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Nordic worry over EU internal market package

| Text: Kerstin Ahlberg, editor EU & arbetsrätt

The European Commission’s proposal for how to apply the EU directive on the posting of workers must not limit our powers to control foreign companies! That was the unified message from government officials, authority representatives, the social partners and researchers from all Nordic countries when they met in Oslo to discuss how to deal with what remains of the the so-called internal market package.

'The internal market package’ which was introduced in March consisted of two parts:

  • partly a proposed directive on how the existing directive on the posting of workers should be implemented (”the Enforcement Directive”)
  • partly the so-called Monti II regulation, on the right to take industrial action in the context of the freedom of establishment and the free movement of services. The week before the Oslo seminar only the first part remained. The Commission had decided to withdraw the Monti II regulation.

And it really was an impossible regulation, neither appropriate nor politically realistic, professor Niklas Bruun told the seminar. But there is still a problem which remains to be solved.

EU already limits the right to strike

With its judgments in the Laval and Viking Line cases, the Court of Justice of the European Union has already begun to regulate the right to strike. The question is not, therefore, whether this should be regulated on an EU level but whether only the Court of Justice should be responsible for setting out the norms for this, Bruun pointed out. He launched the idea that perhaps the Nordic countries could approach the Commission with a better proposal which could rectify the current imbalance where the right to strike in reality has become secondary to the EU’s economic freedoms.

But what will then happen to the Enforcement Directive - will it be implemented at all or will it too end up in the paper bin? The two proposals were after all presented as one packet where both were considered necessary. 

“Yes, there will be a directive, but it will probably be less comprehensive than what the Commission initially proposed,” said Stig Hansen Nørgaard from Denmark’s Ministry of Employment, who spoke about possible scenarios for the continued political process. There is support in the EU Council for the idea that some rules are needed, but many parts of the proposal remain contentious.

Genuine and non-genuine postings

One issue being debated in the EU Council is rules to help member states differentiate between ‘genuine’ and ‘non-genuine’ postings - an issue also discussed at the Oslo seminar. What will the legal consequences be for workers and their employers if the host country discovers that the employer is nothing but a mailbox company with no substantial activity in the country where it is established, and that the rules for the posting of workers as a result don’t apply at all? In these cases workers might not be covered by the host country’s labour law rules, but it is not possible to get a clear answer to what rules would apply instead, the seminar concluded. 

The proposed directive is very clear, however, when it comes to its power to limit the demands a host country can put on foreign employers in order to control that they fulfil their obligations in that country. The proposal contains a list of control measures which member states may “only” use. The list is based on cases where the EU Court of Justice has decided whether different demands put forward by some member states are compatible with the free movement of services. 

Can countries have their own control measures?

In the EU Council there is a split between governments which want the rules to be predictable for companies and therefore think the list is a good idea, and governments which argue that member states must be allowed, just as they are today, to design their own control measures. The Court of Justice will then decide in each individual case whether these measures are compatible with EU law. Finland is one of those countries.

“We don’t believe the EU Court of Justice has scrutinised all possible control situations and measures. EU countries should not limit their chance to control the posting of workers because we do not know what the future world will look like, and our Riksdag [parliament] does not accept a weakening of the control mandate,” said Anne Vänskä from Finland’s Ministry of Social Affairs and Health. 

If you want to prevent this, it is not enough to simply erase the word ‘only’, said Professor Jonas Malmberg. 

“I fear the EU Court of Justice would still interpret the directive to allow only the control measures which are mentioned in it, in the same way as it interpreted the existing directive on the posting of workers as a maximum directive.”

If you want to make sure this is not going to be the case, you have to write it into the directive, argued Malmberg. 

It was clear that all participants at the seminar shared the fear that the directive would limit rather than strengthen the control mechanisms which the Nordic countries already have. As expected there was more contention surrounding the proposal that construction firms using foreign subcontractors in certain cases should be made to pay the wages of the subcontractors’ workers.

Unhealthy competition in the construction trade

Tapio Kari from the Confederation of Finnish Construction Industries described the comprehensive control system which Finland has developed to stop unhealthy competition in the construction trade. 

“We have developed a system which gives the authorities the opportunity to catch those who break the law. If they don’t do it, one lone company can’t do it. We don’t want to take responsibility for companies which break the law,” he said. In other words, employers in the construction industry do not want the directive’s rule on joint and several liability. 

Yet for the Norwegians, who already have considerably stricter rules on joint and several liability, the proposal is too weak, said Professor Stein Evju.

Swedish trade unions are positive to the proposal, explained Lena Maier Söderberg from Saco - the Swedish Confederation of Professional Associations.

“We don’t have a similar system, so for us this would be a step forward. You could wish the proposal was even more far-reaching, for sure, but we are worried the rules on joint and several liability will disappear altogether from the directive if you complain too much about them. So we try to put forward constructive criticism.”

It will be some time before we see how much of the original proposal is left after it has been through the EU law-making machinery. The European Parliament does not plan to look at it until May next year, after which the EU Council will consider the Parliament’s proposed amendments. Yet judging from the Parliament’s earlier position on questions relating to the posting of workers, one could expect tough negotiations on the Enforcement Directive.

The Oslo seminar was jointly organised by the newsletter EU & arbetsrätt and the Nordic Council of Ministers‘ Industrial Relations Committee.

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