Latvian builders’ misfortunes in Sweden continue

Since the autumn of 2004, several Latvian construction firms have been affected by the Swedish Building Workers’ Union’s boycott of the construction services market. The unions believe that Latvian firms doing jobs in the Swedish market are paying their workers lower wages than is permitted in Sweden. The attitude toward the Latvian firms has generated a broad resonance and revealed that implementing the free movement of services and labor is not a simple process.

On November 2 2004 the Swedish Building Workers’ Union (Svenska Byggnadsarbetareförbundet) started a boycott against the Latvian construction firm Laval&Partneri Baltic Bygg, which had undertaken to build a school near Waxholm, not far from Stockholm (LV0501101F). Laval&Partneri Baltic Bygg is a subsidiary of the Latvian firm Laval&Partneri, which was established to fulfill contracts in Sweden but was subsequently restructured as an independent company.

The Swedish Building Workers’ Union argued that the Latvian company had not observed the national collective agreement and paid its contracted workers from Latvia considerably lower wages that is permitted in Sweden. The union wanted the Latvian enterprise to sign the Swedish collective work agreement, but the Latvians refused to do this. The conflict widened and the Swedish Building Workers’ Union was joined by the Swedish Electricians’ Union (Svenska Elektrikerförbundet) in blocking electrical installation work on the Latvians’ building site.

Laval&Partneri claimed that the wages set for the Latvian workers were in line with the collective agreement in Latvia, where the firm’s central office is located. The firm filed a suit before the Swedish Labor Court (Arbetsdomstolen) on the restricting of free competition.

On December 20 2004 the Swedish Labor Court ruled that it would not uphold the application by Laval&Partneri to lift the blockade by the Swedish Building Workers’ Union.

As a result of the union boycott, in February 2005 Laval&Partneri Baltic Bygg withdrew from the construction of the Waxholm school and at the start of April 2005 it filed for bankruptcy. The firm’s owner maintains that the sole reason for the bankruptcy is the blockade lasting over three months.

In March 2005 the Swedish Building Workers’ Union started a boycott of another Latvian construction firm - R.O.K.. The cause of this conflict is also the excessively low wages paid to the 25 Latvian builders working in Sweden and the unwillingness of the Latvian company to conclude a collective agreement with the Swedish union. The Swedish Building Workers’ Union has announced that due to this reason from May 18 2005 it will start blockading yet another Latvian enterprise - Bygg-Lett i Örebro - which employs around 20 builders from Latvia. In both cases the union plans to keep the firms’ building sites in encirclement until they sign Sweden’s industry-wide collective wage agreements.

Meanwhile, the rights of the disputing parties in the Laval&Partneri case have still not been decided. After hearing both sides, on March 11 2005 the Swedish Labor Court ruled that European Union laws do not clearly indicate whether the union blockade of the Latvian construction firm does or does not contravene the principle of the free movement of labor and the prohibition on discrimination as well as the localization directive. The Swedish Labor Court the European Court of Justice (EJC) to rule on the dispute between the Latvian construction firm and the Swedish union. It would require the Court of Justice 1-2 years to rule on the case.

The umbrella organization of the Swedish trade unions is worried about this turn of events. On the other hand, the Confederation of Swedish Enterprise (Svenskt Näringsliv) has welcomed the court ruling. The Confederation has expressed the hope that the court case will result in clearer guidelines for foreign enterprises operating in Sweden. The Confederation also has promised to cover court costs for Laval&Partneri. In May 2005, European Commission President Jose Manuel Borosso informed Latvia’s Prime Minister Aigars Kalvitis that the EU executive would decide by June whether to send Sweden a formal warning over insufficient transposition of EU law in connection with restricting operations of Latvia’s construction company Laval&Partneri.

The campaigns against the Latvian companies have added fuel to the debate on European Union legislation on the free movement of services and labor.

This information is made available through the European Industrial Relations Observatory (EIRO), as a service to users of the EIROnline database. EIRO is a project of the European Foundation for the Improvement of Living and Working Conditions. However, this information has been neither edited nor approved by the Foundation, which means that it is not responsible for its content and accuracy. This is the responsibility of the EIRO national centre that originated/provided the information. For details see the "About this record" information in this record.