The Vaxholm Battle

EU news: An Independent View from European Voice

Vaxholm is a small town in the Stockholm archipelago. It is centered around the fortifications built there since half a millenium in order to prevent any hostile navy from ever entering Stockholm.

But in reality the fortifications there never had to fight much of a battle. Intruders kept away during the centuries.

Now, however, a much more serious battle of Vaxholm is being waged. It's the battle between conservative trade union power in Sweden and the opening up of Europe to competition across the old borders.

Some of the facts around the dispute can be found in the editorial from the latest issue of European Voice that I have taken the liberty of copying below. The debate has been given new impetus by the visit to Sweden of the responsible European Commissioner. He made it plain on which side he stands in the dispute.

The Social Democrats are - understandably; they are the party of the past - up in arms over what he said, and it seems as if they have also scared some others into the same position.

"Charlie McCreevy, the Irish internal market commissioner, has struck at the heart of Sweden's widely praised social model.

He has intruded on debates about the best way for Europe to reconcile social protection with competitiveness.

McCreevy said that the European Commission would side with a Latvian company, Laval, and against the Swedish trade union Byggnads, in a politically charged case involving accusations of protectionism on one side and social dumping on the other.

McCreevy's blunt announcement infuriated the political establishment in a country where trade unions and collective agreements are the basis of a notoriously competitive social model. The Swedish government strongly supported Byggnads in its conflict with Laval last winter.

The Latvian building company did not strike a collective wage agreement with Byggnads when it started a school building in Vaxholm, near Stockholm. The Latvian builders were working under a Latvian collective agreement, but Byggnads demanded that they should be subject to the Swedish collective agreement. The conflict escalated when several Swedish trade unions blockaded the building site, sending Laval into bankruptcy.

Laval sued Byggnads in a Swedish labour court and complained to the Commission, arguing that while the union blockade may have been legal under Swedish law, it violated EU rules on the free circulation of labour and services.

In April, the Swedish court referred the case to the European Court of Justice (ECJ) in Luxembourg, for a preliminary ruling on the application of EU law.

EU law says that companies from one member state that are performing services in another have the right to post their workers in the state where the work is being done, but must pay them at least the minimum wage of the country where the work is being done and must respect the working hours of that country.

Swedish unions say that posted workers must respect their collective agreements, too, which cover everything from working time to an industry-wide minimum wage.

The Swedish court considers EU legislation to be unclear about whether the blockade was compatible with the freedom to provide services and a ban on discrimination against foreigners, as well as the EU directive 96/71 on the posting of workers abroad.

This is explosive stuff. Fears of EU enlargement and of social dumping, the freedom to provide services in another member state and relations between EU law and traditions in member states blend into a politically charged cocktail.

MEPs worked themselves into a predictable lather with socialists demanding that McCreevy be summoned to explain himself. The president of the Party of European Socialists, Poul Nyrup Rasmussen, said that in half an hour in Stockholm, McCreevy had destroyed Swedes' understanding of Europe. Now there is talk of whether a referendum should be called on whether Sweden should withdraw from the EU, if its social fabric is under threat.

But this is not just about an indelicate commissioner stirring things up. The picture is much more complex - politically and legally. Sweden is a country where more than 80% of the population has union membership and is understandably protective of its social tradition. Swedish unions have become extremely powerful and increasingly protective.

The Latvian workers who were to build the school were to be paid salaries based on collective agreements between the Latvian company and their Latvian trade union. So was the Swedish trade union just not ready to accept an agreement which it was not party to? Here is a power-struggle which Swedish unions could not lose for fear that it might set a precedent.

The role of the ECJ is to rise above this politics, to ensure the application of the EU law. EU treaties provide for the freedom of movement of labour and freedom to provide services. EU law has primacy over national law.

If the Latvian building company complied with the provisions of the posting of workers directive, it seems logical that the court (and the Commission) should apply EU law.

Eighteen months after the EU's expansion, a cloud still hovers over the question of who has the right to work where and under what conditions across the EU.

The EU clearly needs, the sooner the better, a services directive that fills in the current legal void, spelling out in what conditions cross-border services can be offered. Otherwise, it will be the courts across the Union and particularly the ECJ in Luxembourg, that make EU policy."

So the battle of Vaxholm will continue. It's the Northern European version of the French debate about the Polish plumbers.

Europe will win. And also Vaxholm will be better as a result.