On 7 March 2023, the Italian Court of Cassation rendered a judgment (No 6723/2023) on the public policy exception as a ground for refusing, pursuant to Articles 45 and 46 of the Brussels I bis Regulation, the recognition and enforcement in Italy of a decision rendered by a Danish Labour Court.
In its judgment, the Court of Cassation addressed (and sometimes dodged) a number of questions concerning the interplay between, on the one hand, the uniform regime of the public policy exception set out by the Brussels I bis Regulation and, on the other hand, Italian procedural law, read in the light of the case law of the CJEU and of the ECtHR.
Facts and Procedure(s)
On 8 December 2017, a Labour Court in Denmark, sitting in a single-judge formation and as a judge of first and last instance, ascertained that a company established in Italy had violated a number of provisions of Danish employment law. Said Italian company had seconded a group of construction workers in Denmark, whose working conditions were regulated by a collective agreement concluded between this company and Danish trade unions. Subsequently, however, the Italian company breached the obligations stemming therefrom, by omitting to pay salaries, pension insurance contributions, holiday remuneration and other social benefits in accordance with the conditions set by said agreement. Based on these grounds, the Danish Labour Court condemned the company to pay (to the trade unions) a total amount of € 1.900.000,00 ca. This amount was calculated by taking into account the making of budgetary savings unlawfully realized by the company (essentially, by underpaying its workers and omitting to comply with social security obligations) complemented by a 7% increase for deterrence (ca. € 129.000,00). In Danish law, this fine (bod) finds its legal basis in Article 12 of Act. No 106 of 2008.
The Danish trade unions subsequently sought to enforce that judgment in Italy. At this stage, the Italian company filed an application under Articles 45 and 46 of the Brussels I bis Regulation, claiming, inter alia, a breach of the Italian public policy stemming from:
- an alleged lack of impartiality of the Danish judge, based on the remark that “the majority of the members of the deciding court were designated by one of the trade unions who were parties to the procedure”.
- the Danish court’s refusal to submit a preliminary reference to the CJEU concerning the interpretation of a number of provisions of (primary and secondary) EU law, deemed relevant for the resolution of the dispute(notably, the freedom to provide services, the principle of non-discrimination based on nationality, Article 12 of the Charter, Article 3 of Directive 96/71/CE and Article 6 of Directive 98/49/CE).
- the “criminal” nature of the fine (bod) imposed by the Danish Tribunal and/or its non-conformity with the criteria set by the Combined Civil Sections of the Cassation itself for the recognition and enforcement in Italy of punitive damages.
The Italian Court of first instance (Tribunale di Siracusa) refused the recognition and enforcement of the Danish decision, deeming that the sanction inflicted by the Labour Court was indeed criminal in nature, in application of the Engel criteria.
The Court of Appeal of Catania reversed this ruling and granted recognition and enforcement, holding that this sanction aimed at compensating the trade union for a breach of contract, consistently with the ordinary function of civil liability. While the Court of Appeal acknowledged that the 7% increase (bod) might have an inhibiting or repressive purpose, it found it in compliance with the criteria established by the Court of Cassation for the recognition of punitive damage in Italy.
Called by the applicant to assess whether the lower courts had correctly interpreted and applied the law, the Court of Cassation came back to questions 1), 2) and 3), mentioned above.
Unpacking the Cassation’s Ruling
The Cassation’s judgment addresses a number of legal questions, which should be separately assessed.
a. On the Possibility of Raising the Public Policy Exception Ex Officio
This issue was brought to the attention of the Court of Cassation in connection with the alleged lack of impartiality of the Danish judge, who – according to the applicant – had been unilaterally appointed by one of the trade unions who were parties to the dispute (Danish law, it seems, allows the parties to labour disputes to appoint the members of the deciding panel). The fact that the Danish legal order offered no possibility of appealing the decision rendered by this judge constituted, in the applicant’s view, an additional violation of the right to a fair trial, having particular regard to the ‘criminal’ nature of the inflicted sanction
The Court of Appeal had refused to rule on this allegation, deeming that this claim had not been (adequately) substantiated by the applicants in the original application submitted before the court of first instance. It should therefore be regarded as a new claim raised first the first time on appeal and dismissed as inadmissible. According to the applicant, however, this ground of refusal (contrariety to public policy for the lack of impartiality of the deciding panel) should have been raised ex officio by the first instance judge.
The Court of Cassation briefly considers this line of argument in an obiter, where it acknowledged that this way of reasoning would lead to an additional legal question. It should be determined, in particular, whether the Italian judge
is empowered to raise ex officio a breach of the substantive or procedural public policy of the forum, in application of the domestic procedural rules that usually allow for this possibility (in Italy, Article 112 of the code of civil procedure), or whether, conversely, this ex officio control is precluded by the favor that [the Brussels I Bis] Regulation expresses towards the recognition [of foreign judgments], in that it explicitly requires the party who has an interest in not having that judgment enforced in the forum to take appropriate steps to that end [free translation by the author of this post].
To answer this question, the Court of Cassation would have had to take a stance on the interplay between the uniform procedural regime established (sometimes implicitly) by the Brussels I bis Regulation and the domestic rules of procedure of the forum, as well as on the leeway granted to the latter by the principle of procedural autonomy. Regrettably, the Court of Cassation decided to “dodge” this question. In fact, it continues its reasoning by remarking that: “even admitting that the applicant had properly raised the claim concerning the partiality of the deciding panel at the first instance” (as the company was also alleging), the terms in which this claim was formulated would be too generic and unsubstantiated. This claim was solely grounded in the letter of the Danish law, which allows for the abstract possibility that the trade unions appoint the members of the deciding panel under specific conditions. However, this was not what happened in that concrete case, since the case file evidenced that the judge who issued the contested judgment had been chosen (through a different procedure) among those serving at the Danish Supreme Court. Moreover, it had never been recused by the applicant in the proceedings in the issuing State.
The Court of Cassation also rejected the applicant’s argument whereby the sheer existence of a provision allowing for the appointment of the judicial panel by trade unions who are parties to the dispute could amount to a “structural deficiency” of the Danish legal order. To this end, the Italian Court reminded that the notion of “public policy” under the EU PIL Regulations shall not be construed with reference to purely internal values, but rather according to a broader international perspective. In this vein, the Court of Cassation remarked that many foreign states establish similar systems of judicial appointment and that , in any case,
it is not for the judge called to decide on a cause of non-recognition of a judgment issued by a court of a EU Member State to investigate about systemic deficiencies in legal order of the State of origin (‘structural deficiencies’), in the light of the respect and consideration paid to this State (specifically, Denmark) at the pan-European level.
b. On the Breach of the Obligation to Request a Preliminary Ruling and the Public Policy Exception
This issue was solved in a rather straightforward manner by the Court of Cassation. The applicant claimed that, as the judge of first and last resort, the Danish court should have referred a preliminary question to the CJEU, since the interpretation of a number of provisions of EU law was, in his view, essential for the resolution of the dispute. The non-respect of the obligation established by the CILFIT case law would then result in legal impossibility of recognizing and enforcing the ensuing foreign judgment, this being contrary to the public policy of the requested State.
The Court of Cassation evoked, in this respect, the case law of both the ECtHR and the CJUE. In Ullens dr Schooten, the former held that a national court’s refusal to grant the applicants’ requests to refer to the Court of Justice preliminary questions on the interpretation of EU law, that they had submitted in the course of the proceedings, does not violate Article 6 of the ECHR if this refusal has been duly reasoned. In Consorzio Italian Management, the CJEU specified that
if a national court or tribunal against whose decisions there is no judicial remedy under national law takes the view… that it is relieved of its obligation to make a reference to the Court under the third paragraph of Article 267 TFEU, the statement of reasons for its decision must show either that the question of EU law raised is irrelevant for the resolution of the dispute, or that the interpretation of the EU law provision concerned is based on the Court’s case-law or, in the absence of such case-law, that the interpretation of EU law was so obvious to the national court or tribunal of last instance as to leave no scope for any reasonable doubt (§ 51).
Against this backdrop, the Court of Cassation deemed that the Danish Court had sufficiently explained the reasons behind its refusal to refer a preliminary question to Luxembourg. It also added that this assessment should be made solely on the basis of the reasoning developed in the judgment whose recognition is sought: any further assessment on this point, extending to the correctness of the interpretation given to the Danish provisions and their application to the facts of the case, would amount to a review on the merits, explicitly forbidden under the Brussels regime.
c. On the Allegedly Criminal Nature of the Danish Fine (Bod)
Concerning the disputed nature of the fine inflicted with the judgment whose recognition was sought, the Court of Cassation aligned with the view expressed by the Court of Appeal. It noted that, in the Danish legal order, the bod is characterized as a financial penalty (sanzione pecuniaria) belonging to the toolbox of civil liability. It can be inflicted solely for breaches of collective work agreements and pursues a double objective: on the one hand, strengthening the binding effects of these contracts (whose purpose would be defeated if, in case of non-compliance, the compensation granted by the court was limited to the damage effectively suffered by the trade union) and, on the other hand, fighting social dumping. The Cassation therefore recognizes that the bod combines the functions typically vested in civil liability with a deterrent effect typical of criminal law, aiming at the preservation of the general welfare. However, this “duality of functions” of the bod cannot, as such, serve as a basis to qualify this financial penalty as a criminal sanction.
For the purposes of a correct characterization of a fine as being “criminal” in nature, the Court of Cassation pointed to the judgment No. 43 of 2017 of the Italian Constitutional Court, which in turn refers to the Engel criteria. Accordingly, a fine may be recognized as being criminal in nature – even despite a different explicit characterization in positive law – if (a) it affects the population at large; (2) pursues aims that are not merely reparatory, but also punitive and preventative; (3) has punitive character, its consequences being able to reach a significant level of severity (§ 3.3).
Assessed from this standpoint, the Court of Cassation concluded that the Danish bod could not be regarded as being criminal in nature. Its (partially) “punitive” function should rather be ascribed to the system of civil liability.
In Italy, the recognition of foreign (civil) judgments awarding punitive damages is regulated by a ruling of the Combined Sections of the Court of Cassation of 2017 (No. 16601). Therein, that Court admitted, for the first time, that punitive damages could be compatible with Italian public policy under specific conditions: (1) they shall comply, first and foremost, with the principle of legality and the principle that there must be a legal basis, pursuant to which conduct giving rise to the imposition of punitive damages must be defined beforehand in legislation; (2) secondly, and relatedly, punitive damages damages shall be foreseeable; and (3) their amount should not be disproportionate, ie grossly excessive in nature. Having regard to these criteria, the Cassation concluded that the Danish bod could be recognized in Italy, given that: it found a sufficiently specific legal basis in Danish law (ie in the provisions of Act. No 106 of 2008); the application of these provisions was adequately foreseeable, also as concerns the determination of the amount of the fine, given that Danish courts have issued specific guidelines for these purposes; the damage awarded for “punitive purposes” was not grossly disproportionate in relation to the amount of the prejudice effectively suffered by the trade unions and their members (7% thereof).
Based on these arguments, the Court of Cassation finally gave the green-light to the recognition and enforcement of the Danish judgment in Italy, thus rejecting the claimant’s application under Articles 45 and 46 of the Brussels I bis Regulation.