EU Court of Justice

Viking and Laval: A Collision Waiting to Happen

Richard Arthur

Thompsons Solicitors

 

Presentation to the STUC Conference February 2008

1. So, What is the Purpose of the European Union?

 

Well, according to the consolidated Treaty on the Function of the European Union, first preamble, it is to "ensure the economic and social progress of States by common action to eliminate the barriers which divide Europe." Inherent within that purpose are at least two separate purposes: one is economic, and one is social.

 

On the one hand, there is the promotion of economic interests such as the establishment of a common economic area and associated rights, such as the freedom of nationals and organisations from one Member State to establish themselves', and provide services in, the territory of another Member State.

 

On the other hand, there is the objective of "promotion of employment, improved living and working conditions, so as to make possible their harmonisation while the improvement is being maintained, proper social protection, dialogue between management and labour, the development of human resources with a view to lasting high employment and the combating of exclusion." This objective is to be pursued "having in mind" fundamental social rights such as those set out in the European Social Charter of October 1961 and the 1989 Community Charter of the Fundamental Social Rights of  Workers.

 

Economic and social interests will inevitably conflict. The Vikinq and Laval cases were a collision waiting to happen.

 

 

2. The Facts of the Viking Case

 

Viking owned a ship called the Rosella which operated under a Finnish flag on the route between Tallinn and Helsinki. It was making a loss and sought to "reflag" the Rosella to operate under a "flag of convenience" in Estonia or Norway, which would have enabled it to avoid collective agreements with Finnish Trade Unions and cut jobs and terms and conditions.

 

Following a request from the Finnish Seamen's Union (FSU), the International Transport Workers' Federation (ITF) issued an instruction to affiliates to boycott Viking's activities. The FSU also called for strike action by its own members.

 

Viking brought proceedings in the High Court in London, arguing that its right to freedom of establishment under EC law was infringed by the industrial action. The Court of Appeal referred questions to the European Court of Justice as to the balance to be struck between the unions' right to take industrial action and the employer's competing right to freedom of establishment.

 

 

3.The Facts of the Laval Case

 

Laval, a Latvian company, contracted to build a school at Vaxholm in Sweden. It posted Latvian construction workers to Sweden for the purpose.

 

The Swedish construction unions attempted to get Laval to sign up to collective agreements in the construction sector covering pay, holidays, other terms and insurance arrangements.

 

Laval refused to sign up and the Swedish construction unions "blockaded" Laval's sites in Sweden, with further sympathy action being called for by the Swedish Electrician's Union. The Swedish arm of Laval was eventually declared bankrupt.

 

Laval brought proceedings in the Swedish courts arguing that its freedom to provide services had been infringed and that it had been discriminated against because of the failure of Swedish national provisions to take into account collective agreements entered into between it and unions in Latvia.

 

 

4. The ECJ's Judqement in the Viking Case

 

The European Court of Justice, in a judgement delivered on 11 December 2007, ruled in the Viking case that:

 

•         the right to take collective industrial action is "fundamental" and

of "overriding public importance";

•         the EC treaty provisions protecting an organisation's right to

freedom of establishment apply to industrial action;

•         those EC treaty provisions can be relied upon by non-state

emp!oyers;

• industrial action represents a restriction on the right of freedom of establishment where it makes the exercise of that right "less attractive";

•         a restriction on the right of freedom of establishment is acceptable where the industrial action pursues a legitimate aim and is justified by overriding reasons of public interest;

•         the protection of workers is one of the overriding reasons of public interest;

•         the aim of protecting jobs and terms and conditions is legitimate when those jobs and terms and conditions are "under threat"; and

• industrial action must also be "suitable" for achieving the objective, having regard to whether other means of achieving that objective are at the union's disposal which are less

restrictive of the employers' right to freedom of establishment.

 

 

5. The ECJ's Judgement in the Laval Case

 

The European Court of Justice, in a judgement delivered on 18 December, ruled in the Laval case that:

 

•         the right to take collective industrial action is a "fundamental" right";

•         the EC treaty provisions protecting an employer's freedom to provide services in other Member States apply to industrial action;

•         those treaty provisions can be relied upon by non-state employers;

•         industrial action represents a restriction on the freedom of

provision of services where it makes the exercise of that right "less attractive";

•         a restriction on the freedom of provision of services is

acceptable where the industrial action pursues a legitimate aim and is justified by overriding reasons of public interest;

 

So Where are We?

 

Both the Viking and the Laval cases had a trans-national dimension which may not be of immediate and direct relevance to industrial action in the UK. The EC law right relied upon by Laval was its right to provide services in a Member State other than its state of origin under (the then) Article 49 of the EC Treaty. The EC law right relied upon by Viking was its right to establish itself in a Member State other than its state of origin under (the then) Article 43 of the EC Treaty. Typically, such trans-national rights of establishment, and provision of services, will not be in scope in industrial disputes in the UK because the employer will already have established itself in the United Kingdom, most usually through the establishment of a UK registered subsidiary.

 

That said, it is not impossible to envisage a circumstance where, for example, a French train operating company secured a rail franchise in the UK and sought to renege on existing UK collective agreements with trade unions. If it had not already established a UK registered subsidiary, it is possible to envisage such a French company then arguing that any industrial action brought by rail unions infringed its right to provide services, or its right to freedom of establishment. In practice, this is probably an unlikely, though not impossible situation.

 

That said, the implications of the two judgements are profound insofar as they represent the European Court of Justice's first attempt at reconciling the right to take industrial action (social principles) with employer's economic freedoms (economic principles). We will also have to combat any suggestion by the UK government that some of the principles set out by the European Court of Justice in the context of trans-national disputes should be imported into domestic industrial action legislation.

 

Notwithstanding the European Social Charter, ILO Convention number 87 on the Freedom of Association and Protection of the Right to Organise and the Community Charter of the Fundamental Social Rights of Workers, the European Court of Justice has failed to give the right to take industrial action any superior protected status by reference to employer's economic freedoms.

 

The ECJ distinguished its decision in the Albany case $ (where it had found

that certain restrictions on competition are inherent in collective bargaining). It did not accept the unions' argument that the exercise of trade union rights will necessarily involve the restriction of others' rights (for example, to unrestricted competition) and such restriction should therefore be permitted.

 

Instead, although the right to take industrial action "must be recognised as a fundamental right which forms an integral part of community law the observance of which the Court ensures, the exercise of that right may nonetheless be subject to certain restrictions".

 

As a matter of EC law, therefore, the ECJ has been prepared to balance unions' rights to take industrial action against competing EC law rights of employers. The employer's competing EC law right in the Viking case was the right to freedom of establishment, and in the Laval case it was the right to freedom to provide services, but there may be other competing EC law rights that employers will seek to rely upon.

 

The Laval case is particularly hostile to trade unions. The Posted Workers Directive 9is intended to set minimum of standards of protection for workers posted to other member-states. The Directive specifically provides that its protections are not intended to prevent more favourable standards than the minimum levels of protection. It is, in my view, ludicrous for the ECJ to find that because the union's demands were for a collective agreement containing terms in excess of those minimum protected standards (and, in relation to pay, where Swedish law set no clearly defined minimum standards) the objective of the industrial action was not legitimate.

 

In both cases, but particularly in the Laval case, the European Court of Justice has undertaken an exercise which is not currently permitted by corresponding UK legal provisions. In the UK, industrial action achieves immunity in tort where it is taken in contemplation or furtherance of a "trade dispute"10. A "trade dispute" is defined in Section 244 of the Trade Union and Labour Relations (Consolidation) Act 1992 as a dispute between workers and their employer which relates wholly or mainly to a wide-ranging list of matters including terms and conditions of employment, engagement or nonengagement of workers, allocation of duties and responsibilities, matters of discipline and machinery for negotiation and consultation.

 

In short, provided that the subject matter of the dispute is within the confines of Section 244 TULRCA, the dispute will satisfy the definition of a "trade dispute" and, provided that the union satisfies the balloting requirements, it will attract immunity in tort. There is no opportunity for the courts to scrutinise the merits of the dispute or the objectives sought to be achieved by the union.

 

But there are now two ECJ judgements which give legitimacy to closer scrutiny of the objectives to be achieved through industrial action. An employer's right to freedom of establishment, for example, according to the Viking case, can only validly be restricted through industrial action where that action has as its objective the protection of jobs and terms and conditions and is "suitable for ensuring the achievement of that objective". The ECJ encourages national courts to superimpose their own views as to whether jobs and terms and conditions are actually at risk, and to consider whether the action represents a proportionate means of achieving that objective, taking into consideration what other means may have been available to the union.

 

It is not immediately apparent that such increased opportunities for scrutiny of the objectives of industrial action will be available to employers at present in domestic courts. To make such scrutiny available, employers would need to engage economic freedoms, as the employers were able to do in the Viking and Laval cases. Typically, this will not be possible in industrial disputes in the United Kingdom.

 

Nonetheless, the concern has to be for the longer term that government in the UK will seek to rely upon the increased opportunities for scrutiny of the objectives of industrial action described by the ECJ in future legislative amendments to the industrial action provisions contained in Part V of TULRCA.

 

So far, so bad.

 

7. A Ray of Light?

 

I suspect that I have not been providing you with much encouragement so far. But there may be opportunities to be grasped from the Viking and Laval cases.

 

In the Viking case, an important point arises regarding restrictions on the right to strike in national law. In replying to the Danish government's argument that community law does not have competence to regulate the right to strike, the European Court of Justice says:

 

"Even if, in the areas which fall outside the scope of the community's competence, the Member States are still free, in principle, to lay down the conditions governing the existence and exercise of the rights in question, the fact remains that, when exercising that competence, the Member States must nevertheless comply with community law".

 

The conclusion seems to be that the conditions in Member States regulating the exercise of rights to take industrial action are equally subject to the EC Treaty's protection of the right to strike. National laws are, on this analysis, open to challenge where they limit the right to strike protected by European Community law.

 

This seems to me to confirm that European Community law does set some minimum standard for the protection of the right to strike. It is not immediately clear what the extent of that protection is, but there are helpful observations to be made. The most obvious is that the European Court of Justice has not, in the Viking case, automatically declared unlawful, as a matter of European Community law, the calling of secondary action by the International Transport Worker's Federation. Nor has it declared unlawful as a matter of course the sympathy action called by the Swedish Electricians' unions in the Laval case. This suggests that the European Court of Justice may be prepared to countenance circumstances in which secondary action is lawful.

 

8. Conclusion

 

The direct and immediate consequences of the Laval and Viking cases may well be limited. But they do represent the European Court of Justice's first pronouncements on a question which goes to the very heart of the European Community: how are economic and social rights under the EC Treaty to be balanced? The first results are not encouraging. The right to strike is not given any supremacy. We must be vigilant to ensure that there are not further encroachments onto trade unions' already restricted rights to take industrial action. But at the same time, if there are opportunities from the Viking and Laval cases, as I believe there are in the context of shaping and drawing upon the European Community law right to take industrial action, then they must be grasped with both hands.

 

Richard Arthur 27 February 2008

For further information visit the Trade Unionists against the EU Constitution website

‘The ECJ Cases’ – What are they?

There have been four decisions by the EU Court of Justice that have transformed the legal context of trade union activity for the worse.  They are:

VIKING  ECJ decision 11 December 2007

Viking was a Finnish shipping line which reflagged a ship in Estonia with a crew on lower wages.  The Finish Seaman’s Union took industrial action.  The company’s legal appeal went to the ECJ which found that the ‘industrial action must be ‘suitable’ for achieving objectives having regard to whether other means of achieving the objective ‘are less restrictive of the employer’s right to freedom of establishment’.

 

LAVAL ECJ decision 18 December 2007

Laval was a Latvian company commissioned to build a school in Sweden and employed Latvian labour on wages and conditions that contravened existing collective bargaining agreements in Sweden’s public sector.  The construction unions blockaded the site. The ECJ found that \EU Treaty provisions protecting an employer’s freedom to provide services in other member states apply to industrial action.  Industrial action represents a ‘restriction of the freedom of provision of services where it makes the exercise of that right less attractive’.

 

RUFFERT  ECJ decision 3 April 2008

The German state authority of Lower Saxony commissioned a Polish company to undertake work and sought to enforce the payment of wages in line with those agreed under state collective bargaining agreements.  The company appealed against a ruling by the German constitutional court.  Overturning its finding, the ECJ ruled that workers posed to another country, under the terms of the Posted Workers Directive, were only entitled to the minimum wages and conditions.  Any attempt to enforce existing collective bargaining agreements was illegal under EU law.

 

LUXEMBURG ECJ decision 19 June 2008

The government of Luxemburg had sought to enforce regulations under its own legislation for pay and conditions on posted workers.  The ECJ instructed Luxemburg to revise its legislation and to remove provisions that required employers of posted workers to provide a written contract of employment and to pay automatic cost of living allowances where these took wages over the minimum.

 

For clarity it should be noted that the European Court of Human Rights is quite separate from the ECJ and does not come under the authority of the EU.