European Court of Justice judgements exacerbate labour relations in Europe

Ambiguous EU directives, different national regulations and traditional judgements by the European Court of Justice that favour freedom of trade over trade unions are exacerbating labour relations in Europe.

Crisis exacerbates labour relations

At the height of the worldwide financial and economic crisis, with collapsing markets, increased mass unemployment and uncertainty affecting millions of people, labour relations within the EU are also becoming critical. The problems are to an extent self-inflicted. Although common principles for free trade and social justice in Europe are defined in EU law, there is no indication as to which of these two principles should have greater weight in a specific instance – in the case, for example, of freedom of establishment and free competition versus equal treatment of nationals and foreigners through equal pay for all.

In this struggle, trade unions have been disadvantaged because it is only now that they are attempting to assert binding and enforceable rights, such as collective bargaining or minimum standards that already exist at the national level, throughout the EU. In this grey area between ambiguous EU directives and continuing labour struggles for common social standards in Europe, the traditional jurisdiction of the European Court of Justice in Luxembourg has also contributed in the last few years to the confusion. The reason is a series of fundamental judgements by the Court that gave priority to freedom of establishment and free competition over the unions’ EU-wide right to industrial action.

Cheap labour from Italy and Portugal

The latest focal point is the Total oil refinery in Lindsey in the English Midlands. The multinational energy concern commissioned an American company (Jacobs) to enlarge the refinery at a cost of 200 million pounds (around 200 million euros). The Americans invited tenders to complete the work and awarded the contract to an Italian subcontractor (Irem), which brought 300 cheap Italian and Portuguese labourers to Lindsey, housing them on a barge off the coast. At the same time 300 British contract workers were dismissed. Since then, nerves have been frayed all round.

Wildcat strikes have been organised and have spread throughout Great Britain, marking the largest industrial action in 20 years. Unemployed building, steel and dock workers also joined the strike, along with the staff of nuclear power stations and even a couple of hundred Polish foreign workers. The dispute has deteriorated as unionists accuse the British government and the EU of aggravating the crisis through wage and welfare dumping. Employer associations claim that fair and customary wages are being paid, an assertion that the trade unions dispute. The employers in turn accuse the trade unions of wanting to prevent foreign EU workers from joining the labour market. The British employment market has taken a heavy toll recently with unemployment rising to two million. The sterling exchange rate is also in free fall: its value has been scythed by 50 per cent and it is now on a par with the euro.

Shipping: struggle against cheap flags

Change of scenery: the Finnish ship owner Viking wanted to have its loss-making ferry sail under an Estonian flag and to replace the Finnish crew by a lower-paid Estonian one. The trade unions kicked up a fuss, attempting to force Viking to pay the same wages as in Finland, even if its ship sailed under an Estonian flag. Viking took its case to the European Court of Justice, which decided that in this case strikes constituted a limitation on the freedom of establishment. The right to strike was recognised by the Court, however, if jobs were safeguarded as a result.

Laval: classic example

The case involving the Lithuanian building company Laval also gave rise to massive protests from trade unions. Laval dispatched several dozen Lithuanian workers to a building site in Sweden but refused to pay them the customary Swedish wages. The Swedish trade unionists called a strike. The building site in Sweden managed by Lithuanian building company went bankrupt and Laval claimed for compensation with the European Court of Justice, which decided against the trade unions, stating in principle that freedom of establishment had priority over the trade union’s right to force Laval to pay Swedish-level wages.

Severe setback for model country Luxembourg

In a final example from last June, the European Court of Justice found against Luxembourg and decided that companies who sent workers to Luxembourg were not required to apply Luxembourg labour law. This means that foreign EU workers in Luxembourg no longer have the right to automatic indexing of their wages to the living costs, nor do they need to be paid the collectively agreed rates, and they are not entitled to paid leave, fixed-term contracts, temporary or part-time work as provided for under Luxembourg law. The Court found that in all these cases Luxembourg labour law conflicted with the posting of workers directive and free movement of services and should therefore be amended.




There is growing criticism of this decision, coming mainly from trade unionists, social democrats and Greens, who are formed up against employer associations and conservative groups, which support the Court’s decision.