Upper limits on compensation and their compatibility with the directives

AuthorChrista Tobler
ProfessionEuropean Network of Legal Experts in the non-discrimination field
Pages36-39

Page 36

1. Forms of damages

The final part of this report deals with one specific type of remedy, namely compensation or damages. The main types of damages mentioned in the national laws of the Member States are pecuniary and non-pecuniary damages. Punitive (or exemplary) damages are much less common. It would seem that only the national laws of Cyprus, Ireland and the UK provide for punitive damages in the context of the implementation of the Race and Employment Framework Directives.95 It is often thought that it is predominantly common law systems that provide for punitive damages.96 However, Shelton (1999:75 subs.) has pointed out in the context of international human rights law that punitive damages are not only known in common law systems but also in civil law systems. Punitive damages are a particularly interesting remedy because they may incorporate a forward-looking strategy and a macro rather than just a micro approach (cases where the amount awarded is used for combating, on a group level, the type of discrimination at issue, including through positive action measures). According to O'Dempsey (2004:13), punitive damages can be justified in view of the requirement of dissuasiveness.

The Race and Employment Framework Directives do not specify the types of damages that must be granted under EC law if compensation is the chosen remedy. It would seem that even under the existing sex equality case law it is not entirely clear which types of damages are necessarily included in the concept of compensation. In the cases that have come before the Court of Justice, different types of damages have been mentioned, although the Court did not always explicitly address them. Under the Court's case law, no doubts can exist in relation to material or pecuniary damages, that is, loss of physical assets (damnum emergens) and/or loss of income (lucrum cessans). Such damages must also include interest97 - although in the context of sex equality the Court did not address possible distinctions between different types of interest. In Marshall II (para. 31), the Court simply stated that the award of interest must 'be regarded as an essential component of compensation for the purposes of restoring real equality of treatment'. The Court's case law on damages under general EC law shows that damages can relate to damnum emergens as well as to lucrum cessans (e.g. Kampffmeier,98 in the context of Member State liability; also TEAM,99 in the context of a decision to annul an invitation to tender). It also includes interest on damages (here, the Court may distinguish between default interest and compensatory interest, with the former arising only where the amount of the principal sum owed is certain or can at least be ascertained on the basis of established objective factors; Brazzelli,100 para. 35, in the context of staff law and salary arrears). According to AG van Gerven, all of the most important components of compensation must be included in the concept of compensation, namely loss of physical assets, loss of income, moral damage and damage on account of the effluxion of time (Marshall II, point 18 of the AG's opinion). It was also seen that moral damages may be required under international human rights law.101However, it can be argued that with regard to injury to feelings there may be other types of remedies that might also be effective, proportionate and dissuasive (meaning that in this regard the national law does not necessarily have to provide for a right to damages). Such remedies may include, for example, an apology to the victim of Page 37 discrimination, acknowledgment of the truth of events involved in the discrimination or commemorations and tributes to the victims of the discrimination. Non-pecuniary remedies may be granted through the means of remedial orders, as mentioned in the Network's Irish country report102 (see also Shelton 1999:292 subs.).103

2. Upper limits on compensation

The Race and Employment Framework Directives are not specific regarding the level of compensation granted as a remedy for discrimination. In the country reports it is often noted that the level of damages awarded to victims of discrimination under the national laws of the Member States is in practice and generally speaking very low and that for this reason this particular remedy may not be sufficiently effective, proportionate and dissuasive. On the legal level, upper limits104 are not uncommon, although there are wide differences regarding the amounts set in law.105

Upper limits for pecuniary damages seem to apply under the laws of Estonia (six months' salary in the case of discriminatory termination of an employment contract where the victim of discrimination waived reinstatement), Hungary (twelve months' average earnings, in addition to reinstatement in cases of discriminatory dismissal), Ireland (104 weeks' pay; EUR 12,697 where the victim of discrimination was not an employee; EUR 6,348.69 under the Equal Status Act) and Sweden (32 months' wages in cases of dismissal after 10 years of employment; 48 months if the victim of discrimination is aged 60 years or over). In Finland, there appears to be an informal upper limit (EUR 15,000; this limit can be exceeded for special reasons). Statutory upper limits on compensation for non- pecuniary damages seem to apply in Belgium (six months' salary in the case of victimisation where a dismissal is proven to be a form of reprisal) and Malta (200 Liri, which is equivalent to EUR 465).There appear to be no limits in relation to either pecuniary or non-pecuniary damages in the national laws of the Czech Republic, Germany (based on draft legislation which is still under debate), Italy, Luxembourg, the Netherlands, Poland, Portugal, Slovakia, Spain and the UK. In Latvia, there are currently no upper limits but this may change in the future (a draft law provides for upper limits on moral damages: 3,000 Lats or 5,000 Lats (equivalent to EUR 4,310 and 7,184, respectively, in cases of grave moral damages; 10,000 Lats, equivalent to EUR 14,369, if grave harm has been caused to life, physical integrity or health). Finally, Austrian law provides for an upper limit of EUR 500 in cases of non-recruitment or non-promotion if the employer proves that the victim would not have been recruited or promoted even in the absence of discrimination. Page 39

Of the countries where limits do exist, Ireland is particularly interesting because there are no comparable statutory limits on compensation for discrimination on grounds of sex. Under EC law, there can be no doubt that upper limits on compensation for discrimination are not acceptable either in the context of either the Race or Employment Framework Directives. Even though, to date, explicit case law and legislation106 on this issue concerns sex discrimination, there is no conceivable convincing reason why a different approach should apply in relation to other types of discrimination. Rather, the Court's reasoning in the sex equality cases indicates that its findings are based on general, rather than sex discrimination-specific, considerations. Thus, the Court held in Marshall II (para. 26) that where compensation is the remedy chosen by the national legislator, it 'must be adequate, in that it must enable the loss and damage actually sustained as a result of the discriminatory dismissal to be made good in full in accordance with the applicable national rules'.107 In the same decision (para. 30), the Court also stated that 'the fixing of an upper limit of the kind at issue [meaning the limits under national law for damnum emergens] cannot, by definition, constitute proper implementation of Article 6 of the [Second Sex Equality] Directive, since it limits the amount of compensation a priori to a level which is not necessarily consistent with the requirement of ensuring real equality of opportunity through adequate reparation for the loss and damage sustained as a result of the discriminatory dismissal' (see also von Colson and Kamann, para. 24). Commentators link the prohibition of upper limits on compensation to the requirement of proportionality (namely of the damage suffered to the compensation awarded; e.g. Betlem 1991:1367). Others explain the Court's explicit approach, rather than reliance on the more general requirements of equivalence and effectiveness under Art. 10 EC, by the Court's concern for the effet utile of EC non-discrimination law (e.g. Curtin 1994:640).

In Draehmpaehl108 (para. 33), the Court held that a statutory presumption of an upper limit on compensation is acceptable in cases of a discriminatory refusal to take an application for employment into consideration where there was no prospect of being recruited even in the absence of discrimination. Ward (1998:71) explains that the Court in this case distinguished between a situation where an applicant was not the best qualified person for the position but who had suffered discrimination on grounds of sex and a situation where the applicant would have been appointed to the post but for the discrimination.The fact that a limitation of damages in the former case may be acceptable is due to the fact that it involves a less radical form of harm. Alternatively, it could also be said that in this case discrimination is not the only case for not being appointed (rather, there are two parallel causes). Subsequently, the Draehmpaehlruling was codified in Art. 6(2) of the Revised Second Sex Equality Directive. Finally, I agree with O'Dempsey (2004:13) that upper limits on punitive damages appear acceptable in situations were there was no loss.

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[95] Some country reports point out that to some extent non-pecuniary damages may overtake the function of punitive damages (country reports of Austria and Portugal).

[96] Compare Rdler (1999:258) who noted in 1999 and in the context of race discrimination that only UK and US law provide for punitive damages.

[97] As Moore (1993:539) rightly states, the duty to pay interest is not limited to cases of discriminatory dismissal but also relates to other situations involving discrimination.

[98] Joined Cases 5/66, 7/66 and 13/66 to 24/66 Firma E. Kampffmeyer and others v Commission [1967] ECR 245.

[99] Case T-13/96 TEAM Srl v Commission[1998] ECR II-4073.

[100] Case C-136/92 P Commission v Augusto Brazzelli Lualdi and others[1994] ECR I-1981.

[101] See II.2.2. above.

[102] See above III.1.

[103] As Shelton notes more generally, it is not always appropriate to substitute money damages for the invaded interest as it may allow the perpetrator 'to buy injustice'.Whilst damages are certainly adequate in situations where actual economic damage has occurred, performance must remain the preferred remedy in order to contravene notions of human rights reduced to a series of propositions assuring the payment of money to victims.

[104] The opposite, namely lower limits (minimum compensation) is also conceivable. For example, Austrian law provides for a minimum compensation of one month's salary for cases where the discrimination proves crucial for non-employment. Similarly, in cases of harassment, there is a minimum compensation of EUR 400.

[105] The following statements are based on the country reports as available to the author at the end of March 2005. In many cases, these are not yet the final versions of the reports. Also, certain reports, even in their final versions, do not provide all the information that would be useful for the author's purposes.Whether or not there are upper limits on damages for discrimination remains unclear particularly with regard to Cyprus, Denmark, Greece, Slovenia, Spain and France (according to O'Dempsey 2004:12, in France there is a system of upper limits on compensation for employment related wrongs.The Network's country report does not address the issue of such limits). - Based on the materials available to the present author, Lithuanian law does not seem to provide for damages at all.

[106] Art. 6(2) of the Revised Second Sex Equality Directive, Art. 8(2) of the Goods and Services Directive, Art. 18 of the Recasting Directive.

[107] Interestingly, AG van Gerven had suggested that following von Colson and KamannCommunity law did not require full damages in the sense of compensation equal to the full damage sustained but only adequate damages (para. 17 of the AG's conclusions).The Court expressly contradicted this interpretation by its clear statement on full damages.

[108] Case C-180/95 Nils Draehmpaehl v Urania Immobilienservice OHG[1997] ECR I-2195.

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