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European court to rule on landmark labour case

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Page context: Home > Transport International Magazine > Issue 27 April 2007 > landmark labour case

The Viking case, heard before the European Court of Justice on 10 January 2007, is of fundamental importance to the European trade union movement. The case concerns a significant challenge to the right to take collective action in Europe in defence of workers’ interests, as DEIRDRE FITZPATRICK reports

The future direction of the European social model will be profoundly affected by the decision of the European Court of Justice in the Viking case. In a reference from the London Court of Appeal, the European Court has been asked to decide the relationship between the economic freedoms on the one hand and the right to take collective action including strike action on the other, both protected by the Treaty establishing the European Community. This is a significant EU constitutional issue.

The case arises from a dispute concerning a passenger and cargo ferry, Rosella, currently a Finnish flagged vessel with a predominantly Finnish crew, trading between Helsinki in Finland and Tallinn in Estonia. In 2003, the shipowner Viking announced that it wished to reflag the vessel to Estonia and man it with Estonian crew who would be paid lower wages and terms and conditions.

The ITF-affiliated Finnish Seamen’s Union (FSU) stated that its response to reflagging would be industrial action in the form of strike action by its members. It was entitled to take this action under Finnish law on the expiry of the manning agreement covering the Rosella. The ITF supported the union and called upon its affiliates to show solidarity, in particular by not agreeing to negotiate a collective agreement for the ship in the event that it reflagged to Estonia.

In late 2003, and again in 2005, a manning agreement was signed for the vessel, linked to which is an industrial peace obligation. This will expire in 2008 unless reflagging takes place in the interim.

"The case therefore involves an essential issue: whether, and to what extent, industrial action by trade unions in order to prevent the imposition of lower wage rates and terms and conditions of employment is permissible when ships transfer flags within Europe."

In the meantime, in 2004, Viking sought injunctions through the London courts to prevent the ITF and the FSU from taking or calling for any industrial action in the future against the Rosella or any other asset of Viking.

Legal and social principles

Viking was able to commence the action in London because the secretariat of the ITF is based in London. The English Commercial Court initially granted temporary injunctions against the ITF and the FSU, but these were later set aside by the Court of Appeal, which decided that the case raised important and difficult questions of European law. It referred a series of 10 complex and technical questions to the European Court of Justice.

Viking’s essential claim is that any industrial action that would be taken by the ITF and the FSU would make reflagging pointless and thereby would impede its free movement rights, namely the right of establishment and/or the right to provide services. Were this claim to be successful, this would see a greater restriction of the right to strike than has hitherto been considered appropriate by any international or European supervisory body.

The case therefore involves an essential issue: whether, and to what extent, industrial action by trade unions in order to prevent the imposition of lower wage rates and terms and conditions of employment is permissible when ships transfer flags within Europe.

Without doubt, the four guaranteed market freedoms – that is free movement of goods, capital, services and persons – were the cornerstone of the economic vision of an internal market. But it was also clear from the outset to the supporters of the European project that market integration alone would not be sufficient to assure reliable social integration at Community level. Thus social policy, as a Community objective to be pursued independently, took shape in the primary law of the European Union when, from the mid-1980s onwards, the Single European Act massively accelerated the establishment of a single European market.

Today it is clear that the EU legal order recognises fundamental social rights of EU residents. These are contained for example in the European Social Charter, the 1989 Community Charter of the Fundamental Social Rights of Workers, and the Charter of Fundamental Rights of the European Union of 2000. A series of key judgments of the European Court have ensured that the constitutional traditions of the member states also have significance in determining what rights are recognised as fundamental in the Community legal order.

In Finland, freedom of association is protected by Article 13 of the Finnish constitution and this right is also interpreted as embracing the right to collective action. The right to take collective action is also protected in many of the constitutions of other member states. Thus the European Court will also have to decide the extent to which EU powers can encroach on national sovereignty by making member state social models subject to EU economic freedoms.

Freedoms and restrictions
The Viking case raises similar questions of Community law to those contained in the Laval case, also currently before the European Court on a reference from the Swedish Labour Court. In that case, Laval, a Latvian company, supplied contract workers to build a school for the town of Vaxholm in Sweden but a dispute arose with the construction unions concerning an appropriate collective agreement.

Without doubt, the open borders of the single European market attract foreign workers and companies to offer their services in the domestic market. The concern over greater competition for jobs and a reduction in the terms and conditions of employment for workers already in those states has led to restrictions on the free movement of workers from accession states.

Yet while free movement of workers has been restricted, an “unintended consequence” has been an increase in outsourcing, temporary work and a flourishing secondary market for services and posted labour. Providers of services are moving from one member state to another by exercising their entitlement to freedom of establishment, and are using independent contractors or cheaper labour in ways which undercut the terms and conditions of domestic workers.

This trend is further complicated by the actions of existing service providers within the 15 previously established EU member states. They are now creating subsidiaries in new member states so as to take advantage of reduced regulatory requirements and lower labour standards. This is the situation in the Laval and the Viking cases.

The Viking and Laval cases will therefore be a major test for the European Court. The references happen at a particularly crucial time in the evolution of the European unification process. The situation of increased economic integration together with reduced social protection has already come together to form a highly explosive combination which contributed to the rejection of the European Constitution in the French and Dutch referenda. Effectively, popular approval for Europe is seen to be markedly dwindling.

The European Union and its member states have recently had to grapple at a political level with the issues of the social limits to the internal market as seen in the debate giving rise to the new Directive 2006/123/EC on services in the internal market published on 27 December 2006. It is now the turn of the European Court of Justice to address these issues in a legal context. The outcome of the Viking case, and also of the Laval case, will be extremely important for the European trade union movement’s acceptance of the principles of the internal market, and its support for continued political integration in Europe.

Deirdre Fitzpatrick is legal officer of the ITF.

Section home:
Issue 27 April 2007

Other pages for Issue 27 April 2007:
Comment: No union rights without human r | Pedro Zamora | Readers' survey | Fighting free trade bullies | Common cause | New order on the buses | Back in state hands | Stepping up to the mark | Educate to organise | Reflections: On union organising challenges | Working life

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