The impact of the European Court on the European Social Policy

In recent years, social policy in EU member States and at the European level has been seriously affected by the European Court (EuC). Key decisions taken by the EuC have been favourable for business and employers and unfavourable for workers and trade unions. For this reason, national socialist and social democratic parties in Europe, and of course also the Eurosocialists, will have to be concerned about the effects of the rulings of the EuC.

The European Court

The EuC, located in Luxembourg, was founded in 1952. Its job is to ensure and promote uniform jurisdiction and administration of European law in all member States. The Court handles complaints by member States against the European Commission. Conversely, the European Commission can sue any member State before the EuC. The Court is obliged to examine whether or not a member State has violated obligations derived from the Treaty of the European Community.

In a number of decisions taken by the EuC, the Court has emphasized that the member States have voluntarily accepted, and must adhere to, the independent supra-national legal order of the European Community. The supremacy of European law and European jurisdiction has been demonstrated in many decisions taken by the EuC. Example: the EuC revoked a decision taken by the EU Ministers of Finance in July 2004 to suspend proceedings against Germany and France because of their public budget deficits in excess of the permitted three-percent limit. The decision of the Ministers was overruled by the EuC which said that France and Germany were breaching European law.

The European Court is not to be confused with the European Court for Human Rights located in Strasbourg whose competency is to rule on the European Convention on Human Rights; and the International Court of Justice (ICJ) located in The Hague, which is in charge of jurisdiction concerning the United Nations and international law.

Important recent EuC decisions impacting negatively on social policy in Europe

The EuC has repeatedly taken decisions in which it interprets European law or law of EU member States in a way that is adversary for workers and trade unions and which, more generally speaking, challenges basic principles and policy lines of social democrats, socialists, and labourites in Europe. In the main, the decisions concern the right to strike and the respect for collective agreements between employers’ and workers’ organisations.

The case of ‘Laval’

The Swedish Union of Building Workers blocked a construction site at a school in the Swedisch town of Vaxholm in which the Latvian firm Laval had been hired as a contractor for construction work. The purpose of the strike by the Swedish workers was to force Laval to pay wages in line with prevailing collective agreements for the industry. In Sweden, collectively agreed wages are of particular importance because they form the base for financing social security. Laval challenged the strike before a Swedish court (which I think sided with the Swedish construction workers). In the final decision, the European Court ruled that the blockade of the site by the Swedish workers was illegal. In its decision, the EuC interpreted the European Guideline on hiring workers and firms from other EU member States in a very restrictive manner that in effect curbs the right to strike. The purpose of the Guideline had been to effectively protect workers against wage dumping from abroad.

The case of ‘Viking’

The Finnish shipping company Viking wanted to lower wage costs by replacing the Finnish crew on one of its vessels by Estonian workers. Subsequently, the Finnish Seafearers’ Union threatened to call a strike, and the International Transport Workers Federation (ITWF) in London successfully called on the Estonian Seafearers’ Union to refrain from collective bargaining with Viking. Viking brought the case to the EuC. The latter ruled that entrepreneurial freedom and the free choice of hiring workers from anywhere assume legal supremacy in Europe. They are superior relative to the right of workers to strike.

A case of respecting collective agreements in Germany

In 2006, the Constitutional Court of Germany confirmed that employers are held to respect the terms of collective agreements. This decision was overruled by a decision of the EuC which said that in a case of construction workers in Rosdorf near Göttingen that a Polish contracting firm should not be obliged to pay wages in accordance with the existing collective contract even though respect for this contract by any employer, domestic or foreign, was ensured by a law of Lower Saxony. The EuC argued that the law of Lower Saxony would be valid only if all workers in Germany without exception would be paid either a generally applicable collective bargaining wage or a minimum wage.

The devastating impact of the EuC rulings

In effect, each of the three decisions taken by the EuC undermine the meaning and purpose of labour norms set by national labour law in EU member states, and confirmed by the European Guidelines for cross-country worker dispatchment, designed to prevent cross-border wage dumping (In principle, they also overrule the status of ILO conventions ratified by EU member States). The potential scope for such dumping is enormous in view of the very large gaps in wages and labour costs across EU member States. The economic implication of the EuC policy is to expand the sector of sub-standard low wages and working poverty. It can be assumed that the rulings of the EuC has wide ramifications for labour law and collective bargaining in Europe. The EuC decisions are a blow for minimum labour standards in Europe, the (upward) harmonisation of such standards, and beyond that for the European social model in general.

The EuC rulings corroborate and give legal status to the superiority of business freedoms such as unrestricted mobility of firms, capital, and goods over worker rights, including fundamental ones. It feeds a neo-liberal concept of Europe.  In the (radical) view of the EuC (and largely also the EU-Commission), the domestic market in the EU is of overriding value. Yet, to be fair, one has to stress that the bias in favour of business freedoms originates in the Treaty of the European Community. The Court merely accentuates the bias further. For the Court, normative discrepancies of national labour law as such form an obstacle to business freedoms, even if national regulations are neither protective nor discriminatory. From a systemic perspective, the EuC gives precedence to the Anglo-Saxon type of liberal capitalism over the more socially minded patterns of social capitalism in Continental Europe and the Nordic countries. Next to labour law, the EuC decisions have been detrimental to forms of workers participation in the management of companies, and public ownership of enterprises (which inter alia adversely affects publically owned community savings banks because the Court favours private banks).

The policy and decisions of the EuC is not necessarily in agreement with the political will of national governments, or the European Parliament, for example. On the contrary, a number of governments have raised their eyebrows when they learned about decisions taken in Luxembourg. However, the scope for changing the jurisdiction of the EuC is limited, not only because there is no unanimity among governments on social policy, but also because changes in the competency of the Court could only be envisaged under a majority rule instead of the present unanimity rule. The shift would require a change of the original Treaty of Rome through a successful ratification of the Treaty of Lisbon which would replace unanimity decisions by majority decisions. Moreover, the Treaty would have to explicitly recognize that the liberties of doing business in Europe can be restricted to safeguard social concerns.

Note wrote by Werner Sengenberger for the Eurosocialistes in Geneva.

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