Luxembourg, 09/01/2007 (Agence Europe) - Following access of the ten new Member States in May 2004, several collective agreements in force in the territory of the EU15 (the older Member States) have disappeared, or are threatened with extinction, due to the more or less free movement of workers from the new Member States. This scenario highlights a problem that is likely to grow: what should be done when the freedom of movement or establishment is incompatible with the preservation of the national economic and social system? If one of the Union's sacred cows has to be sacrificed on the altar of pan-European State legislation, which one should be chosen and in what circumstances? These are the questions the Court has to answer in the case involving the “Laval un Partneri Ltd” construction company (“Laval”, Latvia), whose oral arguments were heard on Tuesday morning.
The result of this litigation, already a year old, is impatiently awaited. This is partly because the case will be the first in a series of similar affairs and also because it involves sensitive themes on the harmonisation of the European labour market, namely statutes on security, economic freedom and submission of State sovereignty to the interests of the European project. The final judgement of course depends on specific details of the case but it will, nonetheless, be considered as an important antecedent in case law.
Origins of the situation
Laval is a company based in Riga, Latvia. In May 2004, it provided Latvian workers to help build a school in Vaxholm, Sweden, on the basis of contracts concluded with the Swedish L&P Baltic Bygg AB subsidiary (the case is also known as the “Vaxholm” case). Negotiations with Swedish workers began in June 2004 but were not concluded. In November 2004, unions blocked the building site, including the financial services (payment of delivery companies and employees) and company logistics, with the help of unions from other sectors. After a few weeks, Baltic Bygg went bankrupt and Laval took the Swedish unions to the Swedish Works Tribunal, and asked for a sequestration of its assets in compensation of damages.
The Swedish tribunal asked the European Court of Justice a number of questions to determine whether the EC Treaty allowed a union or an association to compel a foreign service provider, through union action, to adhere to a collective agreement on working conditions.
Institutional Context
This affair effectively involves a central aspect of the European project. On one hand, the EC Treaty explicitly rules (Article 49) that, “restrictions to the free provision of services within the Community do not apply to Member State nationals established in a country of the Community other than that of the destination of the service provided”. It would appear not to leave a lot of room for manoeuvre in the case in point, but the provision in the Charter of Fundamental Rights in the EU should also be taken into account. It is just as clear in its allocation to workers of “the right to negotiate and conclude collective agreements at appropriate levels and to resort, in the event of a conflict of interest, to collective action to defend their interests” (Article 28). The legal status of the Charter (proclaimed in 2000 and integrated into the draft constitutional treaty) is perhaps less obvious than that in the EC Treaty but has just been added to this argument in the Swedish case. Although this country was the first to entirely open up to new arrivals in 2004, the autonomous management of its social model (and its union rights) were already a sine qua non condition for its accession in 1995. This management is characterised in practice by universal union membership. The European Commission considers that there is not necessarily a conflict with European legislation but explains that the Swedish tribunal has to comply with regulation in force, namely, the directive on the posting of workers (96/71/EC European Parliament and Council) (EUROPE 9121 and 9122).
An ideological and technical debate
The active participation of Member States demonstrates the importance of implementation. Sixteen governments have used their right to submit their responses to legal scrutiny and most responses underline (with the exception of the Baltic states) that union action should be considered in light of Article 49 of the EC treaty.
This interpretation would make the union action legal and prevent the law from opposing it. The Court has already shown, however, that it is not always convinced by this argument (see the Albany case C-67/96), and this procedure could become more caught up in detail. It should be noted, for example, that Laval indeed guaranteed the Swedish national minimum wage to its Latvian workers, but without taking account of regional variations, which are greater in Vaxholm. In addition, the company's bankruptcy could be due to “secondary” action of sympathetic union members from other sectors, which is only legal in some EU member States. This level of detail, even if it does not feature in the political rhetoric, could nevertheless decide the outcome of the case.
A precedent of some importance
The reason for national governments being in a state of a lert is that this case is becoming commonplace, a tendency which could become the norm. There are other cases currently before the Court, in particular involving the Finnish Viking Line transport company (which is due to be heard on 10 January) and also the construction company Rüffert (no date set). The legal details vary, but at the heart of the arguments lies the apparent conflict between the economic and social priorities of European law. The final decision in the case in point will no doubt set the tone for what is to come. (cd)