The Court held that the threat of strike action by a trade union to force an employer to conclude a collective agreement the terms of which are liable to deter it from exercising freedom of establishment constitutes a restriction on that freedom prohibited by Article 43 EC.
The facts of the case are fairly remarkable. In October 2003, Viking Line, a Finnish ferry company, gave the Finnish Seamen's Union (FSU) notice of its intention to reflag its vessel Rosella, which operated on the Baltic between Finland and Estonia on the "booze cruise". The Rosella operated at a loss and so Viking Line wished to register it in Estonia, where it had a subsidiary, in order to be able to employ an Estonian crew, at a lower level of pay than that applicable in Finland. That way, Viking Line hoped to compete with other booze cruise ferries on the same route. In November 2003, following a request from FSU, the International Transport Workers' Federation (ITF) in London sent a circular to all its affiliates requiring them to refrain from entering into negotiations with Viking Line, with the threat of a boycott of all Viking Line vessels if they failed to comply. FSU imposed conditions on the renewal of the manning agreement with Viking Line and announced its intention to strike. It required, on the one hand, an increase in the number of the crew on the Rosella, and, on the other, the conclusion of a collective agreement, requiring Viking Line, if the vessel was reflagged in Estonia, to continue to comply with Finnish labor law and would not lay off crew. Then, Estonia joined the EU in 2004. Viking Line, which was determined to register the loss-making vessel under the Estonian flag, brought proceedings before the courts in England where ITF had its seat to oblige it to withdraw its circular threatening a boycott and seeking an order against the FSU that it must not infringe Viking's right of establishment with regard to the reflagging of the Rosella.
The English Court of Appeal referred a series of questions to the Court of Justice on whether the rules on the freedom of establishment in Article 43 EC applied in such a case as this one.
The Court of Justice's judgment is a rich one that rewards careful reading.
The Court held that Article 43 EC on freedom of establishment applies to collective action initiated by a trade union or a group of trade unions against an undertaking to force it to enter into a collective agreement, the terms of which are liable to deter it from exercising that freedom. It makes clear that Article 43 EC confers rights on a private undertaking which can be relied on against a trade union or an association of trade unions exercising their autonomous power, pursuant to trade union rights, to negotiate with employers or professional organisations the conditions of employment and pay of workers (Case C-309/99 Wouters and others, paragraph 120, Case 43/75 Defrenne, paragraphs 31 and 39 and Case C-112/00 Schmidberger, paragraphs 57 and 62).
It held that the conditions laid down for the registration of vessels must not form an obstacle to freedom of establishment (Case C-221/89 Factortame and Others, paragraphs 20 to 23). According to the Court, the strike action envisaged by the FSU has the effect of making less attractive, or pointless, Viking Line’s exercise of its right to freedom of establishment, because its aim is to prevent both Viking Line and its Estonian subsidiary from enjoying the same treatment in the host member State (Estonia) as other economic operators established in that State. Secondly, collective action taken in order to implement ITF’s policy of combating the use of flags of convenience, which seeks, primarily, to prevent ship-owners from registering their vessels in a State other than that of which the beneficial owners of those vessels are nationals, must be considered to be at least liable to restrict Viking Line’s exercise of its right of freedom of establishment.
The Court held that Article 43 EC applies in such a case notwithstanding the fact that the right to strike is not a right regulated by EC law according to Article 137 EC and is recognized as a fundamental right.
Finally, the Court examined whether the restriction on the freedom of establishment was justified. It stated that it is for the referring national court to determine whether the objectives of the labor unions were in fact those of protecting workers. The Court did give some guidance on the matter. It held that although the protection of workers' rights was a matter of overriding public interest (see Joined Cases C-49/98, C-50/98, C-52/98 to C-54/98 and C-68/98 to C-71/98 Finalarte and Others, paragraph 33), the restriction on the freedom of establishment could not be justified if it were established that the jobs or conditions of employment at issue were not jeopardized or under serious threat. If, on the other hand there was a threat to jobs or conditions of employment, the threat of strike action must be proportionate to the aim of protecting them.