News

The European Court of Justice restricts a company’s possibility to “buy its way out of” discrimination cases

June 11, 2021

The European Court of Justice has clarified in a new judgment the fact that someone who believes they have been discriminated against is entitled to a determination by a court of law which establishes whether discrimination has occurred – on condition that the opposing party has denied it. Thus, a party who has been accused of discrimination may no longer “block” the right of the affected party to judicial review by stipulating to the compensatory part of the legal action. This decision augments the protection for individuals against discrimination and might mean that certain Swedish procedural rules are incompatible with EU law.

Vinge’s comments

According to Swedish law, a court cannot determine whether discrimination has taken place if a company stipulates to the compensation claimed by the person who asserts they have been discriminated against. In such cases, the court may only compel the company to pay the compensation. This means that, to-date, companies have been able to provide “abstract stipulations” and merely pay what is, in most cases, a relatively limited amount of compensation for discrimination without the court establishing whether any discrimination has occurred.

This important decision from the European Court of Justice alters the legal playing field. The decision makes it clear that anyone who feels that they have been discriminated against actually has the right to obtain judicial review for examination of whether discrimination has taken place so long as the opposing party denies that the act or omission was discriminatory. In other words, a party who has been accused of discrimination may no longer, so to speak, “block” the affected party’s right to judicial review simply by paying. However, the case does not mean that judicial review must occur. Through a settlement, the parties might agree that no one needs to admit improper behaviour.

The judgment thereby firmly establishes that the Swedish procedural rules are not compatible with EU law as regards cases of discrimination. Accordingly, it is likely that some form of legislative amendment can be expected notwithstanding that the European Court has stated that it is sufficient that Swedish courts of law refrain from applying the Swedish rules according to which courts cannot examine whether discrimination has taken place in these cases.

All in all, the protection of individuals against discrimination has been augmented by virtue of this judgment. In addition, the incentive of the parties to settle has also possibly been diminished in some respect, but the practical effects remain to be seen.                                                               

Background

In 2015, the captain of an internal Swedish flight decided that a passenger with Chilean roots from Stockholm would be subjected to an additional security check. The passenger felt disadvantaged as a consequence of his appearance and his ethnic affiliation. The Swedish Equality Ombudsman brought an action in the district court and requested that the airline pay the passenger compensation in an amount of SEK 10,000. The airline consented to pay the requested compensation but was careful to deny that any discrimination had occurred and indicated that the compensation was merely so-called “goodwill compensation”. The passenger was of the position that he did not receive satisfaction by virtue of the payment and, instead, also sought a finding that he had been subjected to discrimination.                                                     

Both the district court and court of appeal found that they were bound according to Swedish law by the airline’s consent to pay the requested compensation and made no finding in a judgment that discrimination had occurred. The Equality Ombudsman appealed to the Swedish Supreme Court.                   

The Supreme Court decided to ask the European Court of Justice whether a court of law, in the event a company or another party stipulates to a person’s claim for compensation, must nonetheless – on the request of the party who believes that they have been subjected to discrimination – examine the issue of whether discrimination has occurred.              

The assessment by the European Court of Justice

The European Court of Justice initially noted that there are EU rules which create a framework for combatting discrimination due to ethnicity or ethnic origin. Persons who believe that they have been subjected to discrimination are to be given effective legal protection, and the Member States are to implement effective, proportionate and dissuasive sanctions for those who have acted in a discriminatory manner.

The European Court of Justice was thus of the position that no EU Member State may implement rules according to which a court is barred from determining whether discrimination has actually occurred if the person who has been accused of discrimination consents to pay the requested amount in damages without conceding that any discrimination occurred.                                                        

The European Court of Justice was of the opinion that disbursement of a monetary payment was insufficient to ensure effective judicial protection of someone who wishes to establish that discrimination has occurred. Payment of money was also deemed inadequate to provide compensation to a wronged person or to work dissuasively.                                                   

Accordingly, the conclusion of the European Court of Justice was that Swedish courts must examine whether discrimination occurred in this case provided that the airline does not acknowledge that discrimination occurred.

It now remains to be seen what the Supreme Court decides. The Equality Ombudsman wishes to see the case remanded to the district court for a determination of the discrimination issue in accordance with the wishes of the passenger.                                  

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