1. Vaxholm – Laval Case European Court of Justice (ECJ) (Case No C-341/05, Judgement 18 December 2007)

2. Contents The course of events Judgment of the Court of 18 December, 2007: - the key aspects - LBAS evaluation, related initiatives

3. The Course of Events Between May and December 2004 Latvia based company Laval un Partneri Ltd (Laval) posted around 35 workers to Sweden to work on building sites including renovation and extension of school premises in town of Vaxholm near Stockholm The work was undertaken by Swedish company L&P Baltic Bygg AB (Baltic) whose entire share capital was held by Laval until end of 2003

4. The Course of Events In June 2004 Laval/Baltic and the Swedish Building Workers’ Union (Svenska Byggnadsarbetareförbundet, Buggnads) initiated negotiations on determination of the wage rates of the posted workers, as well as to Laval’s signing the collective agreement for the building sector

5. The Course of Events However the agreement was not reached and on September 14th and October 20th, 2004 in Latvia Laval signed collective agreements with Latvian Builders-Workers Trade Union (LBWTU) The latter provides that the employer recognizes the importance of Directive 96/71/EC in regard to the posting of workers in the framework of the provision of services, as well as employer grants to comply with all state (national) regulations providing implementation of the directive in the country to which employer posts its workers

6. The Course of Events In September 2004 Byggnads demanded Laval to enter into the collective agreement for the building sector, as well as to grant its workers wages in amount of SEK 145/h (around EUR 16/h; based on statistics on wages for the Stocholm (Sweden) region for the first quarter of 2004, relating to professionally – qualified builders and carpenters)

7. The Course of Events Laval refused to sign the collective agreement; as a result Byggnads initiated a blockade of the building site on November 2nd, 2004 In December the Swedish Electricians Union (Svenska Elektrikerförbundet) joined in solidarity with Byggnads) In December 2004 posted workers returned to Latvia In January 2005 other trade unions joined the boycott of all Laval’s sites in Sweden In February 2005 the town of Vaxholm terminated the contract between it and Baltic and on March 25th, 2005 Baltic was declared bankrupt

8. The Course of Events Laval brought proceedings against Swedish trade unions relating to the legality of the collective action to the Swedish Labour Court (Arbetsdomstolen), which subsequently turned to ECJ with reference for a preliminary ruling - interpretation of Articles 12 EC and 49 EC and Directive 96/71/EC of European Parliament and of the Council of 16 December 1996 concerning the posting of workers in the framework of the provision of services

9. Judgment of the Court of 18 December, 2007 Key Aspects 1st Question Whether the means of collective action in the form of blockade to force a foreign provider of services to sign a collective agreement in the host country is compatible with rules of the EC Treaty on the freedom to provide services and the prohibition of any discrimination on the grounds of nationality and with provisions of Directive 96/71/EC, if the legislation to implement that directive of the host country has no express provision concerning the application of terms and conditions of employment in collective agreements. Whether the means of collective action in the form of blockade to force a foreign provider of services to sign a collective agreement in the host country is compatible with rules of the EC Treaty on the freedom to provide services and the prohibition of any discrimination on the grounds of nationality and with provisions of Directive 96/71/EC, if the legislation to implement that directive of the host country has no express provision concerning the application of terms and conditions of employment in collective agreements.

10. Judgment of the Court of 18 December, 2007 Key Aspects 1) 1) If the Member State (MS) has not determined the minimum requirements for the pay rates in accordance with one of the means provided for in article 3(1) and (8) of Directive 96/71 according to that Directive the MS has no right to impose an obligation on foreign service provider to negotiate the wage rates at the place of work on case-by-case basis (Sweden does not provide for minimum rates of pay and the amount of pay rates is provided trough bargaining process among social partners and stipulated in autonomous collective agreements for each particular situation)

11. Judgment of the Court of 18 December, 2007 Key Aspects 2) 2) The right of trade unions to collective action has to be balanced against the freedom to provide services which is one of fundamental principles of the Community, as well as with objectives pursued by social policy 3) ECJ in this particular case evaluated the obstacle which that collective action (blockade) forms as not justified with regard to the objective of protecting workers

12. Judgment of the Court of 18 December, 2007 Key Aspects 2nd Question Whether Articles 49 EC and 50 EC preclude the system to combat social dumping established in Sweden, pursuant to which a service provider is not entitled to expect that the provisions of the collective agreement to which it is already subject in the MS of its registration to be taken into any account in the MS in which it provides its services. Whether Articles 49 EC and 50 EC preclude the system to combat social dumping established in Sweden, pursuant to which a service provider is not entitled to expect that the provisions of the collective agreement to which it is already subject in the MS of its registration to be taken into any account in the MS in which it provides its services.

13. Judgment of the Court of 18 December, 2007 Key Aspects 1) 1) In this regard ECJ pointed out that national rules in particular case, which fail to take in account collective agreements to which companies that post workers to Sweden are already bound in the MS in which the company is registered, causes discrimination against such companies, as in that way they are treated in the same way as national companies which have not concluded a collective agreement

14. Judgment of the Court of 18 December, 2007 Key Aspects 2) 2) Article 46 EC of strict interpretation states that discriminatory rules may be justified only on grounds of public policy, public security or public health 3) 3) ECJ found that discrimination such as that in this case can not be justified

15. Judgment of the Court of 18 December, 2007 LBAS evaluation LBAS joins to the opinion expressed by European Trade Union Confederation on unexpected judgment of ECJ in particular case and concernment on the influence of the result of the case to the collective agreement systems of Sweden and other Nordic countries

16. Judgment of the Court of 18 December, 2007 LBAS evaluation However, the judgment contains significant positive features - upholding in Community law the right to strike as a fundamental right and trade union’s right to take a collective action against social dumping

17. Judgment of the Court of 18 December, 2007 Related Initiatives LBWTU has submitted with the Latvian Parliament the draft of the amendments to the Labour Law providing the following regulations: - if the members of the employers organization employ more than 50% of employees in certain industry or perform more than 60% of industry's turnover of goods or amount of services in the country, the general agreement concluded between employers organization and trade union is binding to all the employers in particular industry and applies to all the employees employed by mentioned employers;

18. Judgment of the Court of 18 December, 2007 Related Initiatives - employer posting employees to perform work in another MS or states of European Economic Area or Swiss Confederation regardless of the legislation applicable to the employment agreement and employment relationships has to ensure the employment regulations provided by the Labour Law (e.g.minimum wage rates, safety, health protection, equal treatment etc.) and work conditions in conformity with the provisions of respective state regarding posting of the employees.

19. Judgment of the Court of 18 December, 2007 Related Initiatives On December 18th, 2007 LBWTU concluded with the Latvian Builders Association agreement on pay rates for workers in construction for year 2008 According to this agreement the pay rates depending on the profession and qualification level vary from LVL 3,91/h to LVL 6,69/h (EUR 5,56/h to EUR 9,52/h) before taxes

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