That D/C in the B section of "Cause We've Ended As Lovers"...

Lewy

Having a bit of a JB binge for obvious reasons.... so the B section of CWEAL:

D/C  Fm7  Bb7  C

With my hack theory I'm working on the basis that we're notionally in Eb with the vi made major for a bit of an aha moment, but why does that D/C sound so epic. I suppose the answer is "because it does" so maybe my question should be how is it functioning?

I get that D/C is essentially a D triad with a flat 7 in the bass, so is it really just a substitution for the vii of the key (Dm7b5) or is it some sort of C Lydian dominant thing with the 1  9  #4  6.

What is going on here and how would you approach playing over it? 

viz

It’s more helpful to say we’re in C minor, by the way, rather than Eb major, because C is the root. And that doesn’t change throughout the song (albeit the end chord of each line flips to C major, which is called a Tierce de Picardie, or Picardy third, and gives a nice, light resolution to the line). 

So. In the B section, two things happen; firstly the bass line stays on C, while the main chord moves off it. This unchanging bass note is called a pedal. Pedals always sound amazing. Especially when they happen to be the flat 7 like this one. 

Secondly, the chord, the D major triad, is out of key. Chord 2 “should” be a D(dim), if it we were staying diatonic. But he’s playing a lovely major 2 chord. It’s not quite a D major scale however, because for a start as you rightly say, it has a flat 7, so C instead of C#. Also, under the baseline assumption that the other notes that aren't in the D major triad (D, F# A) remain as per the C minor scale, you'd have Eb instead of E and Bb instead of B. The G is in both scales. So the scale on D would be 1 b2 3 4 5 b6 b7 8, which is the Phrygian Dominant scale - 5th mode of harmonic minor. So you could play D Phrygian Dominant. 

Alternatively, there’s nothing stopping you playing a normal 2, which converts Phrygian Dominant to Mixolydian b6, or "the Hindu Scale", which is the 5th mode of melodic minor. So you could play 1 2 3 4 5 b6 b7 8 which is D Mixolydian b6. You’re referring to that one when you say C Lydian Dominant, which is the 4th mode of melodic minor. It has the same notes.

The flattened 2 in Phrygian Dominant makes it sound more mournful; the normal 2 in Mixolydian b6 gives it more light relief.

Or, as a third option, you could go all-out dominant 7th and play the D mixolydian scale (1 2 3 4 5 6 b7 8) which introduces the B instead of the Bb of C minor. This is actually what JB does, and it gives the melody a hopeful, optimistic flavour. He flattens it again nicely when the chord moves to Ab. 

Or, if you want to play arpeggios rather than scalar melodies, you could think the following: Mixolydian b6 has a dim7 chord within it, which is made of stacked minor 3rds. The chords Ebdim7, F#dim7, Adim7 and Cdim7 are all present in D Mixolydian b6. They're all modes of each other because they all repeat up the minor 3rds, so it doesn't matter which one you think of, but if you want to “major" (hehe) on the major 3rd in the D chord, you could get your head into the F#dim7 space and noodle around in that. 

(Btw, when the 2 chord is majorised, whether in a minor key or a major key, it’s often a secondary dominant, with the next chord being the 5 chord. In this case it isn’t used as a dominant because the next chord is the 6, so it shouldn't be called one.)

Lewy

@viz This is amazing. Thanks so much for taking the time to write this answer. Gonna keep me going for a while!