LAVAL C-341/05: Circumstances of the Case

The case arose out of construction work at a school in Vaxholm in Sweden. Following a public tender process the contract was awarded to a Swedish company, L&P Baltic Bygg AB (Baltic). Up to the end of 2003 all Baltic’s shares were held by Laval, a Latvian construction company. From May 2004, Laval “posted” a number of workers from Latvia to work on the site.

In June 2004 the Swedish building workers’ union (Byggnads) initiated negotiations with Laval to conclude a collective agreement. Laval refused to sign an agreement. Instead, Laval signed a collective agreement with the Latvian building-sector trade union, agreeing on wages lower than Swedish workers would be paid. As a result, Byggnads initiated a blockade of the building site with the support of other unions.

Laval’s legal action
Laval brought proceedings challenging the legality of the collective action. Again the company argued it had freedom to provide services (under Article 49 EC) that the unions could not interfere with. The case also revolves around the Posting of Workers Directive (PWD) (96/71), which was designed to protect workers and apparently to apply employment standards of the host state – the country where the work is being carried out.

Again the unions argued they had the right to take action to protect their members and that the EU Treaty did not permit a private company to sue them.

The ECJ decision
By the time the ECJ decision came out, the Viking case a week earlier had already decided that the unions could be the subject of legal action by a company. The PWD, which had been thought to provide a floor of rights, was interpreted as a ceiling. The ECJ decision amounts to an encouragement to drive down wages and conditions in the host state. With no minimum wage in Sweden and reliance on effective regional collective bargaining, the potential for the PWD to protect workers there was all the more undermined.

It had been anticipated that this case would be helpful alongside the Viking case, particularly if the ECJ had followed the advice given to it by the Advocate General. The ECJ stressed that the right to strike is a fundamental right and a union has the right to take industrial action, but action can only be justified on the grounds of public policy, public security or public health and in relation to minimum standards. The issue of “public policy” was further clarified in the Luxembourg case.