UK: Free Market Or Social Protection?

Last Updated: 20 November 2007
Article by Aidan Loy

The International Transport Workers’ Federation and Finnish Seamen’s Union -v- Viking Line ABP & OU Viking Line, ECJ Case, Advocate-General’s opinion.

The founding principle of the European Union (variously the European Economic Community or the ‘Common Market’) has its origins in the European steel and coal community, an idea of common trading between the then West Germany and France, one of whose principal aims was that trade would prevent future confl icts between those countries.

The organisation has evolved out of all recognition since that time. However, in the Treaty of Rome the founding principles of what is now the EU still exist. Increasingly over time additional measures, particularly social protection, have become important. Nevertheless there still exists a hierarchy of precedent over the aims and objectives of the EU. The current case throws this into sharp relief.

Viking Line ABP is a Finnish shipping company based in Helsinki. The service in question ran between Helsinki and Tallinn in Estonia. From 2002 the service had been running at a loss because of the lower costs associated with competing Estonian carriers, largely due to lower wage costs resulting from lower standards of social protection. Viking Line sought, through the establishment of its subsidiary in Estonia, to relocate its operations to Estonia and take advantage of a lower cost base to stem the losses fl owing from its service.

However, the International Transport Workers Federation (ITF) and the Finnish Seamen’s Union (FSU), one of the 600 transport unions in 140 countries affi liated to the ITF, sought to take industrial action as a result of this, and informed all affi liated unions about the matter, requesting them not to negotiate with Viking Line. This, therefore, prevented Viking Line negotiating directly with Estonian trade unions in pursuit of its objectives, and effectively stopped its attempt to relocate its operation. As a result Viking Line settled the dispute, and agreed they would not attempt to re-fl ag before 2005. Anticipating that any attempt to continue to re-fl ag the vessel in question, the Rosella, would initiate collective action from the FSU and ITF, Viking Line sought the aid of the Commercial Court in London for injunctive relief requiring the ITF to withdraw its circular to its members and the FSU not to interfere with Viking Line’s request to utilise its rights to freedom of movement in relation to the re-fl agging of the ship, which was continuing to make large losses.

The Commercial Court granted injunctions and in 2005 the ITF and FSU appealed to the Court of Appeal, which then referred the matter to the European Court of Justice (ECJ).

The Advocate-General (AG) has just given his preliminary opinion on this matter: although not binding on the full Court, the AG’s opinion is usually seen as refl ecting the will of that body.

Although a series of complex questions on matters of law were directed to the ECJ, in essence the issue came down to a central point: which is more important, Article 43 of the Treaty of Rome dealing with the importance of freedom of movement (or in the present case, freedom of establishment), or the subsequent social protection provisions of the EU? As the Court posed the question, is the short term interest of workers in a particular establishment more important in terms of their social protection and relief than the longer term success of a business which can be guaranteed or enhanced by relocation and freedom of movement?

The Court has been asked to adjudicate between these apparently confl icting aims and decide either in favour of free trade, movement and investment, or social protection for a dedicated workforce.

The AG’s opinion should give hope to those who value the ability of organisations, together with individuals and capital, to enjoy the freedom of movement guaranteed by the EU, and also those who still seek to make the Union a competitive organisation.

The view taken was that collective action by a trade union or association to promote, via industrial action, the objectives of the community’s social policy, is not, for that reason alone, exempt from the application of Article 43, and therefore cannot override it. The relevant article has direct effect on any legal proceedings between an organisation and a trade union, and therefore application of social policy cannot take precedence over freedom of movement, association and establishment.

However, the regulations do not prevent trade unions taking collective action in order to attempt to restrict the rights of businesses to relocate to another member state in order to protect the workers of their organisation. It is a matter of national competence for a national court to determine whether such action is lawful in the light of applicable domestic rules. Therefore it is likely that, if the full Court follows the AG, the national court in question (London) would apply its own rules, and therefore concepts such as secondary action, or solidarity action, which may be legal in Scandinavian countries, will not be applicable in this case.

The AG’s view was that the Articles of the EC treaty preclude any co-ordinated policy of collective action by trade unions which seek to restrict the right to freedom of establishment and which in effect partition a labour market to impede hiring workers from certain member states in order to protect the jobs of workers in other member states. In essence, therefore, freedom of movement trumps social policy. Because of the Court’s insistence on national law, this is not a "one-size-fi tsall" panacea for the entire European Union. However, as far as it goes it is a powerful argument in respect of maintaining the rights of businesses to relocate and to compete in economic terms, particularly if forethought is given to headquartering such organisations in countries where the national laws preclude secondary action.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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