In Simpson v Intralinks  the EAT found that the UK employment tribunal had jurisdiction to hear claims where there was a clear choice of law and forum clause in favour of the law and courts of Germany and in doing so apply both UK and German law. Ms Simpson's claim pre-dated the Equality Act 2010, which potentially has a different territorial scope from the previous law. However, it is possible that the UK tribunals could be found to have jurisdiction over similar claims brought under the new legislation. Catherine Taylor, Libby Payne and Manteo Eisenlohr report

The facts

Ms Simpson was employed by a UK-based company but worked primarily in Germany, spending a few days each year in the UK. Her contract was in German (with an English translation incorporated) and the governing law of the contract was specified to be German, with the German courts having jurisdiction.

The contract was entered into in January 2009, although Ms Simpson's employment started the previous October.

Ms Simpson brought sex discrimination and equal pay claims in a UK tribunal under the Sex Discrimination Act 1975 and Equal Pay Act 1970. The events, which formed the basis of her claims, took place in 2010 and, we are told, did not fall under the EqA.

The tribunal initially considered that it did not have jurisdiction to hear the claims. Ms Simpson appealed. The EAT addressed the following four areas.

  1. The territorial scope of domestic law

Both the SDA and the EPA apply where the employee works wholly or partly in Great Britain. As Ms Simpson spent some of her time working in Great Britain, the EAT decided she fell within the territorial scope of both pieces of legislation.

  1. The law of the contract/the acts complained about

Although unlawful discrimination is a statutory tort, in the employment context it is necessary for there to be a contract in order to access the protection. Accordingly, as Ms Simpson's employment contract was entered into before the Rome I regulation came into force on 17 December 2009, the Rome Convention applied (although for these purposes, the position is no different).

Under article 3 of the Rome Convention, the contract is governed by the law chosen by the parties as expressed or demonstrated with reasonable certainty by the contract, in this case, German law.

Article 6(1) of the Rome Convention provides that a choice of law clause cannot deprive the employee of the protection afforded by the 'mandatory rules' of the law of the member state that would have applied had there been no express choice. Mandatory rules are essentially those from which the parties cannot contract out.

Under article 6(2), the law that would have applied had there been no express choice was that of the member state where the work was carried out (in this case, Germany) unless the contract was more 'closely connected' with that of another country (here, potentially the UK).

The EAT applied the Lawson v Serco test to determine whether Ms Simpson's employment was closely connected with the UK, although noting that this was ultimately a question of EU law and so Lawson was not determinative.

In Lawson, the House of Lords identified four categories of employees who would be protected under the Employment Rights Act 1996: employees ordinarily working in the UK; peripatetic employees working in different places but 'based' in the UK; expatriate employees working in British enclaves or who are posted overseas for UK business purposes; and employees who have an equally strong connection with the UK.

The EAT considered that Ms Simpson did not fall within any of these categories as she lived and worked in Frankfurt, Frankfurt was her 'base' and the parties had expressly agreed that German law would be the law applicable to the contract; as such, the mandatory rules of UK law would not apply.

This was not the end of the consideration of the applicable law, but the EAT next looked at the question of the forum.

  1. The forum for determination of the dispute

Article 21 of the Brussels I regulation provides that a choice of jurisdiction clause in an employment agreement is only valid where it is entered into after the dispute has arisen. As Ms Simpson's contract was entered into prior to the dispute arising, the choice of forum clause in favour of the German courts was not determinative. This is different from the position with most commercial agreements where a choice of forum clause will usually be binding.

Article 19 provides that an employer may be sued in the member state either in which it is based or in which the employee carries out the work. The EAT ultimately found it was the claimant's choice where to bring her claim, noting that, in accordance with the regulation, it was not up to the courts to state a preference about the appropriate forum.

  1. Alternative grounds for determining the applicable law

Finally, the EAT returned to the question of the applicable law under the Rome Convention. Although the EAT found that that UK tribunal did not have to apply the mandatory rules of UK law under article 6(2), the EAT also considered article 7(2).

Under article 7(2) the mandatory rules of the forum (in this case, the mandatory rules of UK law) may be applied when determining the dispute between the parties, regardless of the governing law of the contract. A rule will only be mandatory if the circumstances of the dispute fall within the territorial scope of the relevant law.

As the EAT found that the SDA and EPA were mandatory rules and had sufficient scope to encompass the claimant's claim (see above) they could be applied by the tribunal to Ms Simpson's claims.

The decision in the German context

In summary, the EAT found that the claimant could bring her claims under the EPA and SDA in the UK tribunal. German law would be applied to determine whether or not there was a contract of employment and the tribunal could do this as a matter of fact. The EAT also noted in passing that it was open to the parties to argue before the tribunal whether the issue of compensation should be determined in accordance with German or UK law.

The question as to whether an employment contract exists under German law should be straightforward as (generally, and where there is no applicable collective bargaining agreement) there are no set formalities for these in Germany.

From a German legal perspective, this decision increases the potential for 'surprises' for employers based in the UK who directly employ individuals in Germany.

Although the contracts of employment may specify German law as the governing law and the German courts as the forum, that may not prevent claims being heard in the UK and certain provisions of UK law applying, particularly where the employee spends some time in the UK. Of course, as a practical matter, a UK employer may welcome a claim before UK courts, thereby avoiding the difficulties of dealing with an unknown legal system.

However, comparing both the law and practice of Germany and the UK, it is not clear why the employee decided to file her claim in the UK. The legislation in both jurisdictions is very similar due to the legal basis of anti-discrimination law found in EU law. For example, the time limit for filing a discrimination claim in Germany and the UK is three months.

In terms of compensation for breaches of German antidiscrimination law, the structural approach to the calculation of damages is different from the UK, although the amounts awarded are likely to be quite similar. For example, the amount of damages for injury to feelings is in principle unlimited in Germany; however, the award must be 'reasonable' (the German notion being 'angemessen') and in practice three months' salary has become the average award made.  

Claims under the Equality Act

Key to this decision was the wide express territorial scope of the SDA and EPA. The EqA, like the ERA, is silent as to its application outside of Great Britain. How its territorial scope should be determined was considered in Bates van Winkelhof v Clyde & Co. In that case, the EAT accepted that the same approach should be taken as for claims under the ERA - the Lawson  test - and concluded that the claimant fell within one of the categories. This case is currently awaiting a reserved judgment from the Court of Appeal.

If the Lawson  test for territorial scope had been applied in Simpson, then, as set out above, the claimant would not have fallen within one of the categories and the tribunal would therefore not have been able to apply UK law (and as such, would not have been able to hear her complaints at all).

In Bates  it was not necessary to look beyond the Lawson  test. Whether the tribunal should do so, given a factual scenario similar to that in the Simpson  case, is a more difficult question to answer, particularly as it is arguable that there should be no regression from the position under the SDA in terms of territorial scope.

EU law may support a different approach. In Bleuse v MBT Transport the EAT held that domestic legislation, which gave effect to rights derived from EU law (there, the Working Time Regulations 1998, giving effect to the Working Time Directive) had to be construed, if possible, in a way which was compatible with that EU right, in this case finding that the implied scope of the Working Time Regulations 1998 was not limited by the Lawson test.

In addition, some principles, known as 'general principles of EU Law' or 'primary EU law', are not, however, founded in a directive. They are derived from international instruments and the constitutional traditions of member states, and are merely given expression by a directive.

Where a national court is dealing with a dispute involving primary EU law, it must ensure the full effectiveness of that law, even to the extent of disapplying any contrary provision of national legislation (see Mangold v Helm). Such principles must be applicable both against public and private employers. An example of a primary law is the principle of non-discrimination on the grounds of age. This is not derived from the Equal Treatment Framework Directive; instead the directive is an expression of the principle (Mangold  and Kükükdeveci v Swedex).

Following the decisions in Mangold  and Kükükdeveci, it is likely that most anti-discrimination legislation will be taken to have derived from primary EU law, in the form of the general principle of non-discrimination. If the tribunal has jurisdiction to hear a claim under the Brussels regulation (and is required to apply mandatory rules under article 7(2) of the Rome Convention), then in order to give effect to EU-derived employment legislation, the tribunal could be required to apply a wider test in relation to territorial scope, even than, for example, the test that applied under the SDA.

Taking this to its logical extreme could potentially allow any employee to bring a claim against a UK-domiciled employer in the UK tribunal under UK legislation derived from primary EU law, even where the claimant fails the Lawson  test and only has a limited connection with the UK, as was the case in Simpson. Whether there is a cut-off point before this extreme is reached and whether one is in fact desirable, remains to be seen.

This article was first published in ELA Briefing on 1 October 2012