Wednesday, 19 July 2017

A Vanishing Breed? Walker v Innospec Ltd - The UK Supreme Court Disapplies a Statutory Provision on the Grounds of Incompatibility with EU Equality Law

Colm O’Cinneide, Professor of Law, UCL

Last week’s decision of the UK Supreme Court (UKSC) in the same-sex pension rights case of Walker v Innospec Ltd [2017] UKSC 47 generated plenty of excited commentary in the UK media. This mainly focused on the UKSC’s finding that it constitutes direct discrimination on the basis of sexual orientation – and thus a breach of EU law - for the rules of a employer’s contributory benefit scheme to deny payment of a ‘spouse’s pension’ to a surviving member of a same-sex married couple, in circumstances where such a pension would be paid to the surviving member of an opposite-sex married couple. This finding is obviously significant, both for its application at national level of the prohibition on direct discrimination on the basis of sexual orientation set out in Article 2 of the Framework Equality Directive 2000/78/EC, and also its concrete impact on the acquired pension rights of same-sex married couples in the UK. However, the media coverage glossed over two other important elements of the judgment, which are of especial interest from the perspective of EU law.

One of those elements relates to the complex issue of the temporal effects of a finding that national law is incompatible with EU legal requirements – namely the Court’s conclusion that, in Lord Kerr’s words at para. 56, ‘the point of unequal treatment occurs at the time that the pension falls to be paid’ and not when the benefit in question was accrued, and that no basis existed for limiting the retrospective effect of the judgment in line with the ECJ’s approach in Case C-262/88, Barber v Guardian Royal Exchange Assurance Group [1990] ECR I-1889.

The other neglected dimension to the case is of more general interest, especially in the run-up to Brexit – namely how the case resulted in the Supreme Court disapplying the provisions of Schedule 9 para. 18 of the UK Equality Act 2010, insofar as they permitted the type of discriminatory treatment at issue in the circumstances. In other words, in Walker, the obligation on national courts to give direct effect to the requirements of EU anti-discrimination legislation resulted in incompatible national legislation being set aside – perhaps one of the last times this happens before Brexit insulates UK parliamentary legislation from legal challenges based on EU law or other fundamental rights standards.

The case involved a legal challenge by a former employer of Innospec Ltd against their refusal to agree to pay a survivor’s pension to his same-sex spouse if he died first, even though such a benefit would have been paid out to Mr Walker’s spouse had she been a woman. Innospec Ltd justified this exclusion in part by reference to the provisions of Schedule 9 para. 18 of the 2010 Act, which permitted employers to restrict access to occupational benefits where the right to that benefit accrued before 5 December 2005 (the date same-sex couples became legally entitled to enter into civil partnerships).

At first instance, Mr Walker won his claim that he had been subject to direct and indirect discrimination on the grounds of sexual orientation, with the Employment Tribunal concluding that Schedule 9 para. 18 could be applied in a manner compatible with the relevant requirements of Directive 2000/78/EC. Subsequently, however, Innospec appealed successfully against that decision, with the Court of Appeal concluding that Mr Walker had been subject to direct discrimination on the basis of his sexual orientation but that the principles of ‘non-retroactivity’ and ‘future effect’ as developed in the case-law of the CJEU meant that the prohibition on discrimination applied only to benefits accruing after the transposition of the Directive in December 2003. (Mr Walker had taken early retirement in March 2003.)

This conclusion was criticised by Robert Wintemute amongst others, in particular in a case-note in the Industrial Law Journal in 2016 (‘Unequal Same-Sex Survivor’s Pensions: The EWCA Refuses to Apply CJEU Precedents or Refer’ (2016) 45(1) Ind Law J 89-100), and his criticisms were subsequently explicitly cited by Lord Kerr in giving the judgment of the majority of the Supreme Court reversing the decision of the lower court.

In brief, the Supreme Court initially applied the established case-law of the CJEU in cases such as Case C-267/06, Maruko [2008] 2 CMLR 32 and Case C-147/08, Römer [2011] ECR I-3591, and confirmed that less favorable treatment by an employer of same-sex partners as compared to opposite-sex partners who have entered into the same or equivalent type of legally recognised relationship will constitute direct discrimination on the grounds of sexual orientation.

Turning to the question of the remedy and by extension the legal effect of Schedule 9 para. 18, the UKSC went on to survey the relevant case-law of the CJEU dealing with issues of the retrospective effect of judgments. It concluded that the ECJ’s decision to restrict the temporal effect of its finding of sex discrimination in the occupational benefits case of Barber was a judicial technique that should only be applied ‘in the most exceptional circumstances and where the impact [of a judgment] would be truly “catastrophic”’ (para. 44).

The Supreme Court further concluded that the CJEU case-law established that the discriminatory treatment in question should be viewed as taking effect at the time when the pension was due to be paid, in part because it was only at that point of time that the spousal obligations at issue crystallised into tangible form. In so doing, they rejected suggestions by counsel based on views expressed by AG Van Gerven in Case C-109/91, Ten Oever [1993] ECR I-4879 that pension entitlements accrued as they were earned, and therefore that any discrimination occurring would have predated the date of transposition of the Directive. The UKSC therefore concluded that the provisions of Schedule 9 para. 18 of the 2010 Act could not be applied insofar as they precluded liability arising for the discriminatory behaviour in question, which was incompatible with the requirements of Directive 2000/78/EC and the general principle of equal treatment as confirmed to exist by the CJEU in case C-555/07, Kücükdeveci [2010] 2 CMLR 33.

The Walker judgment is thus particularly interesting for three reasons: (i) the faithful application by the UKSC of the case-law of the CJEU in relation to discrimination against same-sex partners; (ii) the Supreme Court’s interpretation of the relevant CJEU case-law relating to the temporal effect of findings of discrimination in the context of occupational benefits, which gives strong effect to the principle of non-discrimination; and (iii) the way in which it illustrates how parliamentary legislation can be disapplied if its conflicts with fundamental rights secured under EU law, in particular the right to non-discrimination.

After the process of Brexit is complete, this form of legal protection of equality is likely to fall away, along with the supremacy of EU law in general. Walker may thus mark one of the last instances where EU law takes effect as a trump card within the British legal system; as such, it is striking that its effect was to disapply a statutory provision designed to limit liability for discriminatory behaviour.

Photo credit:
Barnard & Peers: chapter 27, chapter 20, chapter 6


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