Industrial Action v Free Movement of Workers and Services, Part II

An article published in the Steamship Mutual’s website in January 2006 (Industrial Action v Free Movement of Workers and Services) highlighted issues in relation to a shipowner’s freedom of establishment and freedom of movement for workers and freedom to provide services within EU; in the High Court in London a Finnish shipowner (the Owner) sought relief against the International Transport Workers’ Federation (ITF) and the Finnish Seamen’s Union (FSU) which threatened the Owner with industrial action in relation to the Owner’s plans to reflag a ferry to Estonia.  

The Owner who operated the “Rosella” between Helsinki and Tallinn under the Finnish flag sought to reflag the “Rosella” to Estonia in order to better compete with Estonian vessels trading on the same route. The “Rosella” was running at a loss due to the fact that the Estonian crew wages were lower than crew wages in Finland which the Owner was obliged to pay under the terms of Finnish Collective Bargaining Agreement (CBA). The reflagging of the “Rosella” was an alternative to selling the vessel. However the FSA made it clear that it was opposed to the Owner’s plans and threatened to take industrial action if the Owner did not give up its plans to reflag the “Rosella”.   

An injunction was granted against the ITF and FSU by Gloster J who held that a collective action threatened by the FSU and ITF was against the EU rules on freedom of establishment under Article 43 EC and in the alternative rules on freedom of movement for workers and freedom to provide services under Articles 39 EC and 49 EC. The ITF and FSU appealed against the decision arguing that the right to take industrial action to preserve jobs is a fundamental right recognized by Article 136 EC and thus would not be caught by the EU rules under Articles 43, 39 and 49. The Court of Appeal considered that the case involved interpretation of Community Law and thus decided to stay the proceedings and referred the dispute to the European Court of Justice (ECJ) in Luxembourg.  

The main questions referred to the preliminary ruling before the ECJ were those in relation to the scope of the free movement provisions i.e. whether Article 43 EC excludes such collective action (although one of the central rights in the EC’s social policy) taken by a trade union against a private undertaking for the purpose of forcing that private undertaking to enter into a collective bargaining agreement which would restrict that undertaking to re-flag a vessel in another Member State; whether Article 43 EC may be relied on against another private party and in particular a trade union in respect of collective action by that union and whether collective action such as in this case constitutes a restriction within the meaning of Article 43 EC. Article 43 EC reads as follows:   

“Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be prohibited. Such prohibition shall also apply to restrictions on the setting-up of agencies, branches or subsidiaries by nationals of any Member State established in the territory of any Member State. 

Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 48, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.” 

The judgment of the ECJ was given 11 December 2007 (C-438/05). The Court has clearly focused on issues in relation to freedom of establishment and Article 43 EC. According to the Court’s ruling Article 43 EC does not exclude collective action by a trade union which is taken against an undertaking in order to compel the undertaking to enter into a collective bargaining agreement under which terms the undertaking is hindered to excise freedom of establishment. Furthermore the Court concluded that Article 43 EC gives such rights to a private undertaking which may be relied on against a trade union. Article 43 EC is to be interpreted to the effect that collective action such as in this case, the intention of which is to force a private undertaking whose registered office is in a Member State to enter into a collective agreement with a trade union established in that Member State as well as to apply those terms of that agreement to the employees of a subsidiary established in another Member State, constitutes restrictions which are meant in Article 43 EC.  

According to the judgment a boycott of a vessel is to be considered as restricting freedom of establishment. However, on the other hand, the Court concludes that right to take industrial action is a central right and may in principle be justified by “an overriding reason of public interest” such as the protection of workers – however, always provided that such restrictive action does not go beyond what is necessary to achieve the object in question. In other words the judgment puts certain limits on a trade union’s rights to take industrial actions in relation to freedom of establishment.          

The judgment unfortunately does not consider whether industrial action such as at issue restricts freedom to provide services to maritime transport between Member States and between Member States and third countries as is stipulated in Council Regulation (EEC) No 4055/86 of 22 December 1986. On the other hand the judgment may be interpreted in a way that freedom of establishment includes freedom to provide services which, pursuant to the Court’s ruling, cannot be restricted by a boycott of a vessel.  

The dispute between the Owner and the Unions was settled after the ECJ had given its preliminary ruling and thus we do not have any final judgment from the Court of Appeal. However on the basis of the ECJ judgment it can be concluded that a trade union may take industrial action in relation to the freedoms mentioned above only on certain conditions. Whether such industrial action is legal or illegal shall be resolved on the basis of national law and, when considering this issue, a trade union must clarify whether all other possible methods to find a solution to a conflict have been tried before taking industrial action. In practice the judgment has restricted trade unions’ right to take industrial action. A further consequence of the judgment is that courts must consider basis of industrial actions in more detail. As a result, it may now be easier for courts to issue injunctions to prevent a trade union from taking industrial action, such as a boycott of a vessel.

With thanks to Tarja Bergwall of Gahmberg & Co for preparing this article.