Economic and social rights in conflict: Political and ...

Economic and social rights in conflict: Political and judicial approaches to their reconciliation By Phil Syrpis and Tonia Novitz

Reprinted from European Law Review Issue 3, 2008

Sweet & Maxwell Limited 100 Avenue Road Swiss Cottage London NW3 3PF (Law Publishers)

Economic and social rights in conflict: Political and judicial approaches to their reconciliation Phil Syrpis and Tonia Novitz∗ Direct effect; EC law; Freedom of movement; Justification; Posted workers; Proportionality; Strikes; Trade unions

In two recent cases, Viking and Laval, the Court of Justice was asked to consider apparent conflicts between free movement rights fundamental to market integration and the exercise of a right to strike otherwise lawful under national law. It fell to the Court to determine how the economic and social dimensions of the European project should be reconciled. This article examines how a key political decision came to be left to the Court, and the potential consequences of its findings. It is argued that the Court’s traditional approach in free movement cases may be unsuited to the resolution of conflicts between the economic and the social. In particular, the extension of the direct effect of Treaty provisions relating to free movement so as to catch the actions of trade unions is problematic, especially in the light of the tests for justification and proportionality employed by the Court.

Introduction One of the functions of the process of market integration is to eliminate barriers to free movement. An inevitable consequence is that, where they conflict with economic freedoms, long-established social practices and domestic legislation are subjected to scrutiny.1 Some must yield in the face of the integration process. Others survive, either because they are held not to amount to barriers in the relevant sense, or because, although they are held to amount to barriers, they are nevertheless justifiable and proportionate. The 27 Member States of the European Union have very different labour law traditions. To date, these have not been co-ordinated to any significant degree. The total harmonisation of social policies is apparently ruled out by the social provisions of the EC * University of Bristol, e-mail: [email protected] and [email protected]. We would like to thank participants at seminars held in the Centre for European Legal Studies at the University of Cambridge in 2006 and 2008, the School of Law at the University of Leicester in 2007, and the British Law Centre at the University of Warsaw in 2007, where different versions of this article were presented. Any errors are the authors’ own. 1 See further P. Davies, “Market Integration and Social Policy in the Court of Justice” (1995) 24 I.L.J. 49; M. Egan, Constructing a European Market (Oxford: Oxford University Press, 2001); and P. Syrpis, EU Intervention in Domestic Labour Law (Oxford: Oxford University Press, 2007).

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Treaty,2 and has, at least since the 1990s, not been viewed as an acceptable objective of the European Union.3 The interventions of the legislature are, as we shall see, consistent with the maintenance of disparities between national labour law systems. This article examines the extent to which the Member States, Commission, Council of Ministers and European Parliament have addressed the legal status of a key facet of domestic labour law—the right to strike—in the context of the completion of the internal market. We argue that the reluctance of political actors to define the legitimate scope of industrial action has led to litigation, and to the recent judgments in International Transport Workers’ Federation (ITF) and Finnish Seamen’s Union (FSU) v Viking Line (Viking) (C-438/05)4 and Laval un Partneri v Svenska Byggnadsarbetareförbundet (Laval) (C-341/05)5 delivered by the Court in December 2007.6 Our intention is first to consider the decisions made by political institutions, and second to point out the problematic consequences that are likely to follow from the approach now taken by the Court. The source of conflict: rights to free movement and the right to strike In principle, both workers and employers benefit from the free movement provisions of the EC Treaty. European Community law allows workers and employers to invite judicial scrutiny of practices which restrict their free movement rights. However, as part of the political compromise surrounding the enlargements of 2004 and 2007, the rights of migrant workers from Eastern Europe were, on a transitional basis, restricted by many EU-15 Member States.7 No similar restrictions were applied to the free movement rights of employers. In these circumstances, workers have taken industrial action in order to prevent employers’ exercise of free movement rights which could lead to the undercutting of established terms and conditions of employment in the EU-15.8 The potential for conflict between employers’ rights to free movement and workers’ rights to strike under national labour law is aptly illustrated by the factual circumstances surrounding the Viking reference from the United Kingdom and the Laval reference from Sweden. Viking, a company incorporated under Finnish law, was a ferry operator. It sought to sell one of its vessels, the Rosella, which plied the route between Estonia and Finland, 2 See Arts 137(2)(a) and 137(4) EC. Commentators tend to read the reference to “harmonisation” in Art.136 EC broadly; see P.J. Slot, “Harmonisation” (1996) 21 E.L. Rev. 378, 382–8, who identifies “optional”, “partial” and “minimum” harmonisation alongside “total” harmonisation, and S. Deakin, “Two Types of Regulatory Competition: Competitive Federalism versus Reflexive Harmonization: A Law and Economics Perspective on Centros” (1999) 2 C.Y.E.L.S. 231, who refers to “reflexive” harmonisation. 3 See Commission Medium Term Social Action Programme 1995–1997 COM(95)13, p.2; and Commission Green Paper “Modernising Labour Law to Meet the Challenges of the 21st Century” COM(2006)708. 4 International Transport Workers’ Federation (ITF) and Finnish Seamen’s Union (FSU) v Viking Line (Viking) (C-438/05) [2008] 1 C.M.L.R. 51. 5 Laval un Partneri v Svenska Byggnadsarbetaref¨ orbundet (Laval) (C-341/05) [2008] I.R.L.R. 160. 6 See also B. Bercusson, “The Trade Union Movement and the European Union: Judgment Day” (2007) 13 E.L.J. 279. 7 See http://ec.europa.eu/eures/main.jsp?&countryId=&accessing=0&content=1&restrictions=0&step= 0&acro=free&lang=en [Accessed April 9, 2008]; and for comment, S. Carrera, “What Does Free Movement Mean in Theory and Practice in an Enlarged EU?” (2005) 11 E.L.J. 699; T. Novitz, “Labour Rights as Human Rights: Implications for Employers’ Free Movement in an Enlarged European Union” (2006–7) 9 C.Y.E.L.S. 357; and B. Ryan, “The Accession (Immigration and Worker Authorisation) Regulations 2006” (2008) 37 I.L.J. 111. 8 An example was the Irish Ferries dispute in 2005. See TUC statement of December 9, 2005, available at http://www.tuc.org.uk/international/tuc-11142-f0.cfm [Accessed April 9, 2008].


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to its Estonian subsidiary. Such a sale would enable “re-flagging” so that the ship could operate under Estonian law, thereby reducing wage costs. The Finnish Seamen’s Union (FSU) had previously taken industrial action to prevent Viking doing exactly this. At that time, the International Transport Workers’ Federation (ITF), which has its registered office in London, issued a circular communication under a “flags of convenience” policy, which requires vessels to be registered under the flag where beneficial ownership is held, advising members (namely national seafarers’ unions) not to engage in negotiations with Viking. The result was settlement of the dispute under a collective agreement that was due to expire in 2005. Following Estonia’s admission to the European Union in 2004, and in anticipation of expiry of the agreement, Viking brought an action in the High Court in the United Kingdom, on the basis that ITF had its headquarters in London, requesting a declaration that the action taken by ITF and FSU was contrary to the right to free establishment protected by Art.43 EC. Judgment was initially given in Viking’s favour,9 but on appeal, the Court of Appeal referred a series of questions to the Court of Justice.10 The issues arising in the Laval case were complicated by the interaction between Swedish industrial relations legislation and Directive 96/7111 (hereinafter “Posted Workers Directive”). Laval, a company incorporated under Latvian law, posted workers to Vaxholm in Sweden to work on building sites operated by Baltic, a company incorporated under Swedish law.12 Laval had signed a collective agreement with the Latvian building sector’s trade union in Latvia, which entailed lower terms and conditions than those prevailing in Sweden. Swedish trade unions responded by taking industrial action, including boycotts of supplies to the Vaxholm site. Laval brought an action in the Swedish courts in order to obtain a declaration that this action was unlawful, and orders that such action should cease and that compensation be paid. Laval also argued that certain aspects of the Swedish law directly discriminated against foreign undertakings.13 The questions referred to the Court of Justice concerned the implementation of the Posted Workers Directive in Sweden, and the scope of the right to take industrial action to attempt to force a service provider to grant posted workers better terms and conditions of employment under Art.49 EC.14

9 Viking Line ABP v International Transport Workers’ Federation [2005] EWHC 1222; The Times, June 22, 2005. 10 Viking Line ABP v International Transport Workers’ Federation [2005] EWCA Civ 1299; [2006] 1 C.M.L.R. 27. 11 Directive 96/71 concerning the posting of workers in the framework of the provision of services [1997] OJ L18/1. 12 The same person owned both companies. See K. Ahlberg, N. Bruun and J. Malmberg “The Vaxholm case from a Swedish and European Perspective” (2006) 12(2) Transfer 155, 159. 13 This aspect of the case relates to the so-called Lex Britannia, a 1991 amendment to the Swedish Co-determination Act 1976 s.42(3). See C. Woolfson and J. Sommers, “Labour Mobility in Construction: European Implications of the Laval un Partneri Dispute with Swedish Labour” (2006) 12(1) European Journal of Industrial Relations 49, 58–9. 14 The interpretation of the Posted Workers Directive, and the potential relevance of terms and conditions set by collective agreement to the award of public works contracts, is currently before the Court in Rechtanswalt Dr Dirk Rüffert v Land Niedersachsen (C-346/06). A.G. Bot’s Opinion was delivered on September 20, 2007.


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A political solution? The competence of the Community under the social provisions of the EC Treaty does not extend to “pay, the right of association, the right to strike or the right to impose lockouts”.15 However, the Community Charter on the Fundamental Social Rights of Workers 1989 (CCFSRW), point 13 of which provides for a right to resort to collective action, including the right to strike, “subject to obligations arising under national regulations and collective agreements”, is referred to, not only in Art.136 EC, but also in the Preamble of the EU Treaty. The EU Charter of Fundamental Rights 2000 (EUCFR) has greater legal effect.16 It too protects the right to strike, but in a more circumscribed manner. Article 28 refers to the entitlement of, “workers and employers, or their respective organisations. . . in cases of conflicts of interest, to take collective action to defend their interests, including strike action”, but adds specifically that exercise of the entitlements set out therein must be “in accordance with Community law”. This provision indicates that rights to bargain or to strike arising under national law may be struck down to the extent that they are inconsistent with the market freedoms guaranteed under EC law. This qualified, hesitant approach is reflected in the text of EC Directives. Absent Treaty amendment, there are limits to what the legislature is able to achieve. The free movement provisions take precedence over secondary legislation, and it is open to the Court to annul legislation that infringes the EC Treaty. In addition, the interventions of the legislature can never be determinative in proceedings before the Court relating to the interpretation of Treaty provisions. However, the legality of the Directives we refer to below has not been called into question, and, as we shall see, the Court is, as we contend it should be, prepared to take the interventions of the legislature into account when interpreting the EC Treaty.17 The Posted Workers Directive The obvious starting point in this regard is the Posted Workers Directive, which was at issue in the Laval case, and which the Court had, even before Laval taken into account when interpreting the EC Treaty provisions on the freedom to provide services.18 The 15 EC Treaty Art.137(5). See B. Ryan, “Pay, Trade Union Rights and European Community Law” (1997) 13 Int. J. Comp. L.L.I.R. 305. 16 The Court now takes cognisance of the rights in the Charter; see, e.g. European Parliament v Council of the European Union (C-540/03) [2006] E.C.R. I-5769; [2006] 3 C.M.L.R. 28 at [38]; and Unibet (London) Ltd v Justitiekanslern (C-432/05) [2007] E.C.R. I-2271; [2007] 2 C.M.L.R. 3 at [37]. The legal effect of the Charter will be enhanced by the Treaty of Lisbon. However, a Protocol on the Application of the Charter to Poland and the UK states, inter alia, that: “[F]or the avoidance of doubt, nothing in Title IV—Solidarity of the Charter creates justiciable rights applicable to Poland and the UK except in so far as Poland and the UK has provided for such rights in its national law.” This is another illustration of the political difficulties associated with the scope of labour law rights. 17 Syrpis, EU Intervention in Domestic Labour Law, p.123. See also M. Dougan, “The Constitutional Dimension to the Case Law on Union Citizenship” (2006) 31 E.L. Rev. 613. 18 See, e.g. Wolff & Muller GmbH & Co KG v Pereira Felix (C-60/03) [2004] E.C.R. I-9553; [2005] 1 C.M.L.R. 21. Note however that in situations of “reflagging”, which involve the freedom of establishment, the affected workers do not come within the scope of the Posted Workers Directive.


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Directive attempts to ensure that “a nucleus of mandatory rules for minimum protection” is observed in the host country by undertakings posting workers to perform temporary work.19 The Directive does not, however, “harmonise the material content of those mandatory rules for minimum protection”.20 The aims of the Directive, as the Court notes in Laval , are first to ensure a climate of fair competition between national undertakings and undertakings which provide services transnationally, and second to enable posted workers to enjoy better terms and conditions of employment.21 The context for the adoption of the Directive was the following statement of the Court interpreting Art.49 EC, which appeared to give an unrestricted freedom to Member States to apply labour legislation to undertakings providing services on their territories. The Court stated that: “Community law does not preclude Member States from extending their legislation, or collective labour agreements entered into by both sides of industry, to any person who is employed, even temporarily, within their territory, no matter in which country the employer is established.”22 The Directive seems to have been intended to restrict the autonomy which the Court had apparently given Member States,23 by providing guidance as to which of the host state’s labour law rules may be applicable to service providers in respect of posted workers. However, as the Laval case amply demonstrates, the Directive has failed to clarify the precise nature of the relationship between free movement rights and collective labour law. Article 3(1) of the Directive identifies a nucleus of mandatory rules (this could be termed a “floor”) which host states must apply to posted workers. It would have been open to the legislature to state explicitly that the application of any rules beyond the nucleus of mandatory rules would be unlawful—in effect turning the floor into a ceiling. Instead, Art.3(7) states that the Directive, “shall not prevent application of terms and conditions of employment which are more favourable to workers”. As has recently been observed in the Opinion of A.G. Bot in Rüffert v Land Niedersachsen (C-346/06),24 “this provision authorises the implementation of enhanced national protection”, but only insofar as “is permitted under Article 49 EC”. In Laval , the Court observed that, in Sweden, terms and conditions of employment covering the matters listed in Art.3(1) of the Directive, save for minimum rates of pay, had been laid down by law25 ; and explained that Sweden had not, as it might have 19 Posted

Workers Directive recital 6. (C-341/05) at [60]. 21 Laval (C-341/05) at [74]–[77]. 22 Rush Portuguesa Lda v Office National d’Immigration (C-113/89) [1990] E.C.R. I-1417; [1991] 2 C.M.L.R. 818 at [18]. 23 See P. Davies, “Posted Workers: Single Market or Protection of National Labour Law Systems?” (1997) 34 C.M.L. Rev. 571. In later cases, e.g. Commission of the European Communities v Germany (C-341/02) [2005] E.C.R. I-8453; [2005] 3 C.M.L.R. 4 at [24], the Court made it clear that: “The application of such rules must be appropriate for securing the attainment of the objective which they pursue, that is to say, the protection of posted workers, and must not go beyond what is necessary in order to attain that objective.” 24 R¨ uffert v Land Niedersachsen (C-346/06) Opinion of A.G. Bot, September 20, 2007 at [81]–[84]. His Opinion is line with that of A.G. Mengozzi in Laval (C-341/05) 25 Laval (C-341/05) at [67]. Article 3(1)(c) of the Directive refers specifically to “minimum rates of pay”. 20 Laval


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done, made use of the options provided in Art.3(8) and (10) of the Directive, which would have secured further rights for posted workers.26 Wage rates were set by way of collective negotiations, on a case-by-case basis and at the place of work, having regard to the qualifications and tasks of the employees concerned. The Court found that Directive 96/71 could not be relied upon to justify an obligation on foreign service providers: “[T]o comply with rates of pay such as those which the trade unions seek in this case to impose in the framework of the Swedish system, which do not constitute minimum wages and are not, moreover, laid down in accordance with the . . . directive.”27 This was on the basis that Art.3(7) of the Directive could not “be interpreted as allowing the host Member State to make the provision of services in its territory conditional on the observance of terms and conditions of employment which go beyond the mandatory rules for minimum protection”, as set out in Art.3(1). To rule otherwise “would amount to depriving the directive of its effectiveness”.28 While it would be overstating the case to suggest that the judgment in the Laval case turns the floor into a ceiling, it is the case that national measures and collective action intended to secure terms and conditions beyond the floor established in the Directive are viewed with suspicion by the Court. The scope for justification of such measures under Art.49 EC, which the Court expressly referred to in Laval ,29 is limited. Emphasis is placed on the clarity of obligations to be imposed on service providers, at the expense of the improvement of terms and conditions for posted workers.30 The fault may well lie with the failure of the political institutions to clarify what they intended by Art.3(7) in the context of a Directive apparently aimed at circumscribing state discretion. The issue was fudged, and it is at least arguable that the Court’s response merely reflected what it construed as a political desire to tame its more generous impulses. The Services Directive Directive 2006/12331 (henceforth “Services Directive”) is an attempt to remove obstacles to economic activity within Europe. A key issue, as with the Posted Workers Directive, is whether host states, or trade unions within those states, are permitted to apply their labour law rules to foreign service providers. We characterise the intervention of the legislature as a missed opportunity. Its effect is to leave assessment of the relationship between economic and social rights in the hands of the Court, and moreover, to give the Court almost no indication of the weight it should ascribe to the various interests at stake. As we shall see in this section, more could have done more to guide the Court. 26 Laval (C-341/05) at [67], [84]. See further Davies, “Posted Workers” (1997) 34 C.M.L. Rev. 571, 579–83 and 593–602. Article 3(8), (10) second indent, refer to standards which derive from collective agreements, “which have been made universally applicable”; Art.3(10) first indent provides for an extended floor “in the case of public policy provisions”. 27 Laval (C-341/05) at [70]. 28 Laval (C-341/05) at [80]. 29 Laval (C-341/05) at [68]. 30 Laval (C-341/05) at [110]. 31 Directive 2006/123 on services in the internal market [2006] OJ L376/36.


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One precedent, and perhaps the clearest statement in favour of the autonomy of national systems, is the “saving clause” in Regulation 2679/9832 (the “Monti Regulation”) relating to Commission action in respect of free movement of goods. Article 2 makes it clear that the Regulation: “[M]ay not be interpreted as affecting in any way the exercise of fundamental rights as recognised in Member States, including the right or freedom to strike.”33 It therefore protects the exercise of fundamental rights “as recognised in Member States” without further restriction, albeit in a limited context. In drafting the Services Directive, the Council was unwilling to afford such a broad scope to national autonomy. The Commission’s first draft was premised on the application of a “country of origin” principle, whose effect would be that service providers would be subject only to the laws applying in the country in which they were based.34 The Posted Workers Directive was to be exempt from this principle, but the capacity of host states to monitor compliance with minimum terms and conditions was to be reduced.35 Following extensive opposition and lobbying from trade unions,36 the European Parliament proposed a number of amendments.37 In particular, the Parliament sought to include a provision stating that the Services Directive would “not apply to or affect labour law”, specifying that: “[I]t shall fully respect the right to negotiate, conclude, extend and enforce collective agreements, and the right to strike and to take industrial action according to the rules governing industrial relations in Member States.”38 The Parliament also included a provision stating that the Services Directive would: “[N]ot be interpreted as affecting in any way the exercise of fundamental rights as recognised in the Member States and by the Charter of the European Union, including the right to take industrial action.”39 Had such a text been adopted, it would have remained open to the Court to apply Art.49 EC, and, notwithstanding the intervention of the legislature, to decide that the exercise of a right to strike might, in particular circumstances, be unlawful. Still, the political institutions would at least have provided a clear indication to the Court of the weight to be afforded to the various interests at stake, which might be expected to lead 32 Regulation 2679/98 on the functioning of the internal market in relation to the free movement of goods among the Member States [1998] OJ L337/8. 33 Regulation 2679/98 Art.2. 34 See Proposal for a Directive on services in the internal market COM(2004)2 Art.16. 35 W. Kowalsky, “The Services Directive: The Legislative Process Clears the First Hurdle” (2006) 12(2) Transfer 231, 238. 36 ETUC comment on “Draft Directive on Services in the Internal Market”, available at http://www.etuc.org/a/499 [Accessed April 9, 2008], referring, inter alia, to the events which took place in Laval (C-341/05). 37 See Editorial Comments, “The Services Directive Proposal: Striking a balance between the promotion of the internal market and preserving the European social model?” (2006) 43 C.M.L. Rev 307. 38 Resolution on the proposal for a Directive on services in the internal market Consolidated text [2006] OJ C290E/343 Art.1(7). 39 Resolution on the proposal for a Directive on services in the internal market [2006] OJ C290E/343 Art.1(8).


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the Court to find a way either to exclude trade unions from scrutiny under the free movement provisions of the EC Treaty, or to find that their actions were justifiable and proportionate. In the Directive which was finally adopted in December 2006, the clauses inserted by the European Parliament were diluted. Article 1(6) provides that the Directive, “does not affect labour law. . . which Member States apply in accordance with national law which respects Community law [our emphasis]”. Similarly Art.1(7) provides that the Directive: “[D]oes not affect the exercise of fundamental rights as recognised in the Member States and by Community law. Nor does it affect the right to negotiate, conclude and enforce collective agreements and to take industrial action in accordance with national law and practices which respect Community law [our emphasis].” Article 3(3) confirms that: “Member States shall apply the provisions of this Directive in compliance with the rules of the Treaty on the right of establishment and the free movement of services.”40 It seems that the political institutions want to be seen to be protecting the right to take collective action. They also recognise that there is some value in the autonomy of national industrial relations systems. However, there are clear disagreements between the various governments and Community institutions in relation to the permissible scope of this autonomy. These disagreements seem unlikely to be resolved post-enlargement.41 The compromise position reflected in the Services Directive was not to attempt to spell out the legitimate scope of collective action in the event of conflict with the free movement provisions of the EC Treaty, but rather to delegate that decision to the Court. A judicial solution? There are various legal techniques which the Court could employ in determining the extent to which collective action may operate as a legitimate constraint on employers’ economic freedoms under Community law. One potential strategy involves reconsideration of notion of the “abuse” of free movement rights. 42 Another involves a (re-)definition of what constitutes a “barrier” to free movement. 43 However, in this article, we focus on the way in which the Court chose to tackle questions relating to: i) the exclusion of collective agreements and action from scrutiny under the free movement provisions of the EC Treaty; ii) the horizontal direct effect of EC Treaty provisions 40 See also “Commissioner Charlie McCreevy’s Statement on the Vote in the European Parliament on the Services Directive” SPEEC/06/687, European Parliament Plenary Session, Strasbourg (November 15, 2006). 41 See M. Heidenreich, “The Decision-making Capacity of the European Union After the Fifth Enlargement” (2004) BACES Discussion Paper No.1 available at http://www.uni-bamberg.de/fileadmin/uni /wissenschaft einricht/baces/pdf/Discussion Paper/discussion paper 1.pdf [Accessed April 9, 2008]; and P. Blokker, “The Post-enlargement European Order: Europe ‘United in Diversity’?” European Diversity and Autonomy Papers EDAP 1/2006. 42 See Van Binsbergen v Bestuur van de Bedrijfsvereniging voor de Metaalnijverheid (33/74) [1974] E.C.R. 1299; [1975] 1 C.M.L.R. 298 at [13]. See the outright rejection of the attempt made by trade unions to put forward this argument in Laval (C-341/05) at [43]–[44]. 43 See, e.g. the tests in Criminal Proceedings against Keck (C-267) [1993] E.C.R. I-6097; [1995] 1 C.M.L.R. 101 at [17]; and Graf v Filzmoser Maschinenbau GmbH (C-190/98) [2000] E.C.R. I-493; [2000] 1 C.M.L.R. 741 at [23]; discussed in Syrpis, EU Intervention in Domestic Labour Law, Chs 2 and 4.


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regarding free movement of services and establishment; iii) potential justifications for breaches of free movement provisions; and iv) proportionality. In both the Viking and Laval judgments, the Court stated that: “[S]ince the Community has thus not only an economic but also a social purpose, the rights under the provisions of the Treaty on the free movement of goods, persons, services and capital must be balanced against the objectives pursued by social policy.”44 This acknowledgement chimes with the current wording of Art.2 EC, and with the aims of the Union as described in the Lisbon Reform Treaty. We argue that, nevertheless, the choices which the Court has made in the Viking and Laval cases represent a tipping of the delicate balance between economic and social rights in favour of the former. Exclusion of collective agreements and action In Albany International BV v Stichting Bedrijfspensioenfonds Textielindustrie (C-67/96),45 the Court found that the social policy objectives pursued in collective agreements would be seriously undermined if management and labour were subject to the competition law provisions of the EC Treaty when seeking jointly to improve conditions of work and employment. Accordingly, the Court held that such collective agreements must, by virtue of their nature and purpose, be regarded as falling outside the scope of those provisions.46 In the Viking case, the Court chose to distinguish Albany on the basis that such an approach was limited to competition law and was not applicable to EC Treaty provisions related to free movement.47 The Court also referred to previous cases in which the terms of collective agreements were assessed with reference to the free movement provisions.48 The Court’s view was that it is not inherent in the very exercise of trade union rights and the right to take collective action that free movement rights will be prejudiced.49 This assertion is potentially problematic. While collective agreements do not necessarily impede freedom of establishment (or services)—and could even contain provisions which encourage mobility—it is hard to imagine, given the Court’s current definition of the “barrier” to free movement, how collective action could not be regarded as having a negative effect on the exercise of such freedoms.50 The key issue is whether the Court chooses to involve itself in balancing the fundamental rights in question. In the Albany judgment, the Court in effect insulated certain collective 44 Viking

(C-438/05) at [79]; Laval (C-341/05) at [105]. International BV v Stichting Bedrijfspensioenfonds Textielindustrie (C-67/96) [1999] E.C.R. I-5751; [2000] 4 C.M.L.R. 446. 46 Albany (C-67/96) [1999] E.C.R. I-5751; [2000] 4 C.M.L.R. 446 at [59]–[60]. 47 Viking (C-438/05) at [53]. 48 Viking (C-438/05) at [54]; citing Schoning-Kougebetopoulou v Freie und Hansestadt Hamburg (C-15/96) [1998] E.C.R. I-47; [1998] 1 C.M.L.R. 931; Commission of the European Communities v France (C-35/97) [1998] E.C.R. I-5325; and Merida v Germany (C-400/02) [2004] E.C.R. I-8471; [2004] 3 C.M.L.R. 52; though these cases all relate to Art.7(4) of Regulation 1612/68, which makes express reference to collective agreements. 49 Viking (C-438/05) at [52]. 50 See, in this respect, Viking (C-438/05) at [72] and [73], and Laval (C-341/05) at [99]. 45 Albany


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agreements from the competition law provisions of the Treaty. In the Viking and Laval cases, the Court, on the contrary, decided that it should be involved in the balancing process when collective action conflicts with free movement. The merits of this approach can only be assessed once the remainder of the Court’s arguments are evaluated. Horizontal direct effect of EC Treaty provisions regarding free movement The extent to which free movement provisions of the EC Treaty should have “horizontal scope” is not settled.51 Prior to the judgments in Laval and Viking, it was far from evident that trade unions, as private parties, would be bound directly by Art.43 EC or Art.49 EC when initiating industrial action. Indeed, the European Commission submitted that the application of horizontal direct effect in these circumstances would be inappropriate.52 In the Laval case on the freedom to provide services, A.G. Mengozzi observed that other cases in which Art.49 EC was found to be directly applicable to the actions of private parties concerned the legality of rules drawn up by private entities,53 whereas the instant case concerned exercise of a legal right to take collective action. Nevertheless, he decided that the way in which the Swedish State had delegated its regulatory powers to Swedish trade unions allowed the actions of the latter to be caught by Art.49 EC.54 The Court agreed on the basis that: “The abolition, as between Member States, of obstacles to the freedom to provide services would be compromised if the abolition of State barriers could be neutralised by obstacles resulting from the exercise of their legal autonomy by associations or organisations not governed by public law.”55 This accorded with the Court’s finding in the Viking, in relation to Art.43 EC, that: “Since working conditions in the different Member States are governed sometimes by provisions laid down by law or regulation and sometimes by collective agreements and other acts concluded or adopted by private persons, limiting application of the prohibitions laid down by these articles to acts of a public authority would risk creating inequality in its application.”56 Thus, where trade unions “participate in the drawing up of agreements seeking to regulate paid work collectively”,57 they are covered by the free movement provisions. 51 See S. Van den Bogaert, “Horizontality: The Court Attacks?” in C. Barnard and J. Scott (eds), The Law of the Single European Market: Unpacking the Premises (Oxford: Hart, 2002), p.123. 52 Bercusson, “The Trade Union Movement and the European Union” (2007) 13 E.L.J. 279, 288. 53 See, e.g. Walrave v Association Union Cycliste Internationale (36/74) [1974] E.C.R. 1405; [1975] 1 C.M.L.R. 320 at [17], [23]–[24]; Dona v Mantero (13/76) [1976] E.C.R. 1333; [1976] 2 C.M.L.R. 578 at [17]–[18]; Union Royale Belge des Societes de Football Association (ASBL) v Bosman (C-415/93) [1995] E.C.R. I-4921; [1996] 1 C.M.L.R. 645 at [83]–[84]; Deliege v Ligue Francophone de Judo et Disciplines Associees ASBL (C-51/96 & C-191/97) [2000] E.C.R. I-2549; [2002] 2 C.M.L.R. 65 at [47]; and Wouters v Algemene Raad van de Nederlandse Orde van Advocaten (C-309/99) [2002] E.C.R. I-1577; [2002] 4 C.M.L.R. 27 at [120]. 54 Opinion of A.G. Mengozzi on Laval (C-341/05) at [158]. 55 Laval (C-341/05) at [98]. 56 Viking (C-438/05) at [34]. 57 Viking (C-438/05) at [64]–[65].


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In our view, it may be appropriate to hold that private parties, including trade unions, are bound by free movement provisions when they are exercising regulatory tasks which would otherwise be exercised by public authorities in the state in question. If that were not the case, Member States would be able to evade their obligations by delegating aspects of their regulatory functions to private parties. However, it is not possible for the state to perform many of the tasks of trade unions, and in these instances, we do not see why trade unions’ conduct should be caught. Our argument can be illustrated by the distinction between setting a minimum wage on a national or sectoral basis, and collective bargaining in respect of particular establishments. The setting of a minimum wage is a task which could be carried out by the Member State or delegated to trade unions and employers’ associations to achieve through collective agreements. Collective bargaining at the level of the enterprise, whereby trade unions negotiate with employers variable terms and conditions depending on scarcity of labour and profitability, usually over and above statutory minimum or minima set out in national level collective agreements (or arbitral awards), is not a form of delegated state regulation. In this respect, there would seem to be much to be learned from the law on the free movement of goods, where the Court has chosen not to extend the reach of Arts 28 and 29 EC to the activities of private parties58 ; rather, private conduct is caught (if at all)59 by the competition law provisions of the Treaty. In Commission of the European Communities v France (C-265/95)60 and Eugen Schmidberger Internationale Transporte Planzuge v Austriar (C-112/00),61 the Court demonstrated that the State may be held responsible for failing to adopt adequate measures to prevent obstacles to the free movement of goods that are created by the actions of private individuals. It is more than a little curious that, in Viking, both A.G. Poiares Maduro and the Court cited these judgments as support for the proposition that Article 43 EC may be relied upon against trade unions.62 Were the Court to have followed the path they signalled, it would not have held that Viking could rely on Art.43 EC against the trade unions, but that the employer may have a claim against Finland, the Member State whose laws had granted unions the right to take collective action. In this regard, we cannot accept the claim of the Advocate General that, had the case “come to the Court in the framework of proceedings against the Finnish authorities”, this: “[W]ould not have affected the substance of the problem: how to reconcile Viking Line’s rights to freedom of movement with the rights to associate and to strike of the FSU and the ITF?”63 58 See e.g. Vereniging van Vlaamse Reisbureaus v Sociale Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten (311/85) [1987] E.C.R. 3821; [1989] 4 C.M.L.R. 213 at [30]. 59 Agreements between undertakings are not caught by Art.81 EC only on the basis that they affect trade between Member States. They must also be shown to have as their object or effect, the prevention, restriction or distortion of competition, and satisfy the de minimis test. 60 Commission of the European Communities v France (C-265/95) [1997] E.C.R. I-6959 at [30]. 61 Eugen Schmidberger Internationale Transporte Planzuge v Austriar (C-112/00) [2003] E.C.R. I-5659; [2003] 2 C.M.L.R. 34 at [57] and [62]. 62 Viking (C-438/05) at [62]; and Opinion of A.G. Poiares Maduro in Viking (C-438/05) at [38]–[39]. 63 Opinion of A.G. Poiares Maduro in Viking (C-438/05) at [40].


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There is, of course, a tremendous difference in practice for the trade unions, which would in effect be insulated from the dispute on the condition that they could show that their conduct complied with the substantive and formal requirements of national legislation. The focus of the dispute would shift instead towards the legality of the national framework in which such action is protected. The right to strike as a basis for justification It was previously uncertain whether collective action, including the right to strike, would be regarded as a fundamental right under Community law.64 Relying on the Council of Europe’s European Social Charter 1961, International Labour Organisation (ILO) Convention 87, the CCFSRW, and the EUCFR, the Court, in both Viking and Laval , was able to hold that “the right to take collective action for the protection of workers”, including the right to strike, must: “[B]e recognised as a fundamental right which forms an integral part of the general principles of Community law the observance of which the Court ensures.”65 Following Schmidberger and Omega Spielhallen- und Automatenaufstellungs GmbH v Bundesstadt Bonn (C-36/02),66 the Court held that the exercise of fundamental rights does not fall outside the scope of the free movement provisions of the EC Treaty,67 but is a legitimate interest which may, in principle, and in accordance with the principle of proportionality, justify a restriction of the fundamental freedoms guaranteed by the EC Treaty.68 Two aspects of the Court’s formulation, and its application to the actions of trade unions, are problematic and worthy of comment. The first relates to the fact that the right to take collective action does not stand alone, but falls to be justified with reference to the end that it serves.69 The requirement that collective action be for the “protection of workers” is consistent with the Court’s earlier formulation of public interest assessments relating to national labour law rules.70 Perhaps in response to this line of authority, and given uncertainty as to whether the 64 Compare Albany (C-67/96) Opinion of A.G. Jacobs at [159], with the Written Observations of the UK in Viking (C-438/05), pp.10–20. See also Bercusson, “The Trade Union Movement and the European Union” (2007) 13 E.L.J. 279, 298–300. 65 Viking (C-438/05) at [42]–[44]; and Laval (C-341/05) at [89]–[91]. 66 Omega Spielhallen- und Automatenaufstellungs GmbH v Bundesstadt Bonn (C-36/02) [2004] E.C.R. I-9609; [2005] 1 C.M.L.R. 5. 67 In this respect, the Court also cited Art.28 of the EUCFR. See Viking (C-438/05) at [44]; and Laval (C-341/05) at [91]. 68 Viking (C-438/05) at [45]–[46]; Laval (C-341/05) [93]–[95]. See Schmidberger (C-112/00) [2003] E.C.R. I-5659; [2003] 2 C.M.L.R. 34 and Omega (C-36/02) [2004] E.C.R. I-9609; [2005] 1 C.M.L.R. 5. Laval (C-341/05) at [117], confirms that “discriminatory rules may be justified only on grounds of public policy, public security or public health”. Space precludes further consideration of the discriminatory aspects of Laval (C-341/05), which the Court deals with at [112]–[120]. On the relevance of discrimination, see also Opinion of A.G. Poiares Maduro in Viking (C-438/05) at [57]–[72]. 69 Similarly, in Schmidberger (C-112/00) [2003] E.C.R. I-5659; [2003] 2 C.M.L.R. 34 at [80], the Court held that freedom of expression and freedom of assembly are not absolute, but must be viewed in relation to their social purpose. 70 See e.g. Criminal Proceedings against Webb (279/80) [1981] E.C.R. 3305; [1982] 1 C.M.L.R. 719 at [17]; and Seco SA v Etablissement d’Assurance contre la Vieillesse et l’Invalidite (62/81 & 63/81) [1982] E.C.R. 223 at [14].


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right to collective action would be recognised by the Court as a fundamental right, the unions themselves, in their submissions, made the link between the right to take collective action and the objective of the protection of workers.71 The Court responded by vigorously scrutinising whether the action in question could indeed be said to be capable of “protecting workers”, requiring, as we shall see, that there be a connection between the action taken and tangible, even immediate, benefits for particular workers.72 In Laval , the Court conceded that: “[I]n principle, blockading action by a trade union of the host Member State which is aimed at ensuring that workers posted in the framework of a transnational provision of services have their terms and conditions fixed at a certain level, falls within the objective of protecting workers.” The same applies to action aimed at preventing “social dumping”.73 However, on the facts of the case, the Court considered that a blockade designed to “force” an employer to enter into negotiations on rates of pay could not be justified on public interest grounds,74 since the negotiations formed “part of a national context” characterised by a lack of “sufficiently precise and accessible” provisions, which rendered it “impossible or excessively difficult in practice” for the employer to determine the obligations with which it was required to comply as regards minimum pay.75 This view of the scope of potential justifications under Art.49 EC is consistent with the Court’s interpretation of the Posted Workers Directive as being intended to render the obligations of foreign service providers clear and readily accessible.76 Yet, the Court’s findings seem to indicate considerable sympathy for an employer that is placed under pressure to enter into exclusive negotiations with a trade union without knowing what the precise outcomes may be.77 The Court’s conclusion affects not just the Swedish system, but all national industrial relations systems which allow workers to strike to gain “recognition”, that is, exclusive bargaining rights which then oblige an employer to enter into some form of negotiations. While the Court accurately observes that recognition of a particular union does not in itself bring concrete rewards or material benefits for workers, these seem unlikely to come about without the exclusive rights of negotiation that recognition accords.78 In Viking, the Court accepted that collective action taken by the FSU to preserve the jobs or terms and conditions of the crew of the Rosella was potentially justifiable, but considered that if the employer could provide a convincing undertaking that neither jobs 71 Written Observations on Behalf of the ITF in (438/05), p.4, para.1.6, and p.49, para.6.106; Written Observations on Behalf of the FSU, p.17, para.3.22. See also Viking (C-438/05) at [76]; and Laval (C-341/05) at [102]. 72 Compare the more generous approach adopted by the Court, in its assessment of a Member State’s margin of appreciation, in Schmidberger (C-112/00) [2003] E.C.R. I-5659; [2003] 2 C.M.L.R. 34 at [86]. 73 Laval (C-341/05) at [107], [103]. 74 Laval (C-341/05) at [111]. 75 Laval (C-341/05) at [110]. 76 Laval (C-341/05) at [64]–[88]. 77 Note also that Laval (C-341/05) at [110], draws on Criminal Proceedings against Arblade (C-369/96 & C-376/96) [1999] E.C.R. I-8453 at [43]. The relevant paragraph of Arblade is specifically concerned with the scope of criminal liability to which service providers may be subject. 78 On the significance of “recognition” within a UK legal framework, see K.D. Ewing, “Trade Union Recognition—A Framework for Discussion” (1990) 19 I.L.J. 209; and Lord Wedderburn, “Collective Bargaining or Legal Enactment: The 1999 Act and Union Recognition” (2000) 29 I.L.J. 1.


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nor terms and conditions of employees would be affected by reflagging, unions would not be entitled to take action.79 By contrast, the actions of the ITF did not come within the scope of “protection of workers”. This was not due to any objection to secondary action or sympathy strikes per se,80 but rather that the ITF “flags of convenience” policy applied regardless of whether the reflagging in question had harmful effects on particular groups of workers.81 The Court seemed not to appreciate that this policy was designed to address a means by which ship owners have incrementally diminished seafarers’ terms and conditions of employment. It is apparently tempting for ship owners to reduce wage costs by reflagging in another state which has not enacted legislation which protects seafarers or which does not do so in an effective manner. Moreover, where the ship owner has no link with the jurisdiction, the assets to compensate seafarers for any breach of their rights may not be available.82 ITF action may therefore be defensible for policy reasons promoting workers’ interests in a general way that the Court is reluctant to contemplate. The settlement of the Viking case in March 2008 means that we will not learn how the Court of Appeal would have applied the guidance proffered by the Court of Justice in this regard. The Court seeks an immediacy in its interpretation of the “protection of workers” not required under ILO supervisory jurisprudence, which has long stated that: “[T]he occupational and economic interests which workers defend through the exercise of the right to strike do not only concern better working conditions . . . but also the seeking of solutions to economic and social policy questions.”83 In 2007, the ILO Committee on Freedom of Association considered a complaint relating to the action taken by the Greek Government to end a strike called by seafarers’ unions.84 The objectives of the action were far-reaching, including not only the initiation of national collective bargaining, but also withdrawal of proposed legislation relating to seafarers, as well as changes to systems of vessel registration (that is, “flagging”), employment, taxation and pensions. The ILO Committee made reference to ILO Convention 87, when concluding in accordance with its established case law, that: “[O]rganizations responsible for defending workers’ socio-economic and occupational interests should be able to use strike action to support their position in the search for solutions to problems posed by major social and economic policy trends which have a direct impact on their members and on workers in general.”85 79 Viking

(C-438/05) at [80], [82]. discussion of the controversy over this issue, see P. Germanotta and T. Novitz, “Globalisation and the Right to Strike: The Case for European-Level Protection of Secondary Action” (2002) 18 Int. J. Comp. L.L.I.R. 67. 81 Viking (C-438/05) at [89]. 82 See A. Couper, “Historical Perspectives on Seafarers and the Law” and R. Churchill, D. Fitzpatrick and U. Khaliq, “Seafarers’ Rights at the National Level” in D. Fitzpatrick and M. Anderson (eds), Seafarers’ Rights (Oxford: Oxford University Press, 2005). 83 ILO Governing Body Committee on Freedom of Association, Digest of Decisions (Geneva, ILO, 2007) at [526]. 84 ILO Report 346, Case 2506, available at http://www.ilo.org/ilolex/english/caseframeE.htm [Accessed April 9, 2008]. 85 ILO Report 346, Case 2506 at [1076]. See ILO Governing Body Committee on Freedom of Association, Digest of Decisions at [527]. 80 For


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The actions of the Greek Government were regarded as unacceptable insofar as they had prevented the unions from doing so. The contrast with the approach of the Court of Justice is obvious. The proportionality test A further difficulty arises in relation to the application of the proportionality test. In Viking, the Court held that: “[I]t is for the national court to examine, in particular, on the one hand, whether, under the national rules and collective agreement law applicable to that action, [the union] did not have other means at its disposal which were less restrictive of freedom of establishment in order to bring to a successful conclusion the collective negotiations entered into with Viking, and, on the other, whether that trade union had exhausted those means before initiating such action.”86 This seems a curious requirement to apply to a trade union contemplating industrial action, which is usually intended to cause disruption so as to extract concessions from an employer. It is suggested by the Court that trade unions cannot rely on compliance with national law in their defence, but if that is so, on what can they rely?87 Should unions take the initiative in proposing further conciliation procedures independent of those offered by the state? Should they provide notice over and above the statutory minimum? To do so would undermine standard hard-line negotiating tactics used by both employers and unions in industrial disputes.88 Moreover, this approach requires that not only trade unions, but also national courts, engage in a complex discretionary exercise every time industrial action is threatened which might have an impact on free movement provisions. It is far from clear that courts are in a position to gauge whether the actions of trade unions in situations of industrial conflict are proportionate.89 In such circumstances, few trade unions may be willing to risk legal liability by taking industrial action, and when they do so, employers may be swift to bring an opportunistic application for an interlocutory injunction.90 Indeed, the uncertain prospect of litigation and legal liability could well undermine the capacity of trade unions to carry out their legitimate functions, previously acknowledged by the Court in Maurissen and European Public Service Union v Court of Auditors (C-193 & C-194/87).91 86 Viking

(C-438/05) at [87]. the application made by the British Airline Pilots’ Association in March 2008 for a High Court declaration as to whether Art.43 EC applies in the context of that dispute and whether a lawful strike ballot would be sufficient to evade a claim for unlimited damages. Press release available at http://www. balpa.org.uk/Media— Pr/BA%20Pilots%20Strike8.htm [Accessed April 9, 2008]. 88 Bercusson, “The Trade Union Movement and the European Union” (2007) 13 E.L.J. 279, 304. 89 As Lord Wedderburn has observed, in “Labour Law 2008: 40 Years On” (2007) 36 I.L.J. 397, 422: “People who have never been on a picket line tend to think that all industrial action is disproportionate if not indecent.” 90 See, for the application of a balance of convenience test under UK law, British Telecommunications Plc v Communication Workers’ Union [2003] EWHC 937; [2004] I.R.L.R. 58; and M. Milner, “Royal Mail Wins Court Injunction to Stop Strikes Planned for Next Week”, Guardian, October 13, 2007. 91 Maurissen and European Public Service Union v Court of Auditors (C-193 & C-194/87) [1990] E.C.R. I-95. 87 Note


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Conclusion As the Viking and Laval cases illustrate, there is a tension between, on the one hand the free movement provisions of the Treaty, and on the other the actions of trade unions otherwise permissible under national labour law. Understandably, some employers want to move so as to be able to exploit the opportunities available in the larger European market; and equally understandably, in these circumstances, some workers want to take steps to safeguard their interests through their organisations. One might have expected to find a political attempt to resolve this conflict. However, the only political agreement reached has been to delegate this decision to the Court. Given little guidance from the Treaties or Community legislation, the Court has employed a familiar arsenal of legal tests, albeit in a novel fashion, in order to attempt to find a compromise solution. What is now evident is that it is a solution unlikely to prove acceptable to trade unions. The Court’s finding in Viking that the right to take collective action, including the right to strike, is to be regarded as a fundamental right was initially greeted with relief within the trade union movement, but there was some appreciation that the “devil was in the detail”.92 Now the European Trade Union Confederation (ETUC) has considered the implications of both the Laval and Viking judgments more fully, and has expressed alarm at various aspects of the judgments. The Court’s decision to subject the actions of trade unions to scrutiny under Arts 43 and 49 EC, combined with the problems which beset the justification and proportionality tests in the labour law field, is said to lead to: “[I]ntolerable uncertainty for unions involved in virtually any case of industrial action over migration and free movement, a naturally growing area for disputes as Europe integrates its labour and services markets.”93 Moreover, the ETUC warns that this new state of affairs is also “dangerous”, in that “it reinforces critics of Europe who have long argued that the single market would inevitably threaten social standards”.94 It remains to be seen whether either the political institutions of the European Union or the Court will heed this warning, but it appears imperative that they do so.

92 See “TUC on ECJ Viking Judgment” at http://www.tuc.org.uk/law/tuc-14088-f0.cfm [Accessed April 9, 2008]; and ITF “Viking Case Judgement Response” at http://www.itfglobal.org/press-area/index.cfm/pressdetail/1703 [Accessed April 9, 2008]. 93 ETUC response to ECJ judgements Viking and Laval, Resolution adopted by the Executive Committee of the ETUC at its meeting of March 4, 2008 in Brussels EC.179, p.2. 94 Resolution adopted by the Executive Committee of the ETUC at its meeting of March 4, 2008 in Brussels EC.179, p.3. The Resolution proposes a “Social Progress Clause”, revision of the Posted Workers Directive, and co-ordination of transnational collective bargaining.


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