During 2004 SIA Laval un Partneri, a Latvian construction company, posted several dozen of Latvian workers to Sweden for work on building sites operated by its Swedish subsidiary L&P Baltic Bygg AB, including a building site in Vaxholm, Sweden. A local branch of a Swedish building and public works trade union requested the Latvian company to sign a collective agreement in respect of the Vaxholm site containing the same conditions the Swedish construction companies are bound by and to guarantee to its workers posted to the Vaxholm site an hourly wage of SEK 145 (approx. EUR 16). Despite collective agreement (providing much lower wages for the posted workers than requested by the unions) concluded pursuant to Latvian law between SIA Laval un Partneri and Latvian building sector’s trade union, the members of which were around 65% of the posted Latvian workers, and after the Latvian company finally refused to comply with the request of the Swedish trade union, the latter began blockading the Vaxholm building site. The Swedish electricians’ trade union initiated sympathy action against the Latvian company shortly thereafter. As a result, the Latvian workers went back to Latvia and did not return, the construction contract concluded between the town of Vaxholm and L&P Baltic Bygg AB was terminated, and L&P Baltic Bygg AB was declared bankrupt.

      On December 7, 2004 SIA Laval un Partneri commenced proceedings before the Swedish Labour Court (Arbetsdomstolen) against the trade unions, seeking a declaration that both the blockading and the sympathy action were illegal and an order that such action should cease, as well as the compensation for the damages suffered as a result of such action. On April 29, 2005 the Swedish Labour Court decided to make a reference to the European Court of Justice for a preliminary ruling on compatibility of the action taken by the trade unions and application of a special provision of Swedish law known as the “Lex Britannia” with the rules of the EC Treaty on the freedom to provide services and the prohibition of discrimination on the grounds of nationality, and with the provisions of the Directive on the Posting of Workers (Directive 96/71/EC). On December 18, 2007 the Grand Chamber of the ECJ answered the questions asked by the Swedish Court. After holding the reference for a preliminary ruling admissible, the Court held that the blockading and the sympathy action taken by the trade unions against SIA Laval un Partneri for several reasons were not compatible with Article 49 EC and Article 3 of the Posting of Workers Directive. The application of the special provision of “Lex Britannia” was found to be discriminatory and also incompatible with the rules of the EC Treaty, in particular, Articles 49 EC and 50 EC.

      Due to the fact that earlier opinion of Advocate General P. Mengozzi, delivered on May 23, 2007, favoured the position of the trade unions, the ruling of the Court took many legal commentators by surprise. Some trade unionists and politicians argue that the Court’s ruling ‘opens the door to wage dumping in the EU.’ The Swedish Court must now decide on the outcome of the case in the light of the Court’s ruling. The importance of this ruling is demonstrated by the fact that the observations to the Court were submitted not only by SIA Laval un Partneri and the trade unions, but also by the European Commission, EFTA Surveillance Authority, as well as the governments of Sweden, Belgium, Czech Republic, Denmark, Germany, Estonia, Ireland, Spain, France, Latvia, Lithuania, Austria, Poland, Finland, United Kingdom, Iceland and Norway.

      For further information please contact Edijs Poga at edijs.poga@evershedsbitans.com