EU Law Blog

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.

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.

Tillack wins in ECHR

Remember that business we wrote about a while ago concerning the journalist Martin Tillack who was "investigated" by OLAF for having obtained documents alleging corruption by Commission officials ?

At the instigation of OLAF, the Belgian police conducted raids and searched Mr Tillack’s home and office and basically trashed both places.

Mr Tillack then took his case to the European Court of Human Rights. He sued the Belgian state, alleging a breach of Article 10 of the European Convention on Human Rights (freedom of expression) and claimed damages.

He won. And he was awarded €10000 (US$ 14,834) in damages and €30000 (US$ 44,497.51) in costs.

The ECHR held that the right of a journalist to protect his or her sources was protected by Article 10 of the European Convention on Human Rights that protected freedom of expression. According to the Court the right to protect sources was not a mere privilege to be granted or taken away depending on the lawfulness or unlawfulness of their sources, but was part and parcel of the right to information, to be treated with the utmost caution in the case of Tillack where he had been under suspicion because of vague, uncorroborated rumors, as subsequently confirmed by the fact that he had not been charged. The Court also described the lamentable and heavy handed manner in which the raids took place. It noted that almost all of Tillack's working papers and tools were seized and placed under seal (16 crates of papers, two boxes of files, two computers, four mobile phones and a metal cabinet). The Belgian police and OLAF even contrived to lose a chest of papers for seven months.

The ECHR judgment is only available in French here. Or try this link.

Professional Secrecy, Presumption of Innocence and the Decision to Publish a Decision: Case T-474/04

It's a litigious world out there. Even a decision to publish a decision can be the object of an action for annulment. And be annulled, as in Case T-474/04 Pergan Hilfsstoffe für industrielle Prozesse GmbH v. Commission.

In its judgment in Case T-474/04 the Court of First Instance annulled a decision of the Commission, taken by the antitrust Hearing Officer, to publish a decision finding antitrust violations containing references to the applicant, Pergan.

That sounds a bit weird. So here's the story. The Commission took a decision on 10 December 2003 (the peroxides decision) imposing fines on five undertakings for their participation in cartels on the market for organic peroxides. But the Commission did not fine Pergan nor did it find that it had breached the antitrust rules in the operative part of the decision. The Commission found that the proceedings against Pergan were time barred and that there was no need to refer to Pergan's participation in the infringement in the operative part of the peroxides decision, or to address the decision to it. The Commission did refer to Pergan in the grounds of the decision and described its alleged role in the cartels.

The Commission informed Pergan of the decision and sent it a copy informing it of its intention to publish a non-confidential version. Pergan then requested that all references to it be removed from the version to be published. That request was submitted to the Commission’s hearing officer. The hearing officer refused to remove from the definitive version the majority of the references made to Pergan on the ground that they were not business secrets.

Pergan then applied to the Court of First Instance to have the hearing officer's decision annulled.

The Court of First Instance agreed with Pergan and annulled the decision.

It held that the Commission had applied the obligation to respect professional secrecy in Article 287 EC too narrowly. The scope of that obligation went beyond protecting business secrets. According to the Court of First Instance, the protection of professional secrecy encompasses the principle of presumption of innocence. That presumption precludes any formal finding and even any allusion to the liability of an accused person for a particular infringement in a decision bringing the administrative procedure to an end, unless that person has been able to challenge the substance of that decision. Because the operative part of the peroxides decision did not refer to it, Pergan could not and in fact did not challenge the peroxide decision itself.

The Court further held that, since the Commission’s findings relating to an infringement committed by an undertaking are capable of infringing the principle of the presumption of innocence, those findings must, in principle, be regarded as confidential as regards the public, and therefore as being of the kind covered by the obligation of professional secrecy. That principle stems from the need to respect the reputation and dignity of the person concerned as that person has not been finally found guilty of an infringement (see, by analogy, Case T‑15/02 BASF v. Commission , paragraph 604). The confidentiality of such information is confirmed by Article 4(1)(b) of Regulation No 1049/2001, which provides that information, whose disclosure would harm the protection of privacy and the integrity of the individual, is to be protected.

Measures against terrorists, transfer of property and references to national law: Case C-117/06

In its judgment in Case C-117/06 Mölendorf the Court of Justice adopted a strict interpretation of Council Regulation (EC) No 881/2002 of 27 May 2002 imposing certain specific restrictive measures directed against certain persons and entities associated with Usama bin Laden, the Al-Qaida network and the Taliban.

What happened was this. The Mölendorfs owned buildings and land in Berlin. In December 2000, they agreed by notarially authorised instrument to sell that property to a group of three buyers. The agreement also provided that the sale price had to be paid to the sellers before final registration of the transfer of ownership in the Land Register. But then, final registration of the transfer of ownership was refused by the competent authority in Germany because one of the three buyers was on the list of persons subject to freezing of funds in accordance with Regulation 881/2002 because of their association with Usama bin Laden, the Al-Qaida network or the Taliban.

The question was posed whether Regulation No 881/2002 and in particular its Article 2 §3 prohibits registration of the transfer of ownership to a buyer who, after conclusion of the contract of sale, has been placed on the list set out in the Annex to that regulation.

The Court of Justice held that the Regulation does indeed prohibit the registration of the transfer of the land.

The Court referred to German property law which was applicable to the transaction in question. It found that under that law ownership of real property cannot be acquired directly as a result of a contract recorded by a notary of sale between the seller and the purchaser. The two parties must conclude an agreement that ownership is to be transferred and for that transfer to be registered in the Land Register for title to the property to pass to the purchaser. Without that registration title does not pass.

The Court of Justice held that real property is an economic resource which, under Regulation 881/2002, must not be made available to persons on the list. Final registration in the Land Register means, under German law, that the property is made available to the buyer, since, according to the applicable law, it is only after final registration that the buyer acquires title to the property and can mortgage it.

The practical consequence is that the sellers, who have received the purchase price, must reimburse the purchasers in accordance with German law. The Court held that the reimbursement in those circumstances was not caught by Regulation 881/2002.

Finally, the Court pointed out any issue of fundamental rights concerned the indirect effect of Regulation 881/2002 and the reimbursement under national law of the purchase price. Thus, as regards the application of Regulation No 881/2002, in accordance with settled case-law, the requirements flowing from the protection of fundamental rights within the EC legal order are also binding on member States when they implement EC rules. Consequently they are bound, as far as possible, to apply the rules in accordance with those requirements (see, Joined Cases C‑20/00 and C‑64/00, Booker Aquaculture and Hydro Seafood, paragraph 88).

Another terrorism judgment and the UN Security Council Resolution 1373: Cases T-47/03 and T-327/03

Catching up on some past cases !

The Court of First Instance has once more struck down Council decisions including certain persons or organizations on a list requiring their assets and funds to be frozen. In Case T-47/03 Jose Maria Sison and Case T-327/03 Stichting Al-Aqsa v. Council, the Court of First Instance held that the Council had not respected certain fundamental rights and safeguards by adopting the decisions requiring the funds of the plaintiffs to be frozen. In particular, no reasons were given for the decisions and the rights of the defense of the persons or organizations concerned were not respected prior to the adoption of the decisions.

Those two judgments are very similar to Case T-228/02 Organisation des Modjahedines du peuple d'Iran v. Council we had noted up here.

An interesting extra point came up in Case T-47/03. Sison not only requested the annulment of Council Decision 2002/974/EC but also claimed compensation for the loss and damage suffered as a consequence of it. However, the Court annulled that decision on procedural grounds. The Court of First Instance confirmed failure to fulfill the obligation to state reasons is not, in itself, such as to cause the Community to incur liability (Case T‑18/99 Cordis v. Commission, paragraph 79). the fundamental principle that the rights of the defence must be observed being essentially a procedural guarantee (Case C‑344/05 P Commission v De Bry [2006] ECR I‑10915, paragraph 39), the Court considers that, in the circumstances, annulment of the contested act will constitute adequate compensation for the damage caused by that breach (see, Joined Cases T‑120/01 and T‑300/01 De Nicola v BEI, paragraphs 140 to 142).

Both cases concerned UN Security Council Resolution 1373 of 2001 calling on all UN members to combat terrorism and the financing of terrorism by all means, in particular by freezing the funds of persons who commit, or attempt to commit, terrorist acts. That resolution did not identify the persons and entities in question but left it to the member States to identify them. To implement the Resolution 1373 (2001), the EC adopted Common Position 2001/931/CFSP and Council Regulation 2580/2001 ordering the freezing of the assets of the terrorist organizations included in a list. That list is to be updated regularly. An organization is included in the list on the basis of precise information in the file which indicates that a decision has been taken by a competent national authority, usually a judicial authority. The names of persons and entities on the list are to be reviewed at regular intervals and at least once every six months to ensure that there are still grounds for keeping them on the list. Sison was included on the list by Council Decision 2002/974/EC. Al-Aqsa, a Dutch group, was confirmed on the list by Council Decision 2003/646/EC.

Jose Maria Sison was also involved in litigation concerning public access to documents which culminated in the judgment of the Court of Justice in Case C-266/05 P Sison v. Council which we had noted here.

See our post of April 26th 2007 on the Council Notice creating certain procedural rights in cases such as these.

Effective judicial protection and national remedies: Case C-432/05

The Court of Justice handed down a major judgment on the application of the principle of judicial protection in relation to challenges to national law alleged to be contrary to EC law. The case is Case C-432/05 Unibet (London) Ltd. and Unibet (International) Ltd. v. Justitiekanslern.

The issue that came up was the following, in a simplified form. Unibet wanted to promote an internet betting service in Sweden. The Swedish authorities prohibited that activity on the basis of the Swedish law on Lotteries and commenced criminal proceedings against Unibet. Unibet considered that the prohibition was contrary to Article 49 EC on the freedom to provide services and sought a declaration before the administrative courts in a separate action that the Swedish law on lotteries was contrary to EC law. To cut a long story short, the Swedish courts held that Unibet could not bring such an action but had to challenge the Swedish law in the course of the criminal or administrative proceedings concerning the specific measures taken against Unibet. The case went to the Swedish Supreme Court which then asked the Court of Justice whether the principle of effective judicial protection under EC law required that there be a separate self-standing action in national law to review legislative measures which were alleged to be contrary to EC law or whether it was adequate that they be challenged indirectly, in the course of enforcement proceedings.

The Court of Justice held that the principle of effective judicial protection does not require the national legal order of a member State to set up a free-standing action for an examination of whether national provisions are compatible with EC law. An indirect route to challenge them is adequate provided it is effective and no less favorable than similar domestic actions such that the issue of compatibility with EC law can be determined as a preliminary issue.

The Court held the principle of effective judicial protection is a general principle of EC law stemming from the constitutional traditions common to the member States (Case 222/84 Johnston paragraphs 18 & 19, Case C-50/00 P Unión de Pequeños Agricultores v. Council paragraph 39, and Case C-467/01 Eribrand paragraph 61). It is also reaffirmed by Article 47 of the Charter of Fundamental Rights.

The Court held that it is necessary to examine the overall scheme of the national legal system to see if no legal remedy exists. It is for the member States to establish a system of legal remedies to ensure that individual rights under EC law can be enforced (Case C-50/00 P Unión de Pequeños Agricultores v. Council paragraph 41).

The Court also held that the principle of effective judicial protection did require it to be possible to obtain interim relief to be granted suspending the application of the national measure until the competent court had ruled on their compatibility with EC law (Case C-213/89 Factortame paragraph 21 and Case C-226/99 Siples paragraph 19).

Fundamental Rights Agency Regulation

Here's an update to our previous post on the Fundamental Rights Agency.

The regulation setting it up - Council Regulation (EC) No 168/2007 of February 15th, 2007 - has now been published in the Official Journal.