January 2006
An attempt by the ITF and the Finnish Seamen's Union (FSU) to take industrial action (including a strike by the latter and a concerted multi-jurisdictional boycott by the former and its affiliates) in order to prevent a Finnish Ferry operator (The Owner) from re-flagging its vessel under an Estonian flag was initially blocked by the English Courts. Granting an injunction to prevent the threatened industrial action Gloster J held, in Viking Line ABP v ITWF and Finnish Seaman's Union, that the threatened action was against EU free movement of establishment, of workers and of services rules, citing the ECJ's ruling in the Bosman Case which held that these rules applied not only to the actions of public authorities but also to "rules of any other nature aimed at regulating gainful employment in a collective manner", and "obstacles resulting from the exercise of their legal autonomy by associations or organisations not governed by public law".
The Unions appealed against this decision arguing that the right of trade unions to take action to preserve jobs was a fundamental right recognised by Article 136 of the EC Treaty. If, as was contended, the threatened activities fell within Art 136 they would not be caught by the rules relating to the free movement within the European Union.
The Court of Appeal set aside the injunction on the basis that the answers under EC law were not clear and concerned issues of fundamental importance which needed to be addressed by the ECJ. The Court of Appeal questioned whether the threatened union activities actually fell foul of the free movement provisions in the EC Treaty, but did not rule on the point. The appeal was adjourned pending reference to the ECJ.
The Owner operated ferries between Helsinki and Tallinn under the Finnish Flag. Its Finnish crew were members of the FSU, and the Owner was obliged under Finnish law and by the terms of a Collective Bargaining Agreement (CBA) to pay the crew wages at set levels. The vessel which gave rise to this dispute, the ROSELLA, was struggling to compete with vessels in the same sector which paid lower Estonian wages. In order to avoid selling the vessel, the Owner sought to reflag it to Estonia with a view to entering a CBA with an Estonian union, and notified the crew and the FSU accordingly. The FSU wrote to the ITF asking it to request that its affiliates (which included both the FSU and Estonian Seaman's Union) refuse to negotiate with the Owner.
There are 600 unions in 140 countries affiliated with the ITF. One of the ITF's principal policies is the "Flag of Convenience" (FOC) policy, explained as follows by the ITF: "the primary objectives of the FOC campaign are first, to eliminate flags of convenience and to establish a genuine link between the flag of the ship and the nationality of the owner and second, to protect and enhance the conditions of seafarers serving on FOC ships ".
In response to the FSU request, the ITF sent a circular to its affiliates asking them not to negotiate with the Owner: "Please be advised that since the vessels are still beneficially owned in Finland, our Finnish affiliates still retain negotiating rights. Please refrain from entering into negotiations with either company". The ITF affiliate unions were expected to comply and failure to do so may have lead to sanctions. The FSU, in turn, refused to renew its manning agreement (which was about as to expire) and threatened to strike unless the Owner gave up its plans to reflag the vessel.
The Owner was, as a result, in an impossible situation. Unable to negotiate with the FSU because of its position of strength, and unable to negotiate with Estonian unions directly, because of the ITF circular, the Owner had to concede entirely to the FSU's demands at the end of 2003. From that point the vessel continued to run at a loss, the Owners continued to wish to reflag the vessel, and the ITF circular remained in force, obstructing any attempt by the Owner to do so.
In May 2004, Estonia became a member of the EU. The Owner commenced proceedings in the Commercial Court in London (the UK having jurisdiction to hear the matter because the ITF is based in London) seeking declaratory and injunctive relief which required withdrawal of the ITF circular and required the FSU not to interfere with the Owner's EC free movement rights in relation to the reflagging of the vessel.
Gloster J, sitting in the Commercial Court granted the relief sought on an undertaking being given by the Owner not to make any employees redundant as a result of any reflagging.
The Owner's successful primary case was that the actions of the FSU and the ITF imposed a restriction on its right to establish itself in Estonia under Article 43 of the EC Treaty or, in the alternative, a restriction on its right to provide services from Estonia to Finland under Article 49. It was further argued that Article 39 "free movement of workers" would be infringed.
The Unions based their appeal on the argument that the right of trade unions to take action to preserve jobs is a fundamental right recognised by Title XI of the EC Treaty and in particular Article 136, which provides as follows:
"The Community and the Member States, having in mind fundamental social rights such as those set out in the European Social Charter signed at Turin on 18 October 1961 and in the 1989 Community Charter of the Fundamental Social Rights of Workers, shall have as their objectives the promotion of employment, improved living and working conditions, so as to make possible their harmonization while the improvement is being maintained, proper social protection, dialogue between management and labour, the development of human resources with a view to lasting high employment and the combating of exclusion"
The rights referred to in Article 136 include the right to strike.
The second issue which arose, in which the Judge in the Commercial Court had also found for the Owner, was whether the free movement rules applied to the activities of the FSU and the ITF. The Judge had relied on the ruling in the Bosman case, in which it was held that the free movement rules applied to the activities of football's governing bodies, which were, like the Unions, non-governmental but could nevertheless "regulate gainful employment" and in doing so had to abide by EC Rules.
The Unions response was that the FSU and indeed any trade union would not have the requisite degree of normative power to be viewed as a regulatory body.
Lord Justice Waller deemed the issues in dispute of fundamental importance with respect to European law and felt the matter should be referred to the European Court of Justice in Luxembourg. He felt, however, that the English Court should look at the merits of the case in order to determine whether the interim relief granted by the Commercial Court should remain in place pending referral to the ECJ.
Lord Justice Waller view was that the Owner would struggle to prove that the Unions' activities constituted "direct" discrimination. Whilst the Gloster J had found there to have been direct discrimination first because the Unions' policy applied by reference to the nationality of the shipowner, and second because it was intended to protect the jobs of Finnish seamen, Waller appeared more sympathetic towards the arguments of counsel for the Unions. These arguments were to the effect that the subjective nature of the policy, i.e. its stated intention, was irrelevant, and an objective test should have been applied: the Flag of Convenience policy related to beneficial ownership and not nationality, and for there to be direct discrimination the requirement was unequal treatment by reference to nationality. Further the threatened action was not to protect Finnish nationals, but rather the crew of the ROSELLA, some of whom were not Finnish.
Even if there had not been direct discrimination, but rather indirect discrimination or some other form of restriction, the question would still remain as to whether the threatened action could be justified. Counsel for the Unions argued that the action in question was for the purpose of protecting workers and improving working conditions by ensuring the application of Finnish rates of pay. Whilst not directly addressing this point, Lord Justice Waller did comment, obiter, that in the absence of finding of direct discrimination, the actions of the Unions would fall within the right to industrial action recognised by Title XI of the EC Treaty, as mentioned above.
The Commercial Court decision was set aside and the questions which arose in the matter were referred to the ECJ. The ECJ's eventual findings are likely to have wide-ranging consequences not only with regard to shipping, and the question of reflagging within the EU for the purpose of saving crew and other costs, but also with regard to oursourcing within the EU generally.
Lord Justice Waller also went on to say that to grant the injunction sought by the Owners would be close to giving the Owners the remedy "which should only be available to it at the full trial of the action". He nevertheless acknowledged that there was a risk that the ECJ could take up to two years to determine the issue which, in the absence of the injunction, would put the Owner to considerable hardship. He expressed hope that the ECJ would treat this matter as one of urgency and prioritise the case accordingly, and also that the Owner and the Unions would agree some sort of compromise to avoid the sale of the vessel.
