PROTECTION AGAINST INSOLVENCY : ECJ RULES ON RIGHT TO COMPENSATION FOR UNFAIR DISMISSAL.

• Position: European Union Court of Justice

The EU Court of Justice handed down a ruling, on 17 January, on application of the directive of 20 October 1980, amended in 2002 (Directive 2002/74/CE), relating to the protection of employees in the event of insolvency of their employer, in particular the payment of compensation for unfair dismissal (case of Josefa Velasco Navarro, 17 January 2008, C 246/06).

The facts of the case are classic. When her company declared provisional bankruptcy, Josefa Velasco Navarro turned to the Spanish Wages Guarantee Fund (Fogasa) to collect the amounts not paid by her employer. While Fogasa paid her wages, it refused to pay compensation for unfair dismissal, which was agreed under a judicial conciliation settlement. The 2000 directive had not yet been transposed into Spanish law.

The case raised two questions for the ECJ. First, a point of law: may a citizen invoke respect for rights guaranteed by a directive before its transposition? If so, from what point: on the date of entry into force (8 October 2002) or only at the end of the transposition period (8 October 2005)? The second question concerned the substance: may a worker obtain compensation negotiated under a conciliation procedure?

The court's ruling is qualified. The member states are only obliged to apply the provisions of the directive to states of insolvency occurring after the date of entry into force. It is settled case that a "directive can have direct effect only after the expiry of the time-limit laid down for its transposition into national law". "The direct effect of the first paragraph of...