Laval takes case to European Court

  • 2007-01-10
  • By TBT staff
RIGA - A landmark case at the European Court of Justice began on Jan. 9, in which the plaintiff, a Latvian construction company, is accusing the defendant, a Swedish trade union, of bankrupting it by imposing illegal labor restrictions on a contractual job.

The commercial conflict, which arose in 2004 after Latvia joined the EU, was the first test case between older and newer members and their diverging views on free labor markets.
Images of Prime Minister Aigars Kalvitis, Foreign Minister Artis Pabriks and the then Swedish Prime Minister Goran Persson facing off at the negotiating table encapsulated the conflict.

During the hearing in Luxembourg, EU member states argued about the extent to which a country can protect its market against competition from states with weaker social protection. The debate has been a recent hot-topic among EU members.
The case began in 2004, when a Swedish trade union demanded that Laval and Partners, a Latvian construction company working on a school in one of Sweden's suburbs, pay its employees higher Swedish wages and sign a collective labor contract.
The Latvian firm, which had employed several Latvian electrical engineers on the project, refused to cave in. The firm argued that the trade union's demands violated EU law on the free movement of services and labor.

Subsequently more Swedish unions supported the protest and joined in on the picket of the work site, effectively forcing Laval off the Swedish market.
"With its blockade, the Swedish labor union reached its goal 's to push their competitor off the market 's and didn't improve the working situation," Latvian Foreign Ministry State Secretary Aldis Vanags was quoted by the daily Diena as saying.
So far 14 EU member states 's including old members Germany, France and Austria 's have expressed support for Sweden in the case, while some new members 's Estonia, Latvia and Poland 's have stood behind the plaintiff.

After Laval and Partners lost their Swedish construction contract in 2004, sales and earnings plummeted.
The company ended 2004 with sales of 1.4 million lats (1.9 million euros), down 32 percent from 2003, while earnings amounted to a paltry 2,962 lats, down 20-fold from the previous year.

At the time, director Guntars Tiltins commented that the "poor" results were mainly due to leaving the Swedish construction market and the strong pressure from trade unions there. "Our operations were focused mainly on filling orders in Sweden, which we no longer have," he said.
A Swedish labor court currently looking into the incident has asked the European Court of Justice to clarify what national and EU rules apply.

Sweden was one of three EU member states that did not specifically impose restrictions on migrant workers from new member states 's the other two being the U.K. and Ireland.
The crux of the matter comes down to working legalities, the main question being should companies abroad follow their own rules or those of the host nation? The issue is especially prevalent with the recent migration of thousands of Eastern European workers to states such as Sweden, the U.K, Belgium and France.

"Laval, as a company temporarily providing services, should not have been a victim of such a far-reaching industrial action. It had to cease its activities in Sweden and its workers lost their jobs," Anders Elmer, a legal representative of the company, said during the trial. "Swedish workers took up Laval's job. In some cases, they even yelled 'Latvians go home."'

Meanwhile, the Swedish government is backing the trade union on the grounds that the nation's labor market model has caused Sweden to become a modern welfare state. Denmark backed Sweden at the hearing, while legal representatives of some of the EU's member states spoke in favor of Laval.
A verdict in the case will be announced later this year.