Trade unions ordered to pay damages in Laval case

The Swedish Labour Court has ordered the two trade unions involved in the industrial action against a Latvian construction company in 2004, which led to the Laval case, to pay public damages. The trade unions have strongly criticised the ruling as unreasonable as they acted according to Swedish law at the time. Employers welcome the ruling as it contributes to the free movement of services and restricts illegal industrial action towards foreign companies.

Swedish labour court rules on costs

The Swedish Building Workers’ Union (Svenska Byggnadsarbetarförbundet, Byggnads) initiated the blockade of the Latvian construction company Laval un Partneri Ltd in 2004, leading to a protracted and landmark European court case, known as the Laval case (EU0801019I). The Swedish Electricians’ Union (Svenska Elektrikerförbundet, SEF), commonly known as Elektrikerna, supported the blockade. Both trade unions have now been ordered by the Swedish Labour Court (Arbetsdomstolen) to pay damages amounting to SEK 550,000 (€53,755 as at 29 January 2010) to the Latvian company for unlawful industrial action, in addition to litigation costs of about SEK 2 million (about €195,500). Byggnads is liable for two thirds of the total, while Elektrikerna has to pay the remaining third.

The main issue concerns Laval’s right to financial compensation for its losses due to the industrial action taken by Byggnads and Elektrikerna in 2004, which led to the Laval case – which in turn has posed serious challenges for the Swedish labour market model (SE0706029I, SE0804029I, SE0901029I). This ruling on costs has divided social partners, especially since the trade unions acted according to Swedish law at the time. The labour court was far from unanimous in its decision; three out of seven of the members behind the ruling had a different opinion.

Reactions of social partners

The social partners have different views on the court judgement. Byggnads, Elektrikerna and the Swedish Trade Union Confederation (Landsorganisationen i Sverige, LO) believe that the ruling will further weaken Swedish trade unions’ ability to sign collective agreements with foreign companies. However, the Confederation of Swedish Enterprise (Svenskt Näringsliv) emphasises that the ruling shows how important it is for Swedish trade unions to respect European Union law and the free movement of services.

Trade unions

Byggnads considers the ruling to pay damages as being unreasonable as the trade unions followed Swedish law at the time of the industrial action. Its legal representative, Peter Kindblom, questions how the affected trade unions are supposed to predict whether Swedish law conflicts with EU law in a situation where even the Swedish Labour Court – Sweden’s highest authority in matters of labour disputes – had to refer the case to the European Court of Justice (ECJ). Furthermore, according to Swedish law, each party shall individually stand for the costs of litigation in labour market disputes if the party that lost the case had a legitimate reason to take it to court. However, on page 59 of the ruling (347Kb PDF, in Swedish), the labour court states that this law does not apply in this situation as the matter does not conclusively differ from other previous cases.

LO believes that the labour court judgement will have serious consequences for Swedish workers as few trade unions will dare to challenge foreign companies in disputes over collective agreements in the future. In practice, this will make it impossible for trade unions to uphold regulations on collective agreements for foreign workers. According to Elektrikerna, the ruling will create a situation where low wages and poor working conditions become a competitive advantage that in the long run will lead to social dumping.

Employers

The Confederation of Swedish Enterprise, which from the start has welcomed restrictions on industrial action (SE0801019I), is generally positive towards the ruling as the labour court clearly rejects the unlawful industrial action taken by Byggnads and Elektrikerna by ordering a relatively large amount in public damages. At the same time, the original claim was for SEK 5 million (€488,682) and the employer organisation considers it regrettable that the labour court does not demand any damages for economic losses to Laval, which went into bankruptcy as a result of the dispute. The Confederation of Swedish Enterprise defrayed the costs of Laval’s judicial process.

Commentary

The Laval case and its effects are still, five years after the initial ruling, highly controversial. The ruling by the Swedish Labour Court in December 2009 and the government’s proposed legislation on a reformed labour market in November (SE0911029I) are together expected to have a serious, negative effect on trade unions’ possibilities to take industrial action against foreign companies operating in Sweden.

References

Byggnads, ‘AD:s lavaldom får allvarliga konsekvenser’, 2 December 2009.

Dagens Nyheter, ‘Fack tvingas betala skadestånd’, 2 December 2009.

Elektrikerna (SEF), ‘Elektrikerna om Lavaldomen och skadeståndet’, 2 December 2009.

LO, ‘Arbetsdomstolens dom i Lavalmålet väcker frågor om rättssäkerheten’, 2 December 2009.

Örnerborg, E., ‘Peter Kindblom: Lavaldomen lågvattenmärke ur rättssäkerhetssynpunkt’, Lag & Avtal, 3 December 2009.

Svenskt Näringsliv, ‘Facken får betala skadestånd till Laval’, 2 December 2009.

Mats Kullander and Johannes Henriksson, Oxford Research

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