Labour market politics through jurisprudence: the influence of the judgements of the European Court of Justice (Viking, Laval, Ruffert, Luxembourg) on labour market policies.

Author:Zimmer, Reingard

1 Introduction

At the end of 2007 the European Court of Justice (ECJ) went through several extremely controversial judgements which contained juridical and political explosives. The important decisions on Viking (ECJ, Case C-438/05 Viking (2007) ECR I-10779-10840) and Laval (ECJ, Case C-341/05 Laval (2007) ECR I-11767-118904) dealt with the compatibility of national collective labour law with the requirements of European law and have imposed as a consequence restrictions on strike action by trade unions. In the judgements on Ruffert (ECJ, Case C-346/06 Ruffert (2008) ECR I-1989) and Commission against Luxembourg (ECJ, Case C-319/06, NZA 2008: 865), collective agreement clauses in public procurement law and a national implementation legislation of the posting of workers directive were declared contrary to community law. In the judgements economic freedoms have been systematically prioritised against fundamental social rights.

The decisions produced widespread debates not only in the European countries concerned. Critics warned of a radicalization of the internal market integration with negative consequences for the European welfare states (see different sources on: The fear is not new that national scope of action is limited by European regulations, but the sharp reaction indicate, that it now has come to a new level of restrictions: national institutions of negotiating partners and decision arenas are targeted and limited, a field on which the countries until now could operate freely. Cologne -based political economist Fritz Scharpf even calls for a boycott of the judgements: "the only way is not to follow the ECJ" (Scharpf 2008: 19 ff.).

The cases not only raise the question of the relation between European law and national law, but have impacts on national industrial relations systems and therefore on labour market policies of the member states. The countries are under pressure to respond to the judgements and have to adjust their policies accordingly. Regarding the consequences of the decisions on Viking - Laval - Ruffert and Luxembourg it is necessary however to differentiate between national systems. Due to the diversity of the different systems of industrial relations, the impact of the cases differ from country to country. The scope of action of governments, national trade unions and employers' organizations is restricted to differing degrees by the ECJ decisions. This leads to a reduction of the rights of workers and trade unions.

In this analysis, it will be shown how member states, which were the trigger for the respective ECJ decisions or which are particularly effected by the judgements, respond to the ECJ jurisprudence - although the article cannot cover the issue conclusively.

2 Historical background

The European Community (EC) was started in 1957 as a project of market integration, based upon the idea of the "four liberties": free movement of goods, services, capital and persons. Trade barriers were reduced between EC member states to achieve a common market in Europe. The European Economic Community's scope was limited to economic policy with social policy being excluded. The guiding principle was that individuals from other member states should enjoy the same rights as nationals concerning terms of investment, access to labour market, trade in goods and provisions of services. The European Institutions (Commission and ECJ) were given the task by the treaties to ensure that these principles were upheld. Since then Commission and ECJ gradually empowered themselves and increasingly shifted the boundaries between national law and European law at the expense of the member states (Hopner 2008: 2).

The enhancement of the fundamental freedoms was based upon the idea to form the project of the European Union on the basis of a gradual market extension. Although social policy initiatives tried to correct market-processes in terms of a "positive integration", EU policy primarily focussed on the establishment of economic freedom of movement. This was manifested with the primacy of a market -related "negative integration" (Blanke 2008: 5-6), which means reduction of trade barriers and de-regulation without re-regulation.

The first (small) social corrections were made with the establishment of the European Union (EU) through the treaty of Maastricht, when the formation of a common European market and a single currency with sharp interventions into the autonomy of the member states in this area, made quite clear that there was a lack of social integration. The consequent lack of legitimacy felt by the European population led to the protocol and the convention on "social dialogue" of 1992, which was finally integrated in the treaty of Amsterdam (1997) with the revision of the EC treaty. This social convention considerably enlarged the EU competences on social policy. In addition, the majority principle was imposed for important legislative decisions of the council of the European Union and the social partners got a more important role in the legislative procedure. The treaty of Nice (2001) contained regulations to allow the smooth institutional operation of the enlarged Union, especially by reforming the consistence and functioning of the European institutions. Finally, on 1 December 2009, the treaty of Lisbon came into force, which refers in Art. 6 TEU to the charter of fundamental rights of the European Union. It remains to be seen if this will strengthen the fundamental rights of the charter (Schomann 2010: 1 ff.).

In any case it becomes clear that there is a contradiction between the slow turning of the EU to more social rights and the outlined ECJ judgements in which market freedoms have priority over social rights.

3 The questionable judgements of the European Court of Justice

Given the fact that the authority of the EU in social policy gradually expanded (according to the treaties of Amsterdam, Nice and Lisbon) it is important to note, that law created by judges, such as jurisdiction by the ECJ, increasingly affects social policy. Recent judgements on collective labour law (Viking, Laval etc) however, are controversial because they may interfere too much in the autonomy of the member states concerning their system of industrial relation.

3.1 The Viking case

The shipping line Viking provides ferry services between Finland and Estonia. The company decided to reflag their ferries under the Estonian flag. One reason for this decision was to employ the crew at lower Estonian wages. In response, the Finnish Seamen's Union (FSU) decided to take collective action against Viking to stop the re-flagging process. Furthermore, FSU requested the International Transport Workers' Federation (ITF) to ask their members outside Finland not to enter in any negotiations with Viking. The coordinated strategy of the ITF states that only the union of the country where the vessel's owner is based has the right to collective bargaining for the crew (for further information see: ITF 2011).

The ECJ declared the threatened trade union action against the re-flagging of Viking to be incompatible with the European Union law. The court argues, that the freedom of establishment under Art. 49 TFEU (ex-Art. 43 EC) is guaranteed as a fundamental (economic) freedom, which not only serves as a defensive right against government interference, but also has "horizontal direct effect" against the restriction by private third parties. Considered as such are also trade unions (ECJ, C-438/05, par. 61, 66), whose right to take collective action is seen as a restriction on the freedom to provide services and the freedom of establishment. Such action by trade unions is recognized only as justified by the ECJ, if the collective action has a legitimate aim, is justified by overriding reasons of public interest, suited to attaining the objective pursued and does not go beyond what is necessary in order to attain it (ECJ, C-438/05, par.75).

In concrete terms, according to the ECJ first the jobs and working conditions of the seafarers would have had to have been severely compromised and secondly the union would have had to have used more lenient instruments than the threat of strike and boycott. Incidentally the threatened boycott by the ITF-members as part of a general strategy would overshoot the mark.

In contrast to the absolute granted fundamental (economic) freedoms, trade unions' fundamental rights are thus treated as imposed barriers. Collective action hence is put to a test of its proportionality which would have been considered as interference in fundamental union rights if it had been performed in that form on national level. At any rate the ECJ sets strict guidelines on how national courts should judge such cases.

Although in the Viking case the ECJ acknowledged for the first time the right to take collective action and the right to strike as fundamental rights, the court gives priority to the fundamental (economic) freedoms over the fundamental (union) rights.

3.2 The Laval Case

The Latvian construction company Laval renovated a school near Stockholm employing posted Latvian workers at Latvian wages. The Swedish Construction union Byggnads started negotiations with Laval to achieve Swedish collective agreements on wages and other working conditions, which in Sweden are always negotiated on a case-by-case basis. To benefit from lower wages in Latvia, Laval stopped the negotiations with Byggnads and signed a collective agreement with a Latvian trade union instead. Thereupon Byggnads started to blockade the construction sites of Laval, later on supported by solidarity action from the Swedish electricians' trade union. Industrial action was lawfull, because Swedish law limited the peace obligation to collective agreements which are directly subject to Swedish law ("lex Britannia" (1)). Collective agreements with trade unions from other member states thus did...

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