European law says that there should be no restrictions on the freedom of nationals in member states to set up and manage companies and firms in other member states.
At the same time the European Social Charter has a number of objectives including the promotion of employment and improved living and working conditions.
The Court of Appeal has said in Viking Line ABP and anor v International Transport Workers' Federation and anor (2006, IRLR 58) that courts have to find a balance between the two sets of rights, and referred a number of questions to the European Court of Justice (ECJ).
What were the basic facts?
Viking was a Finnish passenger ferry operator with seven vessels, including Rosella, sailing under the Finnish flag between Estonia and Finland. The crew of the Rosella belonged to the Finnish Seamen's Union (FSU) affiliated to the International Transport Workers' Federation (ITF), based in London.
In October 2003, Viking decided to reflag the Rosella because it was making a loss. The company wanted to employ an Estonian crew at much lower wages than its current Finnish crew.
The FSU got in touch with the ITF which issued a circular asking all its 600 affiliated unions not to negotiate with Viking, in support of its general policy to eliminate flags of convenience.
In November 2003, the FSU threatened strike action. Viking settled the dispute in December agreeing not to reflag before February 2005, but the ITF did not withdraw its circular.
What happened next?
Prior to the peace agreement coming to an end, Viking asked an English court in August 2004 for an injunction preventing the ITF and FSU from taking industrial action and asking ITF to withdraw its circular.
The company argued that industrial action aimed at preventing them from reflagging the Rosella amounted to a restriction of their right to establish themselves (in this case in Estonia) under article 43 of the EC Treaty, and their freedom to provide services under article 49.
The Judge in the Commercial Court agreed with them and granted an injunction.
What did the parties argue on appeal?
Viking argued that the free movement of establishment and the free movement of services were guaranteed by the treaty. Union activity was not exempt under the treaty, and therefore unions were prohibited from doing anything that inhibited those rights.
The unions, on the other hand, argued that they had a fundamental right to take action to preserve jobs recognised by Title XI of the EC Treaty and Article 136.
What did the court of appeal decide?
As the case raised such important issues relating to the interaction of key provisions of the EC Treaty, the court decided to refer a number of questions to the European Court of Justice (ECJ), looking at the scope of and restrictions on the free movement of provisions and the right of establishment under articles 43 and 49.
It also asked the ECJ to consider the actions of the ITF, specifically its policy on flags of convenience.
The court emphasised the need to find a balance between the employer's free movement rights and the social rights of trade unions.
It felt, however, that Viking was unlikely to get over the hurdles presented by Title X1, unless the company could persuade the ECJ that the unions' activities amounted to direct discrimination. Its general view was that Viking would have an uphill struggle to establish that.
It refused to grant Viking an injunction, saying that it "should only be available to it after a full trial of the action, including answers to the questions posed." On that basis, the court set aside the previous judgement until the ECJ had a chance to hear the questions referred to it.
Comment
This is an important case, as the ECJ is being asked to rule on the rights of collective labour in the increasingly business-oriented European law regime.