Adjudicating Europe

On 2 December 2009, almost two years after the landmark preliminary ruling of the European Court of Justice (ECJ) on 18 December 2007 in case C-341/05, the Swedish Labour Court published its 60-page judgment in the Laval case. The Labour Court, applying EC law, awarded the Laval company compensation for three trade unions’ breach of EC law. But the judgment was not unanimous; one of the professional judges (the vice president) and one of the members representing the labour side dissented on the right to damages with EC law arguments; and one other lawyer member of the Court dissented on the size of the damages, mainly with EC law arguments.

The Labour Court is the Swedish specialized court for labour disputes, and there is no judicial remedy under national law against its rulings. It is therefore a court of last instance in the meaning of article 234.3 EC.

In the Laval judgment, ECJ held that Article 49 EC and Article 3 of the Posted Workers Directive precluded the Swedish trade unions from collective actions to force Laval, a service provider from Latvia, to enter into unforeseeable negotiations with the trade union on the rates of pay for posted workers and with the aim to sign a collective agreement with more favourable conditions than those resulting from Swedish law or from Article 3 of the Posted Workers Directive. The Court also held that the so called Swedish Lex Britannica, which allowed for collective action to set aside a collective agreement entered into in another Member State, was incompatible with EC law.

The parties in the Swedish conflict and the Labour Court have accepted without discussion the judgment of ECJ and thus agreed that the labour dispute was illegal. The remaining question before the Court was thus the question of remedies. The Laval company claimed compensation from the trade unions with 2,77 million Swedish kronor (roughly € 270.000) plus litigation costs. But the trade unions denied liability for damages and litigation costs, mainly arguing that they had applied explicit Swedish law on the matter.

The Labour Court concludes that there is a right to compensation for the Laval company for general damages but not for economic loss suffered, since the company has not been able to prove such economic loss. The Laval company is awarded in total Swedish kronor 550.000 (roughly € 55.000) and compensation for litigation costs with roughly € 200.000.

The judgment is fairly well argued and at first sight, I have no problems to accept it as a reasonable result of ECJ’s Laval judgment and a fair application of EC law on damages. But serious questions can be raised whether the Labour Court had all the information on EC law needed to finally decide the case. The parties were (naturally) divided about the interpretation of EC law concerning the right to damages in a case between individuals, and they raised arguments of good quality. Most of ECJ’s jurisprudence on the right to damages concerns individuals’ rights to compensation for a Member State’s breach of EC law, and the case C-94/07 Raccanelli, on which the Labour Court relies heavily, is not a very strong one: a very short and essentially non-reasoned judgment by a chamber of three judges, concerning a breach of the non-discrimination rule in Article 39 EC, quite another matter than the interpretation of Article 49 in the Laval case. Furthermore, in Brasserie du Pêcheur and Factortame, ECJ listed a number of factors relevant for the test of whether a Member State’s breach of EC law is sufficiently serious for creating a right to damages. Are factors like these relevant also in a case between individuals like Laval? What about the facts that the trade unions relied on the explicit right to collective action according to Swedish law and that ECJ had never ruled on a matter like this before? And what about the Labour Court’s own interpretation of a critical part of ECJ’s judgment in the Laval case, concluded after a comparison of some, but not all, different language versions?

Maybe the Labour Court’s application of EC law and the outcome of the national litigation was not so evident, after all. Maybe the Labour Court, being a court of last instance, had the duty, and not only the option, under Article 234.3 EC to ask ECJ about the interpretation of EC law in a case of damages for collective action like this. The Labour Court simply states that ECJ’s jurisprudence gives sufficient guidance for it to decide the issues of liability for damages so it does not need to submit any questions to ECJ for a preliminary ruling. According to the the Cilfit case, still valid, this argument is not enough. In Cilfit, ECJ stated that a national court of last instance can refrain from submitting a question to the Court of Justice only if an identical question has been answered in the Court’s jurisprudence or if it is convinced that the answer is obvious and the matter is equally obvious to the courts of the other member states and to the Court of Justice. Given already the dissenting opinions of its own judges, the Labour Court should have given the matter and the reasoning a second thought before it decided the case. The Labour Court’s unwillingness to submit the case – for a second time – to ECJ is of course understandable, since it has taken 5 years for the case to be concluded, but one can certainly ask why the Labour Court did not include questions about the right to compensation for damages when it referred the case to the ECJ the first time. In any case, the Swedish judgment seems to be a very weak one since it was decided by 4 judges against 3.

Meanwhile, the legislative saga goes on in Sweden. The Government has submitted a bill to Parliament to amend present Swedish law to be compatible with EC law, but the opposition, led by Social Democrats and supported by trade unions, try to postpone decisions, probably in the hope of a Social Democratic victory in next year’s general elections. What should happen then is still unknown.

Anders Kruse, ambassador (ret.) and Agent for the Swedish Government before ECJ in the Laval case.