European Court gives preliminary ruling on union cases over conflicting rights

The social partners await the final ruling of the European Court of Justice (ECJ) on two trade union cases put before the ECJ by the respective national labour courts. In May 2007, two Advocates General to the ECJ gave preliminary judgements on the two cases in question, namely the Viking and Laval cases. These judgements have provoked much interest among the social partners and highlight questions relating to the provisions of EU law on how to deal with conflicting rights.

A fundamental question, on which the European Court of Justice (ECJ) will rule later this year, concerns how EU law deals with issues of fundamental but conflicting freedoms, in situations where one such freedom may be limited by another, or where the exercise of one freedom may limit the right to exercise another. These issues are at the core of two recent cases brought before the ECJ: International Transport Workers’ Federation and the Finnish Seamen’s Union v Viking Line ABP and OU Viking Line Eesti (referred to hereafter as the Viking case) and Laval un Partneri v Svenska Byggnadsarbetareforbundet and others (referred to hereafter as the Laval case). On 23 May 2007, Advocate General Poiares Maduro and Advocate General Paolo Mengozzi, legal advisors to the ECJ, provided their responses to a series of questions raised in the two cases over how to deal with conflicting rights.

The Viking (EU0605029I) and Laval (SE0706029I) cases each concern the substitution or replacement of workers in one country with workers from another country, in circumstances where the outcomes desired are to reduce labour costs through the offer of less generous terms and conditions to the workforce which differs from that of the original workforce. The background to the two cases is outlined below.

Viking case re re-flagging of ships

In 2003, to cope with operational losses, the Finnish passenger ferry operator Viking Line attempted to reflag its ship, the Rosella, to operate under an Estonian flag, with the intention of hiring an Estonian crew to replace the existing Finnish crew. This would have significantly reduced the company’s labour costs. However, as a result of the threat of strike action by employees, the company withdrew the proposal, although not before the International Transport Workers’ Federation (ITF) had called for a boycott of Viking. The following year, anticipating that when the current collective agreement ended it would wish to return to the solution of re-flagging its ships, the company brought an action before the UK courts, seeking an injunction to stop the ITF and the Finnish Seamen’s Union (Suomen Merimies-Unioni, SM-Ury) from attempting to interfere with Viking Line’s rights to free movement. With the ITF headquarters located in the UK, it was possible for Viking Line to bring the case before the UK courts. The UK Commercial Court granted the injunction. The ITF and FSU appealed to the UK Court of Appeal, which lifted the injunction (FI0512201N) and which referred a series of questions to the ECJ to resolve. These questions included:

  • whether collective industrial action falls outside the scope of Article 43 of the EC Treaty (guaranteeing freedom of establishment and the right to provide services) by virtue of Community social policy;
  • whether the provisions of Article 43 have horizontal direct effect, so as to confer rights on a private undertaking, such as Viking Line, against a trade union;
  • whether industrial action which constitutes a restriction on freedom of movement can be objectively justified, appropriate and proportionate, and whether it can strike a ‘fair balance’ between the fundamental right to take collective action and the fundamental freedom to establish services.

Advocate General Maduro delivered a preliminary judgement on these three questions. He stipulates that:

  • collective industrial action does not fall outside the scope of Article 43, such that the provisions on establishment and on the freedom to provide services ‘are by no means irreconcilable with the protection of fundamental rights or with the attainment of the Community’s social policies. Nothing in the EC Treaty rules, either on rights to free movement or to associate or to take industrial action, is absolute;
  • the provisions of Article 43 do have a horizontal effect in national legal proceedings between an undertaking and a trade union in circumstances such as those related to Viking Line, giving an employer the right to pursue a claim against a trade union;
  • at the same time, Article 43 does not preclude a trade union from taking collective action for the protection of workers that has the effect of restricting the right to free movement. The question of the lawfulness of such action is determined under national legislation, provided that there is no difference in the treatment of national and foreign companies. However, Mr Maduro continued that a coordinated policy of collective action restricting rights to freedom of establishment, that has the effect of portioning the labour market and impeding the hiring of workers from certain EU Member States to protect the jobs of workers in other Member States, is precluded by Article 43.

Laval case re right to impose terms and conditions

The Laval case concerns a Latvian construction company that had posted Latvian workers to work on Swedish building sites. The Swedish Building Workers’ Union, (Svenska Byggnadsarbetareförbundet, Byggnads) sought a collective agreement for these workers, to comply with the existing industry agreement. Having failed to obtain this, it commenced collective industrial action by blockading all Laval building sites in Sweden. Subsequently, Laval brought proceedings before the Swedish courts against the trade union and, as in the Viking case, questions were referred by the national courts to the ECJ as the issues concerned fundamental principles of EU law. Advocate General Mengozzi of the ECJ has given his response on three questions submitted by the national courts. These questions related to:

  • whether the industrial action taken fell within the scope of community law;
  • whether Swedish law, which leaves it to the social partners to define terms and conditions of employment, constitutes adequate implementation of the European Parliament and Council Directive 96/71/EC concerning the posting of workers in the framework of the provision of services;
  • in light of the above two questions, whether trade unions can use industrial action to compel a service provider of another Member State to provide comparable terms and conditions of employment, where national law does not preclude this.

Mr Mengozzi’s opinion on these questions echoes some of those of Mr Maduro in the Viking case. He states that:

  • industrial action does fall within the scope of community law, which means that it must take account of freedoms under community law, including the freedom to provide services;
  • the fact that Swedish law gives freedom to the social partners to conclude agreements does not constitute inadequate implementation of Directive 96/71/EC;
  • trade unions can use collective action to compel service providers from another Member State to provide equivalent terms and conditions of employment, provided the collective action is motivated by public interest objectives such as the protection of workers and efforts to combat social dumping. Using the concept of proportionality, Mr Mengozzi stated that the terms and conditions desired by the trade unions significantly contributed to the protection of posted workers and therefore were not disproportionate.

Analysis of two judgements

The two preliminary judgements of the Advocates General therefore suggest that the right to freedom of movement cannot be seen as an all-embracing restriction on the right to take collective action. However, at the same time, collective action cannot be placed outside the provisions on freedom of movement, so as to exclude it from having to take account of rights derived under Article 43. But industrial action, which is legitimate and proportionate, can co-exist with the right to freedom of movement, even if in practice it places some restrictions on that freedom.

Trade union reaction

Following publication of the preliminary judgements, the principal trade unions have commented on the decisions. In a press release on 23 May 2007, the ITF viewed the decision in the Viking case as containing ‘favourable and unfavourable elements’. While the federation has welcomed the affirmation of the right of trade unions to take industrial action, it believes that the ruling also ‘might encourage businesses to believe they can override those rights’ to collective action ‘through a kind of cross-border hopscotch’. In another press statement on 23 May 2007, a more favourable response to the decision was given by the General Secretary of the European Trade Union Confederation (ETUC), John Monks, who views both judgements positively, stating that ‘union rights to take action to compel a company from another Member State to observe collective agreements have been upheld’. The Confederation of Swedish Enterprise (Svenskt Näringsliv), a pro-business non-profit organisation representing 54,000 Swedish companies, has not yet issued a formal statement on the Laval case since the publication of the preliminary judgements of the ECJ advisor.

Commentary

The final outcome of the cases will not be known until the ECJ delivers its opinion on the questions raised by the national courts. Although the opinions of the Advocates General are frequently relied on by the ECJ, it is by no means guaranteed that this will occur in relation to the Viking and Laval cases. Therefore, it is still possible that the ECJ will either define the rights of collective action more narrowly or will rule that the action proposed was disproportionate.

Sonia McKay, Working Lives Research Institute

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