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29th Mar 2024

Brussels awaits crucial labour rules case

  • The Vaxholm case could have important consequences for the EU services market (Photo: Wikipedia)

Policy makers in Brussels are waiting with keen interest to hear a preliminary ruling this week in a court case that could have major implications for the EU's social model.

On Wednesday (21 May), the advocate general at the European Court of Justice will give an opinion in a case that is eventually likely to clear up several key questions in EU law and workers rights.

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These include whether minimum wages are a question for the national or European level - in this case whether the Scandavian industry-trade union wage deals take precedence over EU internal market rules; whether EU laws restrict workers and trade unions' rights to take collective action and whether member states are permitted to take steps to prevent so-called "social-dumping."

The advocate general's opinion is not binding but in the majority of cases the final verdict of the court - expected in the coming months - is similar.

The case concerns Latvian construction company Laval which in 2004 was hired to build a school in the Swedish city of Vaxholm. But the Swedish construction trade union, Byggnads, pressured Laval to sign the Swedish collective agreement between industry and trade unions on wages and conditions for the sector.

Laval refused saying its workers were operating under Latvian conditions, with lower wages. The conflict escalated with the Swedish trade unions putting the Latvian company under blockade and forcing the firm into bankruptcy.

In 2005, the "Vaxholm case", brought by the Latvian company, was referred to the European Court to rule on questions of EU law.

Internal market rules versus social standards

At the time, the Latvian-Swedish dispute attracted huge media attention, appearing to sum up the heated emotion surrounding the controversial Brussels law on establishing an internal market in services, which was going through the EU legislative pipelines at the time.

Opponents of the law, which has since been watered down, said that its cornerstone "country of origin" principle allowing service providers to set up in other member states using their domestic rules would result in a downward spiral of wages and social security.

The same type of rhetoric has surrounded the Vaxholm case, with the dividing line being whether countries think EU internal market rules are more important or whether certain minimum social rules override free market principles.

The European Commission's internal market chief, Charlie McCreevy, a champion of deregulation and free markets, also waded into the debate telling Stockholm at the time that he thought the country's collective wage agreements breached EU laws on the freedom of movement.

For its part, Sweden says these collective agreement are an essential part of its social model, which regularly sees the country top the scales in competitiveness but also for social inclusiveness.

European trade unions will be watching the Luxembourg-based court very carefully on Wednesday too, believing that the case will define whether Europe is more than just its internal market.

"The case is very important," European trade union confederation chief John Monks told EUobserver, claiming to have the support of 19 of the 27 EU governments for his stance on the case.

Speaking about trade unions positions he said, "we welcome people but do not want them to be doing something that would be regarded as damaging the interests of the domestic population – that way lies social tension."

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