Why EU law will not make the trains run on time

21 December 2016 by

pay-southern-rail-train-strikeGovia GTR Railway Ltd v. ASLEF [2016] EWCA Civ 1309, 20 December 2016 – read judgment 

As all domestic readers know, there is a long running industrial dispute between Southern Rail and ASLEF, the train drivers’ union. The issue : DOOP  – Driver Only Operated Passenger – Trains. The company says they are perfectly safe, have been used extensively, and there will be no job losses. It claims over 600,000 journeys are being affected per day. The union strongly disputes that the new system of door closing is as safe as the old for passengers, and says that the new system is very stressful for drivers. 

Under domestic law, there appears to be no doubt that the strike action is lawful. In the time-honoured phrase, it is in furtherance and contemplation of a trade dispute, and the company accepted that a proper and lawful strike ballot was held – with a 75% turnout of members of whom 90% favoured the strike.

But the company argued that strike action was in breach of EU law, and hence it was entitled to an interlocutory injunction preventing the strike pending trial.

The company said that the strike action was in breach of Art.49 of the Treaty on the Functioning of the European Union, conferring the right of establishment, and of Art. 56 – the right to provide and receive services.

To get such claims off the ground, you need a cross-border element. In the Art.49 claim, this arose because the company is 35% French owned and the French company plays an active part in its decision-making – this, the union accepted. The Art.56 claim was more remote – the rail link to Gatwick was affected by the strike, and passengers to and from Europe might be impeded in the giving and providing of services. This the union denied, and the Court of Appeal agreed with them.

The company said that trade union action would constitute a breach of Art.49 if it was liable to hinder or make less attractive the exercise of the company’s fundamental freedom of establishment. The company was already established in the UK, but it was said that the action would discourage it from extending its activities within the UK.

The company relied on three labour law cases, which it said made this point.

In Viking [2007] ECR I-10779, a decision of the CJEU in Luxembourg, a Finnish shipping company wished to reflag one of its vessels to Estonia and for it to be operated by an Estonian subsidiary. The purpose was to save costs – Estonians are paid less than Finns. The Finnish seaman’s union took industrial action against all Viking’s ships to impose collectively agreed Finnish terms and conditions – defeating the object of re-flagging in Estonia. Viking went to court.

The CJEU said that it mattered not that Viking’s claim was taken not against public authorities but a union, as long as it was addressed at rules regulating in a collective manner employment and the like.

As the CA pointed out, the CJEU was saying it was not simply the effect of the industrial action itself which is critical, but the effect on Viking if it had to accept the terms imposed by the unions.

The CJEU held that the unions were in breach of Art.49.  Collective action would have the effect of making less attractive, or even pointless, Viking’s exercise of its right to freedom of establishment in Estonia. And this was the objective which the strike action was seeking to achieve.

The second case, HolshipCase E 14/15 was a decision of the EFTA court, applying the EEA agreement which mirrors EU law. Holship was a Norwegian forwarding agent wholly owned by a Danish company. It wished to use its own employees at a Norway port. In Norway, stevedores have a monopoly, as a result of a collective agreement designed to provide stability of work. Holship did not wish to play ball. Unions insisted that Holship honour the collective agreement, and when it refused, threatened a boycott.

The EFTA court held that the boycott would be unlawful. It would amount to an unjustified interference with the right of freedom of establishment. It was likely to discourage or even prevent the establishment of companies from other EEA states. It was a restriction on the freedom of establishment, which could not be justified.

As the CA pointed out

the critical feature which constituted a potential deterrence was not the fact that there was a boycott of the company; it was the purpose for which the boycott was being pursued.

The third case was Laval case (C-341/05 Laval [2008] IRLR 160). Laval, a Latvian company, won a contract to refurbish a school in Sweden. It wanted to use its cheaper Latvian workforce there. It was subjected to industrial action to compel it to accept the terms of a Swedish collective agreement. Laval said that this involved an unlawful interference with its right to freedom to provide services under article 56.

The CJEU agreed.  The company was entitled to apply Latvian terms to its Latvian workers. It should be allowed to employ its own staff just as the Swedish companies could do. It would frustrate the purposes of creating a free market and would undermine article 56 to compel it to apply Swedish terms and conditions to those workers.

The CA noted that

 it was the deterrent effect of the object of the strike, rather than the effect of the strike itself considered independently of that object, which constituted the unlawful restriction on the provision of services.

Given these interjections from the CA on these three cases, you may already have spotted why the CA was to reject Govia’s argument.

..it is the object or purpose of the industrial action and not the damage caused by the action itself which renders it potentially subject to the freedom of movement provisions. [39]

The object of this strike was nothing to do with the freedom of establishment, it was all about train manpower. The CA added that a helpful test to apply is to ask whether, if the rules were laid down by government, they would be an unlawful interference with the freedom of establishment.

In our judgment it is inconceivable that a rule which did not discriminate on grounds of nationality and which required a driver and a guard on all trains to ensure the safe closing of doors rather than just a driver, could be said to constitute a deterrent to freedom of establishment or to make it less attractive.

The company argued that such a rule would make it less attractive to exercise its right to establish further enterprises in this country. The CA strongly disagreed.

We do not accept that a rule of the kind would conceivably have that effect. …. even where a measure operates to the detriment of a person … that will not justify an inference that their freedom of movement has been infringed if the effect is either too uncertain, indirect or insignificant to have the requisite deterrent or dissuasive impact.  We have no doubt that it would be too insignificant here.

Nor was it enough that “strong or even bloody-minded trade unions” might discourage French investors from further involvement with UK business – that is not a protection conferred by Art.49. Its purpose

is to allow companies to have access to an open and free market, not to give them a more favourable protection than locally based enterprises.

The CA (including Elias LJ, a very eminent labour lawyer and former academic – who had the misfortune to teach me the subject) stated the underlying concern at [42]

Furthermore, were the strike itself to be the relevant restriction, this would have profound effects on the legality of strike action. It is now firmly established in EU law, as Viking itself asserted at paras 43-44, that the right to take collective action, including the right to strike, “must be recognised as a fundamental right which forms an integral part of the general principles of Community law the observance of which the Court ensures…”. It is not an untrammelled right, but the core of that right at least must be protected.

Any strike in any EU state may be said to make it less attractive for a company to continue operating there. But that could not be the determinant. It would hardly be compatible with the freedom of association or the protection of the right to strike

effectively to put the legality of industrial action in every strike with cross-border impact into the hands of the courts, with the onus on the union to persuade them that the action was not disproportionate.

The CA dealt with the Art.56 (services) argument more briskly. It was doubtful as to whether the right was untrammelled by Art.58 providing for a special legal regime applicable to transport services; it also doubted whether the company could ride on the coat-tails of  passenger impacts on services – but decided neither point. The CA relied on the same point which scuppered the Art.49 point – the strike was not intended to affect those services, even though it might have that effect. In any event, strike action could be justified.

It is not possible in this case to say, in advance of the action being taken, with respect to any individual passenger, that his or her ability to travel to or from the EU will be interfered with. Moreover, it would undermine the right to strike in a most fundamental way if all passengers potentially and indirectly affected by the strike could claim that it was interfering with their rights to provide and receive services. Subject to a defence of justification, the union’s liability would be open ended. That would be an extraordinary consequence of this argument succeeding.

Conclusion

The CA therefore dismissed the appeal and so disallowed this claim for an injunction. It was careful to distinguish its view on the law of strike action, from any questions as to whether the strike was “disproportionate”, as the company had claimed.

So a principled decision by the CA, whatever one thinks of the union’s stance or of the plight of commuters facing repeated rounds of strikes. The right to withhold your labour has to be recognised, just as one’s right to free movement or establishment.

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