European Court: Free Movement for Services Will Lead to Social Dumping

19 December 2007

European Court: Free Movement for Services Will Lead to Social Dumping

Today the European Court of Justice (ECJ) issued its ruling in the so-called Vaxholm case. The case concerned a Latvian building form operating in Sweden. The firm refused to respect the nationally-negotiated agreement which, under Sweden's usual system of labour relations, determines pay and conditions in the industry. The unions reacted by taking various forms of industrial action, including strikes. The ruling, which went against the unions, came as no surprise to SP Euro-MP Kartika Liotard: "That giving firms the freedom to provide services within the internal EU market would provide an opportunity for social dumping always seemed to us unavoidable. The Court has today made this the norm in Europe. I'm not surprised, just angry.”

When, in 2005 – 2006, the Services Directive was up for discussion, the danger of social dumping was one of the main reasons why the SP vigorously opposed the ´Bolkestein Directive', as it came to be known, after the ultra-Thatcherite Dutch Commissioner who originally introduced the measure. “We feared then precisely what the ECJ today confirmed,” said Liotard. That a firm can, via a country with cheap labour and low standards of social protection, employ people throughout Europe, without having to comply with national rules or collectively negotiated national agreements.” This is true even though in some countries the results of what are often tripartite negotiations – between representatives of employers, labour force and government – have until now been legally enforceable. Even where this is not the case, they have been respected through custom and practice and because employers have feared the consequences of going back on such agreements.

Last week the ECJ issued a ruling in a similar case, in which a Finnish ferry line wanted to sail under the Estonian flag in order to be able to hire a crew on lower pay. The unions lost that case, as well. “I'm glad that the legal hairsplitting over the concrete results of increased freedom to provide services can now be ended,” said Liotard. “It's at last quite clear: social rights, protection for employees, minimum wages and collective labour agreements are all to be completely subordinated to the interests of international business. We have fought hard against this and will continue to do so. Hopefully more people, political parties and trade unions will realise after these cases how necessary this is.”

Last week the trade unions remained reasonably content with the European-level recognition of the right to strike, contained in the ECJ's ruling. “But,” Liotard concluded. “today it has become painfully clear just how far that right extends. As long as firms can appeal to the freedom to provide services they can do what they like and no trade union can do a thing about it.”

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