EU Law Blog

Happy holidays

Happy holidays to all our readers.

We're taking a short break and will return to blogging in early January 2008.

Enjoy the break, too.

Strikes, Collective Agreements and Freedom to Provide Services: Case C-341/05

After the judgment in Case C-438/05 Viking on the freedom of establishment we noted up recently, here's the judgment in Case C-341/05 Laval un Partneri Ltd on the free movement of services.

In its judgment in Case C-438/05 the Court of Justice held that Article 49 EC and Directive 96/71 on the posting of workers preclude a trade union from attempting by means of strikes and other forms of collective action such as blockades from forcing a provider of services established in another member State to enter into negotiations with it on rates of pay for posted workers and to conclude a collective agreement for more favorable terms than those resulting from the applicable legislation.

In May 2004, Laval, a Latvian company, posted workers from Latvia to work on building sites in Sweden. The work was carried out there by a subsidiary, L&P Baltic Bygg AB. In June 2004, Laval and Baltic Bygg, and the Swedish building and public works trade union, Svenska Byggnadsarbetareförbundet, began negotiations with a view to determining the rates of pay for the posted workers and to Laval’s signing the collective agreement for the building sector. But they couldn't agree. In September and October, Laval signed collective agreements with the Latvian building sector trade union, to which 65% of the posters workers were affiliated. Presumably, the going Latvian rates were lower than the Swedish rates even with the extra benefits included for travel, meals and accommodations. Because it failed to reach an agreement with Laval in Sweden, the Swedish union Byggnadsarbetareförbundet began collective action in November 2004 by blockading all of Laval’s sites in Sweden. Added to which, the Swedish electricians’ trade union joined in with a sympathy action, the effect of which was to prevent electricians from providing services to Laval. None of the members of those trade unions were employed by Laval. After work had stopped for a certain period, Baltic Bygg was declared bankrupt and the posted workers returned to Latvia.

Laval then brought proceedings in the Swedish courts. It sought a declaration on the unlawfulness of the collective action and for compensation for the damage suffered. The Swedish court then asked the Court of Justice if EC law and in particular Article 49 EC and Directive 96/71 precludes trade unions from taking collective action in the circumstances of the present case.

The Court begins by examining the possibilities available to the member States for determining the terms and conditions of employment applicable o posted workers. It held that Directive 96/71 does not allow 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. Directive 96/71 expressly lays down the degree of protection which undertakings established in other Member States must guarantee, in the host Member State, to the workers posted to the territory of the latter.

The Court held that while the right to take collective action must be recognised as a fundamental right which forms an integral part of the general principles of EC law, such a right cannot render otiose the rest of EC law and the freedoms it grants. Consequently, the right of trade unions of a member State to take collective action to force undertakings established in other Member States into negotiations with the trade unions in order to ascertain minimum wage rates and to sign a collective agreement – the terms of which go beyond the minimum protection guaranteed by Directive 96/71 – is liable to make it less attractive, or more difficult, for such undertakings to carry out construction work in Sweden, and therefore constitutes a restriction on the freedom to provide services.

The question remained whether such a restriction could be justified. The Court held that in principle it was because the right to take collective action for the protection of the workers of the host State against possible social dumping may constitute an overriding reason of public interest. But, in a case such as the present one, the Court held that the employer of posted workers employer is required, as a result of the coordination achieved by Directive 96/71, to observe a nucleus of mandatory rules for minimum protection in the host member State. Thus collective action cannot be justified with regard to the public interest objective of protecting workers where the negotiations on pay which that action seeks to impose on an undertaking established in another member State to enter into form part of a national context in the host state that is too open ended and without precise and clear provisions, such that it is impossible or excessively difficult in practice for such an undertaking to determine the obligations with which it is required to comply as regards minimum pay.

The Court also held that the Swedish trade unions must take account of the collective agreements negotiated in Latvia. It held that national rules which fail to take into account of collective agreements to which undertakings that post workers to Sweden are already bound in the member State in which they are established, give rise to discrimination against such undertakings, in so far as under those national rules they are treated in the same way as national undertakings which have not concluded a collective agreement.

Lisbon Treaty and Charter Published

The Reform-Lisbon Treaty has been published officially now in the Official Journal.

You can find it here together with the protocols and the Final Act. But beware, that is not a consolidated version.

The Charter of Fundamental Rights has been published too. You can find that here. The publication of the text is accompanied by the publication of the "Explanations relating to the Charter of Fundamental Rights" which is a very interesting document and an aid to interpretation.

Official Languages, No Translation, No Enforceability: Case C-161/06

Now here is a curious case ! In its judgment in Case C-161/06 Skoma-Lux the Court of Justice held that the obligations contained in EC legislation which has not been published in the Official Journal in the language of the member State in which enforcement is sought cannot be enforced in that State.

Well, actually, the case concerns enforcement in the Czech Republic and the lack of translation into Czech and Article 58 of the Act of Accession.

What happened ? Skorma-Lux, a Czech importer of wine, was fined by the Czech customs authorities for submitting the wrong customs classification for wine. The Czech authorities claimed Skorma-Lux had breached Regulation 2454/93 implementing the EC customs code. Skorma-Lux, on the other hand, defended itself by submitting that at the relevant time, Regulation 2454/93 had not been translated and published in the Czech language. The Czech court seised of the matter referred questions to the Court of Justice on whether Article 58 of the Act of Accession required proper publication in Czech in the Official language before Regulation 2454/93 could be enforced and whether the matter of its enforceability was a question of interpretation or of validity of EC law.

The Court of Justice held that Article 58 of the Act of Accession requires that EC legislation be properly translated and published in the official language of the member State in which enforcement was sought. It stated that it had already held that an act adopted by a EC institution, such as the regulation at issue in the main proceedings, cannot be enforced against natural and legal persons in a member State before they have the opportunity to make themselves acquainted with it by its proper publication in the Official Journal of the European Union (Case C-98/78 Racke). It had also held that the principle of legal certainty requires that EC legislation must allow those concerned to acquaint themselves with the precise extent of the obligations it imposes upon them, which may be guaranteed only by the proper publication of that legislation in the official language of those to whom it applies (see also, to that effect, Case C-370/96 Covita, paragraph 27, Case C-228/99 Silos, paragraph 15, and Case C-108/01 Consorzio del Prosciutto di Parma and Salumificio S. Rita, paragraph 95).

The court held that it would be contrary to the principle of equal treatment to apply obligations imposed by EC legislation in the same way in the old member States, where individuals have the opportunity to acquaint themselves with those obligations in the Official Journal of the European Union in the languages of those States, and in the new member States, where it was impossible to learn of those obligations because of late publication. It added for good measure that to allow an act which has not been properly published to be enforceable in the name of the principle of effectiveness would result in individuals in the member State concerned bearing the adverse effects of a failure by the EC administration to comply with its obligation to make available to those individuals, on the date of accession, the entire acquis communautaire in all the official languages of the Union.

The Court distinguished Case 160/84 Oryzomyli Kavallas and Others because in that case the Court did no more than assess the impossibility for a Greek company of acquainting itself with EC legislation at the time of the accession of the Hellenic Republic to the EC. The issue of the proper publication of that legislation did not arise as such.

As to the second question, the Court answered that the enforceability of the measure was an issue of its interpretation and not of its validity. The fact that the measure could not be enforced did not mean that it was invalid.

Charter of Fundamental Rights Signed and Proclaimed

The Charter of Fundamental Rights was signed and proclaimed in Strasbourg, France, by the Presidents of the European Parliament, the Council and the Commission.

A press release about it can be found here.

This is a step in the signing of the Reform-Lisbon Treaty as noted previously. The new version of the Charter will be published later.

Boycotts, Strikes and the Freedom of Establishment: Case C-438/05

The Court of Justice has handed down its eagerly awaited judgment in Case C-438/05 International Transport Workers' Federation & The Finnish Seamen's Union v. Viking Line.

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.

New judge appointed at the Court of Justice

A new judge has been appointed to the bench at the Court of Justice.

Mr. Jean-Jacques Kasel, of Luxembourg, has been appointed to replace Judge Schintgen following his resignation. Mr Kasel is appointed to sit until October 6th 2009, that is until Judge Schintgen's term of office was to expire. The decision appointing Mr Kasel has been published here.

Congratulations to Mr Kasel ! And we'll let you know when he is sworn in.

New Merger Guidelines on Vertical and Conglomerate Mergers

The Commission recently made public its "guidelines" (or ersatz legislation that does not follow the proper procedure) on "vertical and conglomerate mergers". Those, in plain English which antitrust lawyers love to shun, are mergers between companies that do not compete with each other.

You can find the new guidelines here.

The new guidelines provide examples of the kind of vertical and conglomerate mergers that may significantly impede effective competition in the markets concerned. Thus, they outline the circumstances under which a vertical merger could be likely to result in competing companies being denied access to an important supplier or facing increased prices for their inputs and thus ultimately lead to higher prices for consumers. They also indicate levels of market share and concentration below which the Commission is unlikely to identify competition concerns (so-called "safe harbors").

These new guidelines complement the existing ones on "horizontal" mergers, that is mergers between competitors.

Reform Treaty - Institutional Changes, part 4 (Other Institutions, Legal Acts and Enhanced Cooperation)

Continuing our mini series on the Lisbon-Reform Treaty, let's look at the changes brought about to the other institutions.

The European Central Bank (ECB) and the Court of Auditors both become fully-fledged Union institutions. The ECB retains its own legal personality and its independence vis-à-vis the other institutions and the member States in order to protect its strict monetary policy.

The Committee of the Regions acquires the right to bring a case before the Court of Justice for infringement of the principle of subsidiarity in areas falling within its field of competence.

The new Treaty does not change the legal instruments (regulation, directive and decision) provided for in the present Treaties. Where it does innovate is in making a distinction between legislation, adopted by ordinary or special legislative procedure, and non-legislative acts. Rather confusingly, both legislative and non-legislative acts can be adopted in the form of a regulation, a directive or a decision. The salient difference between legislative and non-legislative acts lies in the procedure for their adoption.

Enhanced cooperation will be easier under the new Treaty. It provides that enhanced cooperation may apply to any area outside the exclusive competence of the Union. Enhanced cooperation will be possible once at least nine member States participate, provided that certain conditions are met, regardless of the number of member States in the Union. The new Treaty makes it simpler to authorize enhanced cooperation, and it will be easier for other member States to join in later.

That's it for now. Next time we'll be looking at qualified majority voting.

Privileges of Public Shareholders, Italian Civil Code and Free Movement of Capital: Joined Cases C-463/04 & C-464/04

In its important new judgment in Joined Cases C-463/04 and C-464/04 Federconsumatori and others v. Comune di Milano the Court of Justice held that a provision of the Italian Civil Code that permits the state and public bodies to participate more significantly in the activity of the board of directors of a limited company than their status as shareholders would normally allow is contrary to the provisions of the EC Treaty on the free movement of capital.

What happened was this. The City of Milan set up AEM SpA, a limited company, to distribute gas and electricity. When it was first listed on the stock exchange in 1998, the City of Milan held 51% of its capital. As privatization continued, the City reduced its shareholding to 33.4%. Against that background, the right for the City directly to appoint up to one quarter of the directors was inserted in AEM’s articles of association. In addition, the articles confer on it the right to participate in the election on the basis of lists of the directors not directly appointed by it. The consequence was that the City was able to retain an absolute majority of appointments to AEM’s board of directors, even though it holds, subsequent to the transfer of shares, only a relative majority of its capital. That privileged position was based on Article 2449 of the Italian Civil Code that provides that the articles of association of a limited company may confer on a public shareholder the right directly to appoint one or more directors.

Associations of consumers and small shareholders challenged that privileged position in the Italian courts because they considered it discourages potential investors from purchasing shares in AEM and thus reduces the value of their holdings in the corporation. The Italian court seised of the matter then referred the question to the Court of Justice whether the provisions of Article 2449 of the Civil Code amounted to a restriction on the free movement of capital, prohibited by Article 56 EC.

The Court of Justice upheld the claim of the associations of consumers and small shareholders and found that Article 56 EC precluded a provision such as Article 2449 of the Civil Code.

The Court recalled that Article 56 §1 EC lays down a general prohibition on restrictions on movements of capital between member States (see, Case C-112/05 Commission v. Germany, paragraph 17 which we noted here).

It held that by giving public shareholders an instrument to restrict the possibility of the other shareholders participating effectively in the management of the company, the Italian legislation is liable to deter direct investors from other member States. The fact that that measure is included in the provisions of the Civil Code and the right of appointment requires a decision of the general meeting of the shareholders does not take away the restrictive character of the Italian legislation.