PREMISES

The person, contract, tort, property and remedies form the ‘pillars’ of each and every private law system, whatever its origin might be, continental civil law or common law, and however it might appear, traditional private law or regulatory private law. These pillars are subject to a deep transformation, that should be termed ‘constitutional’ and that is captured in Duncan Kennedy's distinction between the three globalisations of law and their impact on legal thought. The focus in this chapter is placed on European law and on the European Union (EU). EU law and the Court of Justice of the European Union (CJEU) are the drivers behind the transformation. This focus is justified because the EU is not a state, because the EU has no European constitution and no European Civil Code, and because the CJEU is neither a constitutional court nor a supreme court. In other words, the EU is a very particular and unique entity containing a little bit of everything that makes for a state and a sovereign legal order. Thus, I claim that the ‘constitutional’ transformation of the pillars of private law through the EU and the CJEU differs in form and in substance from seemingly comparable processes in at least some of the Member States. Personally, I take as plausible the notion of the experimental character of the EU as a new state formation. This perspective views the EU legal (dis)order as a new format for a legal order, with a court that, owing to its particular position in the multi-level structure of the EU, enjoys a degree of freedom and discretion that allows the Court to break boundaries that national courts (whether their position is constitutional or otherwise) tend to defend. However, such an understanding implies equally that my findings are tentative and premature.

This chapter rests on previous research. I have written extensively on private law as economic law, on the EU as a market state, on the experimental character of the EU, on the constitutionalisation of private law at the Member State and the EU level. What I am trying to develop in this chapter could be read as a follow-up to my hypothesis whereby constitutionalised European private law principles exist which hold the fragmented body of European private law together.

SETTING THE SCENE

The relationship between fundamental rights and private law has enjoyed a prominent place in the legal debates of both private and public lawyers for decades. At first sight, so it seems, two opposing, perhaps even contradictory, perspectives exist. On the one hand, constitutional lawyers look at the substantial outreach of fundamental rights. They see private law as a body of law inferior in the hierarchy of norms. In fact, private rights and obligations may even be derived from constitutional law. On the other hand, many private lawyers have expressed concerns that the intrusion of public law principles will disturb the coherence of the system of private law and ultimately pose a threat to libertarian ideals of private law, notably party autonomy. Partisans of such extreme positions are rare. While most discussants accept that there is some influence of constitutional law on private law, none of the views presented have settled the dispute. As the controversy continues, eminent lawyers like Lord Neuberger have advanced the plea for a ‘grand unifying theory from which a freestanding action for breach of human rights could then be identified’.

The aim of this chapter is a more modest one. It will not devise a new theory which explains the missing link between fundamental rights and private law. It acknowledges that constitutional courts of all sorts in fact decide private law cases. Rather, the chapter will provide a sketch of what could be called an inclusive approach to private law. It will only deal with the interaction between fundamental rights (as stipulated in national constitutions as well as in supranational texts, such as the Charter of Fundamental Rights of the European Union or the European Convention on Human Rights) and national private law. The Charter's influence on EU secondary law will not be dealt with, as thus far EU secondary law (EU private law) has mainly been regulated by way of EU directives that must be transposed into national law. The proposal for a Common European Sales Law could have been established as a notable exception, but as the resistance to such a horizontal instrument in some Member States was too strong, the Commission has returned to the traditional approach of harmonisation by directives.

INSTITUTIONAL TURN: PRECONDITIONS OF PRIVATE AUTONOMY

Private autonomy and freedom of contract, in particular, can be justif ed on moral grounds. The further conclusion typically drawn by lawyers was to identify individual freedom with the realm of private law. However, the moral justification of private autonomy faces a kind of ‘institutionalisation gap’, because it does not deal with the institutional preconditions of private autonomy. confines itself to making the rights of formally equal persons compatible with each other, because it presupposes amongst other things general access to property as a means for economic inclusion of persons – persons who are only then able to exercise the freedom secured through a right. However, the way moral reasoning in private law deals with the problem of the preconditions of rights and necessary inclusion of persons into social systems is simply to decline responsibility and move the issue to the forum of public law. Thus private law, thinking traditionally, resolves the institutional question through a kind of theoretical externalisation.

This externalisation is clear, for instance, in Savigny's concept of the obligation, which he sees as fully subjected to the realm of law, being a ‘pure mere legal relation’ that is mastered without any reference to normativities outside the law, let alone societal considerations. The result is a functional division between the rules governing private contracts and the public law rules dealing with the social preconditions – and effects – of contractual freedom. A similar understanding and externalisation can be traced in the work of Rawls who championed ‘the idea of a division of labor between two kinds of social rules’ and their different institutional realisation. According to Rawls, one kind of rule defines the social background and manages to continually adjust and compensate for the inevitable tendencies away from background fairness, while a second kind of rule governs the transactions and agreements between individuals and associations – so that ‘individuals and associations are … left free to advance their ends more effectively within the framework of the basic structure, secure in the knowledge that elsewhere in the social system the necessary corrections to preserve background justice are being made’.

As the Court of Justice of the European Union (CJEU) increasingly applies EU fundamental rights to contract law cases, basic assumptions are put to the test. How do fundamental rights change contract law, how do they contribute to its evolution? What, besides the many intricacies of doctrinal structure, is their substantive impact? After the early years of adjudication in this area, several patterns become visible. Taken together, these patterns arguably form components of a general tendency, a unifying paradigm. This chapter seeks to explore those patterns as well as the overall influence that EU fundamental rights have had on contract law to date. The aim is not to argue what the impact should be but to describe what it is, and to put this into context. To do so, it is first necessary to sketch out narratives of fundamental rights, contract law and the economic order at the national level (see section 1). National discussions of the topic have been ongoing for decades and they build the backdrop to the more recent discourse at EU level. While many scholars have assumed that the impact of EU fundamental rights will resemble national developments, related discussions also shed light on possible differences (see section 2). Based on an analysis of the CJEU's adjudication, it will be suggested that the influence of EU fundamental rights takes its own direction and does not simply make contract law more social or more pluralistic but can best be described to follow market logics (see section 3). This, the chapter will then argue, is a result both of particular features of EU law but equally of how the CJEU uses its discretion (section 4). Concluding remarks follow (section 5).

NARRATIVES OF NATIONAL FUNDAMENTAL RIGHTS, CONTRACT LAW AND THE ECONOMIC ORDER

Over the last two centuries, the implications of fundamental rights for private law have changed, just as the role of the state and the economic order have changed. Well-established narratives suggest that those evolutions were related. In this regard, one can speak of changing paradigms that link up legal developments with broader trends in social theory and practice. In Habermas ‘words, a paradigm’ is discerned primarily in paramount judicial decisions, and it is usually equated with the court's implicit image of society’.

INTRODUCTION

Consumer credit is ‘a basic element of participation in the economic life of modern society’. Access to credit in the form of a deferred payment, (mortgagebacked) loan or other similar financial accommodation enables consumers to meet their basic needs, such as buying a family home, obtaining education or receiving health care. Consumer credit is also an important element of the EU economy. A consumer's ability to borrow money easily allows markets to function more efficiently and stimulates economic growth. Yet the wide availability and use of credit by consumers also have a dark side – consumers run the risk of becoming over-indebted and failing to meet their obligations under the credit agreement.

It is certainly true that over-indebtedness and loan default can be caused by a number of factors, in particular a change of life circumstances after credit is granted. Particularly in the aftermath of the global financial crisis, however, it cannot be denied that irresponsible lending practices by certain market actors, which allowed consumers to fall victim to disproportionate credit-related commitments that they were unable to meet, have significantly exacerbated the problem. At the micro-level, such practices may have a dramatic impact not only on the consumer's financial situation, but also on his or her individual and family well-being, especially when losing a family home. At the macro-level, irresponsible lending to consumers may contribute to a housing bubble and undermine consumer confidence in the financial system; this in turn may not only adversely affect the financial markets but also have potentially severe social and economic consequences.

It is not surprising, therefore, that the post-crisis era has witnessed growing attention to the duty of responsible lending as a regulatory technique of consumer protection in the credit market. The thrust of this duty is that lenders must assess whether a consumer borrower can afford to meet repayments in a sustainable manner; in this sense, it goes beyond a mere determination of whether lenders will recover their money in case of the borrower's default. However, the concept of responsible lending poses problems of definition and has been subject to continuing regulatory debate at both EU and Member State level.

The Court of Justice of the European Union (CJEU) so held in Kušionová. In that case, Monica Kušionová was threatened with eviction from her home, because she had stopped paying a consumer credit of € 10,000, which was secured by a mortgage on her family home in which she lived. The mortgage agreement included a clause according to which the lender, SMART Capital, could sell the family home extra-judicially without any review by a court. Kušionová started proceedings against SMART Capital and asked for the terms of the credit agreement and the mortgage agreement to be annulled under the UTCD. At first instance, the Slovakian Court held that some of the terms in the credit were unfair as well the mortgage agreement as such and annulled them. On appeal, the Slovakian Court referred the case to the CJEU for a preliminary ruling. In its answer, the CJEU mentioned explicitly Article 7 of the Charter of Fundamental Rights, according to which someone's right to a home must be respected, holding that it must be considered while interpreting the UTCD. The wording of Article 7 of the Charter corresponds to Article 8 of the European Convention on Human Rights (ECHR); consequently, in view of Article 52(3) of the Charter, the meaning of Article 7 of the Charter will be the same as that of Article 8 of the ECHR.

This is not the first CJEU decision on unfair terms and housing. The CJEU has adopted an active role in policing unfair terms to prevent the eviction of residents from their homes during the financial crisis. In decisions prior to Kušionová, such as Aziz and Asbeek Brusse, the CJEU omitted a reference to fundamental rights and only referred to the family home as an essential need of the consumer. However, it also held that the loss of a family home cannot be repaired by providing a monetary remedy only.

INTRODUCTION

Nestled away in the panoply of EU equality legislation lies one directive which is little known and little loved. This is Directive 2010/41 on equal treatment for the self-employed. Its predecessor, Directive 86/613, was equally neglected. The very concept of employment rights for the self-employed is already an oxymoron. Why should the self-employed, a group seen as independent and autonomous, need or deserve employment protection? Surely the customers ‘right to choose their supplier is the paradigm of contractual autonomy and the law should not interfere with their decision-making?

Yet, as labour lawyers well know, those who describe themselves as self employed often manifest many of the characteristics of employees – they may in practice be dependent, have inferior bargaining power and they risk exploitation. Even those who do not match this description still need to have access to the labour market: there is no point in being'self- ‘without being ‘employed’. As section 2 shows, the numbers of self-employed are increasing, and women feature prominently in that group. Moreover, with the rise of new forms of working, including via online platforms like Airbnb, it is likely that the number of self-employed will carry on increasing. But empirical evidence shows that these online platforms tend to favour white men. This directly speaks to the concerns of equality law. So, at first sight, a directive giving protection against discrimination to the self-employed makes a lot of sense.

However, one of the most vexed issues in equality law is scope: who can rely on discrimination law and who is subject to it? Section 3 considers the personal scope of the existing EU equality directives and the duty holders under those directives. This examination of the scope of the existing directives reveals a lacuna: at present the self-employed can be the subject of the equal treatment principle but may be able to invoke it only in vertical situations, i.e. against the state. They cannot invoke it horizontally in private contexts, for example where a female plumber is not selected by a potential client from a website where she offers her services.

INTRODUCTION

Are fundamental rights, the sort of rights entrenched in written constitutions and human rights instruments, binding on individuals or other private actors? With few exceptions, most legal systems of the constitutional democratic type answer this question in the negative. The German Basic Law, for example, provides in Article 1(3) that ‘constitutional rights bind the legislature, the executive, and the judiciary’, which means that they bind all the three standard state powers but not private actors such as individuals, corporations, labor unions and the like. Similarly, the Fourteenth Amendment to the United States Constitution provides that ‘no State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States’. The US Supreme Court developed a notoriously large and obscure body of case law on the basis of this seemingly harmless provision – the so-called'state action doctrine’– the gist of it being that constitutional rights do not bind private actors unless they are acting as surrogates of the state or are endowed with public prerogatives. What it all comes down to is rejection of the view that fundamental rights normally bind private as well as public actors or that such rights produce not only ‘vertical’ but ‘horizontal’ effect as well.

But this is hardly the end of the story. Even if fundamental rights cannot be invoked in private relations – meaning, for instance, that the plaintiffcannot base her complaint on the defendant's violation of a constitutional entitlement or that the defendant cannot invoke a constitutional liberty to evade liability – they are fully operative against the state in its capacity as legislator, executive or judge. Imagine the standard hypothetical of a landlord that sues the tenant for breach of a term in the lease that placed the latter under an obligation to attend mass every Sunday and to decorate the premises with religious paraphernalia. While the doctrine of vertical effect bars the tenant from invoking freedom of religion against the landlord, he may do so against the court itself qua enforcer of the lease and against the legislature qua author of the laws which empower private parties to create legal obligations inconsistent with freedom of religion.

A few years later, as other contributions in this volume show, it still seems worth discussing Alemo-Herron. The case was a particularly nasty surprise for those who had been more favourably impressed by previous decisions such as Aziz and Morcillo, in which the Court of Justice (CJEU) had seemed willing to use the Charter of Fundamental Rights (CFREU) to grant relief to people being crudely hit by the economic crisis. Alemo-Herron seems to indicate a different path, providing the application of EU fundamental rights to private law questions with a somewhat bitter aft ertaste.

So many contributions have appeared by now that it is perhaps not necessary to go through the facts of the case in detail. We will only recall some essential information. First, the context: the case concerned the former leisure department of a London borough, which had been transferred to private owners. The individual employment contracts contained a clause providing for the ‘dynamic’ incorporation of those successive collective agreements applicable for the time being, including the related pay increases. EU law was involved because transfers of undertakings, such as the one which had taken place in this case, are regulated by the so-called Acquired Rights Directive, which seeks to secure the rights of employees in the event of transfers of businesses. In proceedings before UK courts, a conflict had arisen as to whether the dynamic clause would be applicable to the new employer. The conflict was induced by the CJEU's own precedent in Werhof. In that case, the Court had only affirmed that EU law did not require the application of dynamic clauses. However, one argument used suggested that dynamic clauses might actually be problematic in themselves: the decision indicated that the possibility of the Directive's imposition of dynamic clauses, referring to collectively bargained agreements, might infringe the employer's (negative) freedom of association. On that view, the Directive did not require more than the'static ‘incorporation approach already adopted in Germany.

BRIDGING THE CANYON BETWEEN RIGHTS AND CONTRACT LAW

The title of this volume unites two disparate and possibly incompatible legal concepts. In the sphere of the legal system, the concepts of contract law and fundamental rights are usually regarded as lying poles apart. The law of contract is normally classified as a part of private law, which primarily concerns the legal relations between private individuals, whereas fundamental rights are traditionally believed to apply primarily or even solely to relations between citizen and the state in public law. Although a constitution that contains fundamental rights may provide a structure for the whole legal system including private law, it may not be generally expected that a bill of fundamental rights will have any direct bearing on the details of disputes between parties to a contract. No doubt we can anticipate that the values that inform fundamental rights, such as respect for liberty and property rights, will also inform the rules of private law. For instance, those values are likely to underpin support for the principle of freedom of contract and the protection of interests in property. Yet this expected congruence or homology in values between private law and fundamental rights is not the same as the construction of a bridge or mechanism by which the fundamental rights protected in public law determine or influence the content of the law governing contracts. The chapters collected in this work all address the character and implications of this recently constructed bridge that enables legal arguments in favour of fundamental rights to be used to steer courts in the resolution of contractual disputes.

This issue of the connection between fundamental rights and private law has been extensively analysed with respect to national legal systems. In the context of the modern nation state, a typical analysis suggests that a legal system's architectural design is that the national constitution, including any bill of rights, establishes a framework or basic structure for both the political system and the economic system. This constitution or framework of public law can set boundaries to the market and require the owners of private property and people entering transactions to comply with basic standards of justice outlined in the constitutional framework, including the basic rights.

INTRODUCTION

Does a private limited company have a fundamental right freely to conduct a business? Article 16 of the Charter of Fundamental Rights of the European Union (CFREU) proclaims that ‘[t]he freedom to conduct a business in accordance with Union law and national laws and practices is recognised ’. The Charter speaks of a ‘freedom ’that is ‘recognised ’(by the EU, presumably). However, in the recent Alemo-Herron case, the Court of Justice of the European Union (CJEU) referred to this freedom as a ‘fundamental right ’. The turn of phrase may have been due to a slip of the pen, but the Court's use of language may also have been deliberate. This raises the question of what exactly it would mean to have a fundamental right to conduct a business. Would it be a human right? Human rights are rights that we all have as human beings, i.e. by virtue of our humanity. However, in Alemo-Herron, the presumed right-holder was not a natural person but Parkwood Leisure Ltd, a private limited company. Perhaps the shareholders in the company may be the ones who hold the fundamental right to conduct a business, but that does not seem to be what the Court had in mind and, in any case, the shareholders were not a party to the dispute.

If Article 16 were indeed to confer a right, then the next question would be: a right to what and against whom? For, when someone has a fundamental right – or indeed any right – that person is entitled to something against someone. So, against whom do we have a right to conduct a business and what is the content of that right? In other words, who is under a duty to do or abstain from doing what towards the right holder? Alemo-Herron was a case about the interpretation of a directive on the safeguarding of employees ‘rights in the event of a transfer of a business. According to the Court, the ‘fundamental right’ to conduct a business ‘covers, inter alia, freedom of contract’.

Since 1981, a large body of European case law and legislation has developed which prohibits many forms of discrimination against lesbian, gay and bisexual (LGB) individuals, and same-sex couples. This chapter will examine developments in this area, starting with protection for LGB individuals, and then turning to the more sensitive (because of the effects on national family law) question of protection for same-sex couples. Within each of these two categories, developments under the European Convention on Human Rights (ECHR, applying to the 47 Member States of the Council of Europe) will be considered first, followed by developments under European Union law (applying to the 28 EU Member States).

DISCRIMINATION AGAINST LESBIAN, GAY, AND BISEXUAL (LGB) INDIVIDUALS

European law generally prohibits all forms of discrimination against LGB individuals, as long as the party alleged to have discriminated is a public authority bound by the ECHR, or a private person acting within the material scope of Directive 2000/78/EC. Where there appears to be a gap in legal protection, it can be argued that there is an ECHR obligation to pass legislation prohibiting discrimination by private persons in certain areas that are not yet covered by EU or national law.

EUROPEAN CONVENTION ON HUMAN RIGHTS

Basic Democratic Freedoms (Expression, Assembly, Association)

In theory, every European government should understand that Articles 10 and 11 ECHR protect the democratic right of any group, including LGB individuals, to campaign for reforms to any area of the law, including family law, through peaceful means: forming associations (civil society or non-governmental organisations); organising public demonstrations, marches, and other assemblies; and expressing ideas through websites, social media, paper publications, banners and placards. Unfortunately, governments sometimes find a particular idea too threatening to traditional society to be tolerated. This has been the case since at least 2001 in much of Central and Eastern Europe, as the LGB minorities of formerly Communist countries attempted to become more visible, by holding the kind of LGB Pride Parade that was by then common in Western Europe. Hostile reactions in these countries have oft en involved demands for public authorities to ban these events, violent attacks by private persons who object to them, or both. Past or potential future violence is oft en used to justify bans, or is tacitly condoned when public authorities fail to provide adequate police protection.