Court to rule on EU labour market case

Judges will rule on Tuesday on a key piece of legislation on the free movement of workers which could have wide-ranging implications throughout the EU.

The European court of justice in Luxembourg will discuss the case of Latvian firm Laval, which was forced into insolvency after industrial action by Swedish construction workers.

Laval was contracted to work on the construction of a school in the city of Vaxholm in 2004, and employed its workers under the terms of a Latvian agreement on wages and conditions.

Swedish unions claimed that the wage agreement should be made under Swedish labour laws, as this would mean better pay and conditions for the Latvian workers.

Unions claimed that some of Laval’s workers were paid just 35 kronors an hour, far less than the 138-145 kronor hourly rate laid down in Swedish collective agreements.

The blockade of the Vaxholm site by Swedish workers forced Laval to declare its Swedish unit insolvent, and the Latvian firm is claiming damages from the union as a result.

The case prompted controversy in 2005 when internal market commissioner Charlie McCreevy appeared to criticise the Swedish system of collective wage bargaining, saying that the EU executive would back Laval’s stance.

Speaking to the Swedish media in October 2005, McCreevy said that he would speak out against Sweden’s system before the court, arguing that such collective bargaining agreements could potentially restrict the free movement of workers.

Sweden fought long and hard to retain its right to collective bargaining agreements when it joined the EU, and McCreevy’s comments were seen as a clear attack on the country’s much-vaunted social model.

The court’s ruling could have major implications for the EU as it struggles to define the European social model in the wake of the heated debate over the services directive.

A ruling in favour of Laval would support the pro-business stance that so angered many centre-left politicians in particular.

On the other hand, if the court backs the Swedish union and gives national labour laws precedence over EU rules in this area, it could further undermine efforts to create a single EU labour market, already stalled by temporary blocks on workers from the new member states in many ‘old’ EU countries.

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