-term unemployed workers into the labour market (see aa) below), or from the advance effects the Court of Justice presumed Directive 2000/78/EC, which has yet to be implemented in Germany, to have (see bb) below), or from the general principle of non-discrimination on grounds of age developed by the Court of Justice (see cc) below).

72

aa) The Court of Justice considered the general principle of non-discrimination on grounds of age to be applicable in the Mangold case given that the case in principle fell within the scope of Directive 2000/78/EC (CJEU, Judgment of 22 November 2005, loc. cit., paras. 51, 64, 75). This assessment was a necessary step in order for the Court of Justice to assess a national law provision – in this case § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts – in light of Community law, and thus also in light of the general principles of Community law. The complainant argued that the provision at issue served to further employment policy, as to which the Member States retain competence.

73

Whether a specific measure taken by a Member State falls within the scope of application of Community law is determined by the Court of Justice in the individual case on the basis of the substantive significance of the measure in relation to the matter and persons affected by it. A directive can result in a matter falling within the scope of the Treaties and thus lead to the general principles of EU law having an impact on domestic law ([…]). Whether a directive results in a matter falling within the scope of the Treaties is determined on the basis of the objectives of the directive in question (cf. CJEU, Judgment of 16 June 1998, C-226/97, Lemmens, ECR 1998, p. I-3711 paras. 25 and 35 f.). The national legislator cannot exclude a measure from the scope of the Treaties by also pursuing objectives in areas – such as employment policy (cf. the limited competences under Art. 145 to Art. 150 TFEU) – in which the EU does not have competences (cf. CJEU, Judgment of 24 November 1998, Bickel and Franz, C-274/96, ECR 1998, p. I-7637 para. 17; established case-law). The justification provided by the Court of Justice is that otherwise Member States could adversely affect, through differing objectives, the uniform effectiveness of EU law.

74

In the case at hand, the Court of Justice based the applicability of Community law, and thus of the general principle of non-discrimination on grounds of age, on the fact that the Act on Part-Time Work and Fixed-Term Contracts was originally a measure implementing Directive 1999/70/EC (CJEU, Judgment of 22 November 2005, loc. cit., para. 75). It could be argued that only the initial enactment of the Act served to implement Directive 1999/70/EC, while the amendment that inserted the fourth sentence into § 14(3) of the Act did not serve such implementation (regarding the lack of a reference to Community law cf. Bundestag document, Bundestagsdrucksache – BTDrucks 15/25, p. 40). However, given the intrinsic rationale of EU law, an important consideration that cannot be fully rejected is the reach of Directive 1999/70/EC, in particular the prohibition on reducing the general level of protection afforded to workers (§ 8(3) Directive 1999/70/EC). This scope, rather than the objective pursued by the national legislator, is the decisive argument.

75

bb) The Court of Justice’s presumption in its Mangold decision that Directive 2000/78/EC, which has yet to be implemented in Germany, produces advance effects also does not amount to judicial development of the law that would violate the principle of conferral or raise a serious issue with regard to the criterion that such a finding must be evident.

76

The Court of Justice presumed that a provision of national law such as § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts could violate Art. 6(1) of Directive 2000/78/EC even though the period allowed for its implementation had not expired at the time the employment contract was concluded (CJEU, Judgment of 22 November 2005, loc. cit. para. 70 ff.). However, this did not curtail Germany’s margin of action or its leeway in further specification to such an extent that it would result in a structurally significant shift of competences. According to the case-law of the Court of Justice, Member States are obliged, during the period prescribed for implementation, to refrain from taking any measures liable seriously to compromise the result prescribed by the directive (cf. CJEU, Judgment of 18 December 1997, C-129/96, Inter-Environnement Wallonie, ECR 1997, p. I-7411 para. 45; CJEU, Judgment of 8 May 2003, C-14/02, ATRAL, ECR 2003, p. I-4431 para. 58).

77

The Mangold decision is in line with the previous case-law of the Court of Justice regarding the domestic effect of directives. The Court of Justice has held in several decisions that a directive ‘cannot of itself impose obligations on an individual and cannot therefore be relied upon as such against an individual’ (cf. CJEU, Judgment of 14 July 1994, C-91/92, Faccini Dori, ECR 1994, p. I-3325 para. 19 ff.; CJEU, Judgment of 5 October 2004, joined cases C-397-403/01, Pfeiffer, ECR 2004, p. I-8835 para. 108). However, the Court of Justice did recognise that domestic provisions enacted in breach of a directive are rendered inapplicable in a dispute between private parties (cf., e.g., CJEU, Judgment of 30 April 1996, C-194/94, CIA Security, ECR 1996, p. I-2201; CJEU, Judgment of 26 September 2000, C-443/98, Unilever, ECR 2000, p. I-7535 para. 49 ff.). In presuming that directives produce advance effects, the Court of Justice in Mangold creates another category in which directives have so-called ‘negative’ effects. Just like the case-law regarding ‘negative’ effects of directives overall, this category only serves to give effect to existing legal obligations on the part of the Member States, and does not create new obligations that might violate the principle of conferral.

78

cc) There is no need to determine whether a general principle of non-discrimination on grounds of age can be derived from the common constitutional traditions and international treaties of the Member States even when, at the time the Mangold decision was rendered, only two of 15 Member States had an express constitutional prohibition of discrimination on grounds of age (cf. Opinion of Advocate General Mazák of 15 February 2007, C-411/05, […]) and the international treaties referenced by the Court of Justice when invoking the recitals of Directive 2000/78/EC also did not contain a specific prohibition of discrimination. Even if it were presumed that the Court of Justice had developed the law in a way that was no longer methodologically tenable, such interpretation of the law would only constitute an evident violation of the principle of conferral if it de facto created new competences. In deriving a general principle of non-discrimination on grounds of age from the constitutional traditions common to the Member States, notwithstanding the disputed existence of such a principle, the Court of Justice did not create new competences for the EU to the detriment of the Member States, nor did it expand existing competences to such an extent that this must be considered equivalent to the creation of new competences. This would only be the case if the development of the law – made in the absence of an act of secondary law that as in this case is considered to have advance effects – created not only rights, but also obligations for citizens and if these obligations amounted to interferences with fundamental rights and shifts in the division of competences to the detriment of the Member States. Even if they serve to guarantee fundamental rights protection at the EU level, general principles may not extend the field of application of EU law beyond the powers transferred to the EU, let alone create any new tasks and powers (cf. Art. 51(2) of the Charter).

79

The present situation is different because it was the institutions involved in law-making on the basis of Art. 13(1) of the EC Treaty (now Art. 19(1) TFEU), including the Council and the German representative in the Council – and not judges engaging in judicial development of the law – that adopted the principle of non-discrimination on grounds of age as a binding principle, and thus allowed for judicial interpretation of the law (see aa) above).

II.

80

The challenged judgment also does not violate the complainant’s freedom of contract following from Art. 12(1) in conjunction with Art. 20(3) of the Basic Law by failing to protect the complainant’s legitimate expectations.

81

1. a) Legal certainty is one of the essential elements of the principle of the rule of law. The expectations of legal subjects regarding the reliability of the legal order should not be frustrated by retroactively taking away acquired rights (cf. BVerfGE 45, 142 <167>; 72, 175 <196>; 88, 384 <403>; 105, 48 <57>).

82

The frustration of the expectation that a law will not change can occur not only when the Federal Constitutional Court declares the law void retroactively (cf. BVerfGE 99, 341 <359 f.>), but also when the Court of Justice of the European Union does so. The degree to which the expectation that legislation that is contrary to EU law will not change merits protection is determined in particular by the question to what extent it was foreseeable that the Court of Justice would consider such legislation to be contrary to EU law. It is also significant if transactions were made with the legitimate expectation that the legislation at issue would not change, i.e. that the affected person acted on that expectation (cf. BVerfGE 13, 261 <271>).

83

b) The situations in which domestic courts may protect legitimate expectations are defined by EU law and subject to limitations. In principle, decisions of the Court of Justice in preliminary ruling proceedings under Art. 267 TFEU take effect ex tunc. Domestic courts must therefore also apply the interpretation of EU law adopted by the Court of Justice to legal relationships established before the preliminary ruling was given. It is only exceptionally that the Court of Justice may, in taking account of the serious effects which its judgment might have, as regards the past, on legal relationships established in good faith, be moved to restrict the retroactive effects of its judgment (cf. CJEU, Judgment of 27 March 1980, C-61/79, Denkavit, ECR 1980, p. 1205 para. 16 f.; established case-law).

84

In light of the foregoing, domestic courts cannot protect legitimate expectations by limiting the effects of a preliminary ruling in such a way that they continue to apply the provision of national law that was found to be incompatible with EU law in the period before the preliminary ruling was rendered. The Court of Justice generally does not allow such protection of legitimate expectations with effects on primary law. This is based on the consideration that the need for uniform application of EU law implies that it is for the Court of Justice alone to decide upon the temporal restrictions to be placed on the interpretation it lays down (cf. CJEU, Judgment of 27 March 1980, loc. cit., para. 18; established case-law). However, there is nothing in the case-law of the Court of Justice to suggest that domestic courts are precluded from protecting legitimate expectations at the secondary level through compensation for the damage incurred through frustrated expectations.

85

c) In order to protect legitimate expectations as mandated by constitutional law, it is possible to award compensation at the domestic level for those persons who expected that a law would continue to apply and made arrangements based thereon and were then affected by the law being rendered inapplicable with retroactive effect following a decision from the Court of Justice of the European Union. The EU legal framework on liability also assigns responsibility for a law that is incompatible with EU law to the Member State concerned, thereby providing relief for citizens. […]

86

2. The Federal Labour Court did not fail to recognise the significance of legitimate expectations that must be protected under Art. 12(1) in conjunction with Art. 20(3) of the Basic Law. In light of the precedence of application of Community or EU law, the Federal Labour Court was entitled to find that it was unable to protect legitimate expectations by upholding the decisions of the lower courts that were in favour of the complainant. The proceedings before the Federal Labour Court did not concern a possible claim to compensation from the Federal Republic of Germany for financial losses incurred by the complainant due to the conversion of the fixed-term into a permanent employment relationship. Awarding such compensation does not conflict with the precedence of application of EU law.

III.

87

The challenged judgment does not violate the complainant’s right to its lawful judge under Art. 101(1) second sentence of the Basic Law.

88

1. The Court of Justice is a lawful judge within the meaning of Art. 101(1) second sentence of the Basic Law. Where a German court fails to comply with its duty to refer a matter to the Court of Justice for a preliminary ruling pursuant to Art. 267(3) TFEU, this amounts to a violation of the right to one’s lawful judge (cf. BVerfGE 73, 339 <366 ff.>; 75, 223 <233 ff.>; 82, 159 <192 ff.>). According to the case-law of the Federal Constitutional Court, however, not every failure to comply with the duty of referral under EU law amounts to a violation of Art. 101(1) second sentence of the Basic Law. This is because the Federal Constitutional Court only intervenes if, based on a critical appraisal of the tenets of the Basic Law, the provisions governing the allocation of jurisdiction are interpreted and applied in a manner that no longer appears comprehensible and is manifestly untenable (cf. BVerfGE 29, 198 <207>; 82, 159 <194>).

89

This standard of arbitrariness is also applied when a violation of Art. 267(3) TFEU is at issue. Under EU law, the Federal Constitutional Court is not required to fully review violations of the duty of referral on the basis of the Court of Justice’s case-law regarding Art. 267(3) TFEU (cf. Federal Constitutional Court, Order of the First Chamber of the Second Senate of 6 May 2008 ‑ 2 BvR 2419/06 ‑, NVwZ-RR 2008, p. 658 <660>; for a different view cf. Federal Constitutional Court, Order of the Third Chamber of the First Senate of 25 February 2010 ‑ 1 BvR 230/09 ‑, NJW 2010, p. 1268 <1269>). Art. 267(3) TFEU does not require that Member States provide for an additional right to appeal against non-compliance with the duty of referral ([…]). A court adjudicating at last instance is by definition the last judicial body before which individuals may assert the rights conferred on them by EU law (cf. CJEU, Judgment of 30 September 2003, C-224/01, Köbler, ECR 2003, p. I-10239 para. 34). The ordinary courts thus retain a margin of appreciation and assessment when interpreting and applying EU law, which corresponds to the margin afforded these courts when applying provisions of ordinary law within the German legal order. The Federal Constitutional Court only ensures that the courts respect the limits of this margin; it does not serve as a ‘supreme court for the review of referrals’ (oberstes Vorlagenkontrollgericht; cf. Federal Constitutional Court, Order of the First Chamber of the Second Senate of 9 November 1987 ‑ 2 BvR 808/82 ‑, NJW 1988, p. 1456 <1457>).

90

In particular, the duty of referral under Art. 267(3) TFEU is handled in a manifestly untenable manner when – in the view of the court of last instance in the underlying proceedings – an issue of EU law is relevant to the proceedings, and yet the court does not even consider making a referral despite having doubts as to the correct resolution of the issue in question (fundamental disregard of the duty of referral). The same applies when a court of last instance in the underlying proceedings reaches a conclusion that deliberately deviates from the case-law of the Court of Justice on relevant issues, but nevertheless chooses not to request a (new) preliminary ruling (deliberate deviation without referral). If an issue of EU law that is relevant for a court decision has not yet been addressed in the case-law of the Court of Justice, if it appears possible that the existing case-law does not exhaustively address the relevant issue, or if the further development of the jurisprudence by the Court of Justice is more than just a remote possibility, a violation of Art. 101(1) second sentence of the Basic Law can only be found if the competent court of last instance in the underlying proceedings untenably exceeds the margin of assessment that it must be afforded in such cases (incomplete case-law). In particular, this may be the case if other views on the relevant issue of EU law are clearly preferable to the one put forward by the domestic court (cf. BVerfGE 82, 159 <194 ff.>). If the court has resolved the relevant issue in a manner that is at least tenable, then no violation of Art. 101(1) second sentence of the Basic Law can be found.

91

2. The challenged judgment does not violate Art. 101(1) second sentence of the Basic Law because the Federal Labour Court, in deciding not to refer the matter to the Court of Justice, did not remove the complainant from the jurisdiction of its lawful judge.

92

In particular, the Federal Labour Court was not required to request a preliminary ruling on the grounds that the Court of Justice’s case-law was incomplete. The Federal Labour Court presumed that the Court of Justice had declared inapplicable § 14(3) fourth sentence of the Act on Part-Time Work and Fixed-Term Contracts with the necessary clarity, and that the requirements laid down in the Court of Justice’s case-law regarding a temporal restriction of the effects of its decision had not been met. The Federal Labour Court therefore considered itself under no obligation to request a preliminary ruling from the Court of Justice regarding the ex post protection of legitimate expectations. This is a tenable outcome. […]

IV.

93

The decision was taken with 6:2 votes as regards the reasons; it was taken with 7:1 votes as regards the outcome