The Economic and Financial Crisis and Collective Labour Law in Europe 9781474201735, 9781849466141

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Foreword Social standards in general and collective labour law in particular have been under severe attack, especially since the outbreak of the financial and economic crisis and the sovereign debt crisis. The role of the trade unions has been undermined by the decentralisation of collective bargaining, thus leading to a growing democratic deficit in the European management of the crisis. ‘Structural reforms’ have done little to bring about economic recovery: they rather characterise a new economic governance approach to labour law which promotes the dismantling of collective rights. This book is the outcome of a fruitful and scholarly longstanding project of the Transnational Trade Union Rights Expert Network (TTUR) of the European Trade Union Institute, a network of leading European labour law experts: Niklas Bruun (Finland), Klaus Lörcher (Germany), Simon Deakin (UK), Filip Dorssemont (Belgium), Antoine Jacobs (the Netherlands), Csilla Kollonay-Lehoczky (Hungary), Bruno Veneziani (Italy), Mélanie Schmitt (France) and Isabelle Schömann (ETUI). The authors’ aim is to analyse the impact of the economic and financial crisis on collective labour law in Europe, scrutinising the wave of deregulatory measures in collective labour law at national level and to investigate potential ways out of the crisis in terms of litigation strategies at international and European levels. Given the importance and far-reaching consequences of the reforms taking place in national labour law in Europe, the TTUR organised two seminars in 2012 and 2013 to gather internal and external experts, lawyers and economists, academics and trade unionists to reflect on the new European economic governance and its impact on workers’ rights. We would like to take this opportunity to warmly thank the participants in the seminars for their constructive input and prospective analyses, building on their experience dealing directly or indirectly with the EU. Among others we would like to thank: Professor Sylvaine Laulom (University Jean Monnet, Saint Etienne); Professor Monika Schlachter (University of Trier Council of Europe, Vice President of the European Committee of Social Rights); Professor Lucio Baccaro (University of Geneva); Dr Lefteris Kretsos (University of Greenwich); Dr D Francisco J Gómez Abelleira (University Carlo III, Madrid); Lára V Júlíusdóttir, hrl (Iceland Supreme Court attorney); Fotis Vergis (Cambridge University, UK); Esther Lynch (Irish Congress of Trade Unions); and Andreas Botsch (ETUI senior researcher, Brussels). Furthermore, the TTUR is grateful to Lukas Oberndorfer (Austrian Chamber of Labour); Professor Andreas Fischer-Lescano (University of Bremen, Germany); John Hendy QC (employment law barrister, Old Square Chambers, London) and Professor

vi  Foreword Keith Ewing (King’s College London) for their written contributions to this initiative. The book is divided into three sections: the first section deals with the European responses to the financial and economic crisis in terms of changes to the general framework of the EU, the changes in EU secondary legislation, the role of the Troika and the EU social and economic governance and the European Monetary Union (EMU). The TTUR analysis shows that the means used by the European Union in handling the financial and economic crisis can barely sustain serious legal examination. The second section addresses the labour law reforms imposed in the member states in terms of the role of the trade unions, especially the right to strike and the decentralisation of collective bargaining, with a particular focus on the lack of democratic procedures accompanying such reforms. The authors demonstrate how the Lisbon Treaty and the jurisprudence of the Court of Justice of the European Union (CJEU) should provide the necessary safeguards against the dismantling of collective labour rights. In the third section, the authors examine legal and judicial avenues in EU primary law, as well as in international law, for re-establishing collective labour law in its prime function of protecting workers, including the ILO Conventions, the (Revised) European Social Charter and the ECHR. This in-depth investigation offers the readers a new and comprehensive legal analysis of the impact of the crisis on collective labour law in terms of current reforms and possible ways out in terms of litigation strategies. The publication clearly demonstrates that in contrast to the current predominantly economic vision of Europe, there should be much more investigation and promotion of the protective role of labour law, reinstating the social and human dimension at the heart of the European Union, which is more than ever necessary in this time of crisis. With this book, the TTUR Experts’ Network of the European Trade Union Institute intends to stimulate academic scrutiny and to raise awareness of the urgent need to safeguard the EU’s social dimension. As well as an academic endeavour, it is also an attempt to contribute to the public debate on the framing of social Europe. In order to obtain a better view of the impact of ‘structural reforms’ on labour law, the TTUR Experts’ Network launched a manifesto in 2011, supported by nearly 600 labour and social lawyers, to raise awareness across Europe of the dramatic consequences of the ‘anti-crisis’ measures in labour law and to call on the European Union to respect and promote fundamental social rights, in particular in respect of crisis-related measures.1 The European Trade Union Institute thanks the authors for their thorough analysis that demonstrates the dramatic impact of labour reforms in Europe in 1  Information on this initiative can be found at: www.etui.org/Networks/The-TransnationalTrade-Union-Rights-Experts-Network-TTUR. The Manifesto is to be found in Annex 2 of this book.



Foreword  vii

terms of violations of labour standards and presents legal avenues to develop litigation strategies to restore labour rights.

Maria Jepsen Director of the Research Department, ETUI

List of Contributors Niklas Bruun is Professor of Law at the Hanken School of Economics, Helsinki, Finland. He is leader of the research programme ReMarkLab, and a guest professor, Stockholm University. Simon Deakin is Professor of Law at the University of Cambridge, UK. Filip Dorssemont is Professor of Law at the Catholic University of Louvain, Belgium. Keith Ewing is Professor of Public law at King’s College London, UK. Andreas Fischer-Lescano is Professor of Public Law and European law at the University of Bremen (Zentrum für Europäische Rechtspolitik – ZERP), Germany. John Hendy QC is a Barrister at Old Square Chambers, UK. Antoine Jacobs is former Professor of Law at the University of Tilburg, The Netherlands. Csilla Kollonay-Lehoczky is Professor of Law, Eötvös Lóránd University, Faculty of Law and Central European University, Legal Studies Department, Budapest, Hungary. Klaus Lörcher is former Legal Adviser to the European Trade Union Confederation (ETUC) and former Legal Secretary to the Civil Service Tribunal of the European Union, Germany. Lukas Oberndorfer is a legal scholar in Vienna and scientific staff member of the Austrian Chamber of Labour, Austria. Isabelle Schömann is senior researcher at the European Trade Union Institute (ETUI), Belgium. Mélanie Schmitt is Maître de conférences HDR, Université of Strasbourg, Faculté de droit – UMR DRES – équipe Droit social, France. Bruno Veneziani is former Professor of Labour Law and Comparative Trade Union Law, University of Bari, Italy.

Introduction1 ANTOINE JACOBS

I

T IS ALREADY six years since the financial crisis erupted. It started in the autumn of 2008 as a banking crisis. In the United States and Europe several banks collapsed and many had to be kept alive with enormous amounts of public money. Soon afterwards the so-called real economy faced the consequences of the banking crisis. Finally, in Europe, there was the monetary crisis, when it appeared that a number of EU member states – notably Greece, Ireland and Portugal – could be saved from bankruptcy only with huge loans from the other member states. Even large member states, such as Spain and Italy, were compromised. Economic growth disappeared from most of Europe. Many member states fell into recession. Unemployment rose sharply. Several member states could no longer stick to the golden rules of the European Monetary Union: a maximum budget deficit of 3 per cent and state debt not more than 100 per cent of GDP. Although initially governments tried to cope with these problems by reverting to old Keynesian recipes, after a while they turned to classic neoliberal austerity measures. The most draconian measures were imposed on the member states that needed huge financial support from the other member states. They were inserted in the conditions imposed on them by the so-called ‘Troika’ (European Commission, European Central Bank and International Monetary Fund). Other member state governments, however, often followed the same path in order to achieve economic recovery. Meanwhile an intense debate has arisen between economists and politicians about the right way out of the crisis. Roughly, two ways are indicated: the neoliberal way, insisting on a decrease in state expenditure, social costs, taxes, wages etc in order to improve competitiveness; and the neo-Keynesian way, stimulating consumption and investment, higher taxation and so on. This debate reminds us of earlier economic crises, such as the Great Depression of the 1930s which was, initially, addressed by classic instruments, austerity measures, until Keynes taught us that nothing could be achieved in that way, because it   The views and opinions expressed in this chapter are those of the author.

1

2  Antoine Jacobs only takes money out of the economy. It also reminds us of the economic crisis of the 1970s, which was fought unsuccessfully with Keynesian recipes, until Reagan and Thatcher returned to the recipes of classic economics. The current debate cannot avoid an analysis of the causes of the crisis. Many insist that the crisis was provoked by too great permissiveness towards the financial world and emphasise that the crisis is best fought by more strictly regulating financial institutions, preventing tax evasion and so on. Others insist that the crisis has revealed the poor competitiveness of our industries and should be fought by lower taxes, deregulation, flexible labour markets and so on. Most of the authors of this book are not economists but lawyers and specialists in social policy. We cannot hope to persuade people with economic arguments. However, we think that we have something to add to the debate about legal arguments, as well as something about the organisation of society. For the crisis is not a laboratory phenomenon; it touches the real world, society, in which legal rules and social patterns have been developed to foster civilisation, justice and peace in a world otherwise prey to human beings driven only by selfinterest. One may argue that many laws and patterns have been produced to serve societies that are on the brink of disappearing in an era of globalisation, modern technologies and communications. And indeed, the preservation of all existing laws and patterns is never a wise option. However, there are laws and patterns which have been renewed recently, exactly to better serve contemporary societies. And there are laws that soar above particular times and societies that should not be disregarded in any debate about exit-strategies in the current financial crisis. In a recent publication, Resocialising Europe in a Time of Crisis,2 a number of distinguished lawyers dealt with the legal impact of the financial crisis on labour law in its broadest sense. In this book, the authors focus on collective labour law and the industrial relations side of this crisis and its various procedural and litigation aspects. Collective labour law and industrial relations are the result of the development of modern industrial societies, which emerged in the nineteenth century in the Manchester Liberal states, in which the state was not really concerned about the working class, with much inhuman misery, engendering revolutions and terrible wars. It took time before it was generally accepted that lasting peace was unattainable without social justice. Collective labour law and industrial relations are the precious fruit of this awareness. They must evolve in line with changes in our societies, but they should not be sacrificed on the altar of anti-crisis processes. Isabelle Schömann analyses the institutional reactions of the European Union to the economic and financial crisis. She recalls that the Lisbon Treaty, which entered into force in December 2009, has already added important provisions to the European Treaties in order to strengthen the economic governance of the 2   N Countouris and M Freedland (eds), Resocialising Europe in a Time of Crisis (Cambridge, Cambridge University Press, 2013).



Introduction  3

eurozone. However, as the financial crisis evolved, the EU needed new competences to cope with it. The Council, basing its actions on Article 48(6) of the Treaty on European Union (TEU), decided to amend Article 136 of the Treaty on the Functioning of the European Union (TFEU). Moreover, two intergovernmental Acts were adopted: the Treaty on Stability, Coordination and Governance of the Economic and Monetary Union (also called the Fiscal Treaty) and the European Stability Mechanism Treaty (ESMT). Having sketched the various contents of these measures, Schömann mentions the widespread criticism the adoption of all these measures has provoked. They were also challenged before the Court of Justice of the EU, notably in the Pringle case, but without success. Schömann considers this judgment as ambiguous with regard to a large part of the doctrine and raises at least four major concerns. The chapter written by Lukas Oberndorfer takes us through the detailed EU measures on surveillance and coordination of national economic policies adopted in recent years. The Maastricht Treaty had already given the EU the competences to coordinate member state economic policies, but these competences were buttressed by fairly weak sanctions. Economic policies at first remained the responsibility of the member states, but when the euro crisis erupted the need was felt for much stricter control of public finances, at least in the euro countries. In order to avoid a treaty revision, the new competences were laid down in an intergovernmental treaty (the so-called Fiscal Treaty), binding all EU member states except the United Kingdom and the Czech Republic. As a result, an entire edifice of new EU measures has been erected: the so-called ‘Six-pack’ (a package of five regulations and one directive) and the ‘Two-pack’ (consisting of two decrees), while a further package is planned: the competitiveness pacts. Oberndorfer leads us through all these measures in detail, indicating that they are not providing for codecision rights for the European Parliament and avoid nearly all popular democratic control. They have granted the European Commission significant power in an area that was previously termed ‘the royal right of parliaments’. Moreover, he argues that these neoliberal measures will have a pro-cyclical effect. The obligation to make cuts in public spending during an economic downturn leads to a further breakdown of (state) demand, and so to a continued decline in the economy and finally to an increase in public debt. It aims at preventing an expansive economic and social policy, which could shift the power relationship in favour of trade unions and social movements. This requires corrections in wage policies and deregulation of labour, product and service markets until competitiveness is restored. Oberndorfer submits that the central instruments of this ‘new economic governance’ were passed without the necessary basis of competence, so they are manifestly illegal. He calls this entire development ‘authoritarian constitutionalism’, which de facto amounts to an annihilation of state parliaments. He states, in turn, the demands raised for a convention on a new founding of Europe as a starting project for a ‘progressive constitutionalism’. In the following chapter, Andreas Fischer-Lescano questions the legal basis for the actions taken by the European institutions – the ECB and the European

4  Antoine Jacobs Commission – in managing the financial and economic crisis. In particular, the author focuses on the so-called memorandum of understanding (MoU) negotiated between the European Commission and the member states concerned in liaison with the ECB and the IMF, one aspect of the MoU being that it sets out conditions for access to financial support that lead to drastic structural reforms in the field of labour law. Indeed the legal basis for the action by the European institutions is debatable, as Fischer-Lescano demonstrates. Furthermore, FischerLescano raises the question whether the troika is bound by fundamental and human rights, by European law and in particular by the Charter of Fundamental Rights of the European Union. In a comprehensive legal analysis of the nature and scope of the MoU, the author reveals how the European Commission and the ECB, acting in areas in which they have no competence, have infringed Union law, since MoU procedure does not uphold the general principles of Union law, and is not consistent with the requirements for collective and institutional competence under Union law. Furthermore, the lack of involvement of the European Parliament, the limited scope for manoeuvre of national parliaments and the lack of consultation of social partners, raise the question of the democratic deficit in the procedure establishing the MoU. In this context, the author doubts whether the MoU should be binding on member states, insofar as the provisions are unlawful; he stresses the urgent need to bring EU institutions back within the framework of European law, especially since procedural requirements are concerned to secure the participation of the European Parliament and the social partners at national and European levels, and to ensure human rights monitoring to accompany anti crisis measures, and in particular the MoU. Simon Deakin’s chapter is about the new role that social policy is being called on to play in the EU. Up to now the idea was that social policy should compensate for or legitimate the construction of the internal market. Since the eurozone crisis, social policy is to be used to promote economic and monetary union through its impact on wages and labour market flexibility. Analysing the causes of the eurozone crisis, in both its short-term and long-term features, he highlights the failure to coordinate pay by a common wage determination policy as the root cause of the sovereign debt crisis. As the eurozone countries, unlike the United Kingdom, did not have the option to allow its currency to depreciate, the alternative to currency devaluation – so-called internal devaluation – found its way onto the European policy agenda: reducing domestic wages and living standards to the level needed to restore competitiveness. In order to achieve this, the Troika required the member states concerned to initiate reforms to labour and social security laws. Deakin argues that this form of economic governance did not address the root causes of the euro zone crisis and even exacerbated it. The same criticism is possible of the ‘Blueprint for a Deep and Genuine Economic and Monetary Union’ that the European Commission published in November 2012, although later published documents from the EU leadership show more attention to social policy.



Introduction  5

Against this analysis, Deakin submits his opinion that there is an urgent need to put in place a framework for effective wage coordination at both national and transnational level. It should be an egalitarian social policy that puts solidaristic collective bargaining and coordinated wage determination at its core. In Bruno Veneziani’s contribution, the EU’s actions in the financial crisis are tested against the principles of democratic governance. After sketching the slow acceptance of this principle in the EC/EU, he outlines the role of these principles in the EU Treaties as modified by the Treaty of Lisbon. He explores the relationship between democracy and subsidiarity, democracy and solidarity, European citizenship, dignity and equality, social policy and – finally – collective labour law. To him democracy means a distribution of social powers. Having outlined all that, Veneziani more particularly tests the new rules of the so-called Fiscal Treaty against the principles of democratic governance. He considers astonishing the absence of collective autonomy in the elaboration of intervention mechanisms. Concluding that the Fiscal Treaty poses a question in terms of respect for the rule of law – one of the foundations of a democratic regime – he urges that Article 152 TFEU on the autonomy of the social partners should be fully observed. Filip Dorssemont in his chapter deals with two questions: the role of the trade unions in the new economic governance and the legal problems surrounding strike actions against the imposed austerity measures. On the first topic, Dorssemont argues that the disregard for the social partners in the measures of the new economic governance is at odds with several provisions in the European Treaties: Article 152 TFEU, Article 9 TFEU, as well as the provisions in the title on Employment Policy in the TFEU, except for one provision in the so-called Six-pack, which at least pays some lip service to Article 152 TFEU and Article 28 of the Charter of Fundamental Rights of the European Union (CFREU). Moving to the legal problems that may arise when trade unions take strike action against austerity measures, Dorssemont first deals with the classic argument against such actions: they would be political strikes, which generally are not covered by the right to strike. He tackles that argument from two angles: first, it is generally accepted that not all strikes directed against a government are political by definition and hence illegal. Strikes may be related to major socio-economic issues and could for this reason not be considered ‘political’. This might be sufficient in some countries to justify their legality. Second, even in those member states where strikes are qualified as political, they may be justified on the basis of the freedom of assembly or even on the basis of a ‘ius resistendi’ in exceptional circumstances. Finally, Dorssemont deals with specific private international law legal issues of a ‘pan-European’ strike in order to try to understand how these legal divergences within domestic strike law can constitute an obstacle to such actions. Antoine Jacobs’s chapter deals with the many changes that the current financial crisis has wrought with regard to how working conditions and labour standards

6  Antoine Jacobs are established. In most countries this standard setting is traditionally done in multiple ways, and the relationship between standards set at various levels constitutes a hierarchy in terms of labour law: higher/broader levels have priority over lower/narrower levels, corrected by means of the so-called favourability principle. Within this framework most Western European states after the Second World War developed a fairly centralised system of labour law standard setting. Since the 1980s, however, there has been an about-face in the direction of decentralisation. In other words, decentralisation did not start with the current financial crisis nor is it intrinsically wrong. It has been fruitful in a number of countries where an ‘organised decentralisation’ has developed. However, there are prerequisites for such ‘organised decentralisation’, many of which are lacking in member states on which decentralisation is now being imposed by the EU’s new economic governance. In those countries, the process had led a major de-collectivisation of labour relations and a sharp decline in collective bargaining coverage. After a brief look at the legal side of this development – the chapters by Niklas Bruun and Klaus Lörcher examine this in more detail –Jacobs concludes that we cannot afford to allow labour law to become balkanised by company bargaining on a massive scale or even by individual bargaining that may derogate in peius from statutory labour law and sectoral bargaining. In her chapter Mélanie Schmitt investigates the legality of national austerity measures imposed by the EU in terms of collective labour law. She provides a broad survey of these measures as they have been imposed on the member states experiencing great difficulties, notably Greece and Portugal. She tests these measures against the competences of the EU contained in the EU Treaties and the Charter of Fundamental Rights, and all in light of the case law of the Court of Justice of the European Union (CJEU). She extends this testing to the ‘right to collective bargaining’ as it is guaranteed in the European Convention on Human Rights (ECHR) and the ILO Conventions, in terms of its interpretation in the case law of the European Court of Human Rights and ILO committees. Finally, Schmitt reveals the ‘sidelining’ of the European social partners from anti-crisis processes and the legal problems they and national social partners are encountering in challenging this marginalisation before the EU Court of Justice. The financial and economic crisis has driven a number of European countries to intervene directly in free collective bargaining, and Niklas Bruun’s chapter seeks to show how controversial this is from a legal point of view. Focusing in particular on the crisis countries in which the Troika have intervened directly, he reviews how the various measures taken by these countries have been evaluated in the ILO jurisprudence on Conventions 87, 98, 151 and 154, all concerning freedom of association and collective bargaining. He examines measures involving state intervention in the substantive content of valid collective agreements; restrictions on the coverage of collective agreements; infringements of the principle of favourability; how non-union employees’ representatives have been enabled to conclude collective agreements in small and non-unionised companies;



Introduction  7

the abolition or reduction of the so-called ‘after-effect’ of collective agreements; restrictions on existing extension mechanisms; and permanent institutional intervention in the structural framework of collective bargaining. Bruun provides a richly documented survey of recent verdicts of the ILO’s Committee on Freedom of Association (CFA) concerning the various austerity measures imposed in the context of the financial crisis. He concludes that the new austerity policy has implemented a complete shift in policy. Collective bargaining is now seen as an obstacle and the prevailing aim is to dismantle collective bargaining and weaken the unions. Klaus Lörcher focuses on the (Revised) European Social Charter (RESC) which – he considers – provides the broadest protection of fundamental social rights in Europe. He examines the legal framework offered by the Charter, as well as the existing case law on specific provisions. He explains that the RESC is to be interpreted in line with the international standards in the ILO Conventions and the ECHR, but must also be applied according to some of its own standards, such as the principles of ‘social progress’ and of ‘non-regression’, as well as the idea of ‘effective exercise’. Because the various austerity measures are being implemented mainly under pressure from the EU, he considers the relationship between the EU and the RESC and argues that EU law should be interpreted in full conformity with the RESC. He points to the need for a limited interpretation of the possibilities of the RESC to allow the contracting states to put restrictions on the rights contained in it. Among the austerity measures that may easily conflict with the fundamental rights contained in the RESC, Lörcher mentions the diminished role of social dialogue institutions in some EU member states, the decentralisation of collective bargaining, the derogation in peius from higher level collective bargaining and statutory rules, as well as the trend of extending trade union prerogatives to works councils or informal workers’ representation. This contribution is completed with a survey of the practical avenues that the RESC offers for litigation, notably the recently opened possibility of ‘collective complaints’, which offers to trade unions in particular a quick and easily accessible way of challenging austerity measures. Keith Ewing and John Hendy, finally, turn the spotlight on the ECHR, notably Article 11. In recent years the European Court of Human Rights (ECtHR) has given it a broad interpretation, based on the doctrine that the ECHR is ‘a living instrument’. In particular in the 2009 case of Demir and Baykara v Turkey, this Court ‘reconsidered’ its earlier case law, reversing its former stance that collective bargaining was merely one of a set of optional rights from which states, within a certain margin, could choose the means by which unions would be permitted to intervene on behalf of their members. In ‘reconsidering’ its case law the ECtHR made reference to the many international instruments mentioning the right to collective bargaining and relied on the elaboration and application of those standards in the jurisprudence of their supervisory bodies. Like Lörcher, Ewing and Hendy focus on the need for a limited interpretation of the

8  Antoine Jacobs possibilities of the ECHR to allow the contracting states to put restrictions on the rights contained in it. They are convinced that the economic interests of employers by themselves cannot trump the human rights of workers and their unions. They conclude by praising collective bargaining: it is vital at a sectoral level to prevent undercutting by competitors seeking to reduce labour costs; it encourages competition through investment in research and development; it is a solution to the inequality problem; and it provides a means by which workers can be heard by those who make decisions. ‘The grim reality is that where political reversal of neoliberal restriction is not achievable, sometimes legal challenge may be the only option’. The book is completed with some conclusions by its editors, and with an Appendix containing a Manifesto signed by several hundred labour lawyers in the EU member states.

1 Changes in the General European Legal Framework ISABELLE SCHÖMANN

INTRODUCTION1

T

HE CURRENT ECONOMIC and financial crisis which hit Europe in 2008 is at present bringing the euro area to its perilous limits, in particular with the introduction of amendments to the legal framework of the European monetary union and the eurozone, already broadly modified by the Lisbon Treaty to strengthen ‘economic governance’ in the eurozone. The management of the economic and financial crisis and of the following sovereign debt crisis has further increased the ability of the Council to decide on economic and monetary coordination within the European Union and the eurozone, to such a critical extent that constitutional reviews and complaints to the Court of Justice of the European Union (CJEU), as well as to the Council of Europe and the International Labour Organization (ILO) have questioned the legality of the procedures used, as well as the outcomes for member states in respect of violations of fundamental social rights. Such reactions come, on the one hand, from euro area member states that are at the epicentre of the economic and financial earthquake, namely, Cyprus, Greece, Ireland, Latvia, Portugal, Romania and Spain, which have had to obtain financial assistance from the European Union, the European Central Bank and the International Monetary Fund (the so-called ‘Troika’), but also from member states affected at the domestic level by far-reaching decisions taken at the European level. On the other hand, in the eurozone, member states have criticised the procedures followed and the outcomes of such measures at national level in terms of the economic, financial and social burdens they have imposed. This chapter attempts to analyse the EU institutional reactions to the economic and financial crisis and the ensuing sovereign debt challenges, focusing on the amended Treaty architecture designed to surmount this financial and   The views and opinions expressed in this chapter are those of the author.

1

12  Isabelle Schömann economic cataclysm, with particular emphasis on the changes in Article 136 of the Treaty on the Functioning of the European Union (TFEU) and the Treaty that created the European Stability Mechanism (ESM), an intergovernmental organisation under public international law, together with the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, also called the ‘Fiscal Treaty’. The chapter also addresses the judicial challenges to actions adopted in this crisis context, in particular the grounds for disputing measures adopted in and outside the Treaty framework. I  GENERAL LEGAL FRAMEWORK IN THE LISBON TREATY OF 2009

With the Lisbon Treaty important provisions were added to strengthen the economic governance of the eurozone, concerning in principle the ability of the Council to contribute to better management of the eurozone, while leaving economic and monetary policy largely unchanged. Replaced in a historical perspective, the two latter issues are inherited from Working Group VI on economic governance,2 launched, with eight other working groups, within the framework of the European Convention to draft the European Constitution. It is striking that there was a reluctance to add further economic governance powers in both the European Convention proposals and in the Lisbon Treaty. Five years later, the EU’s economic governance approach has totally changed in the direction of extending powers of economic governance at the expense of social and labour rights. With its roots in the original Rome Treaty,3 the coordination of the economic and monetary policies in the EU got its golden letters with the creation of the European Monetary System in 1979, completed in the 1992 Maastricht Treaty with the creation of the European Monetary Union (EMU) on the initiative of the Delors committee of 1989.4 As member states retained their fiscal, budgetary and economic powers, they agreed on coordination of their economic policies within the European Council on the basis of Article 99 TEC and in Amsterdam in June 1997 created the Stability and Growth Pact.5 The Pact was modified in 2005. The 2009 changes adopted via the Lisbon Treaty aimed at improving economic governance within the EU, while reaffirming that monetary policy is the exclusive competence of the EU for the member states whose currency is the euro   See: european-convention.eu.int/pdf/reg/en/02/cv00/cv00357.en02.pdf.   Mainly, Art 6 (1) of the original EEC Treaty providing for a general obligation for member states to coordinate their respective economic policies to the extent necessary to achieve the objectives of the Treaty; Art 145 and later 202 TEC enabling the Council to ensure coordination of the general economic policies of the member states and Arts 103 to 109 of the EEC Treaty on economic policy, exchange rate policies, assistance and safeguard procedures in case of difficulties with the balance of payments. 4   J-C Piris, The Lisbon Treaty. A Legal and Political Analysis. Studies in European Law and Policies (Cambridge, Cambridge University Press, 2010) 301–07. 5  Presidency Conclusions, European Council, Amsterdam, 16 and 17 June 1997 (OJ C236/1 Regulations: 1466/97 and 1467/97). 2 3



Changes in the General European Legal Framework  13

(Article 3(1) TFEU), in particular with the improvement of decision-making processes and the representation of the eurozone. This ranged from a proper legal basis for the Council and the European Parliament for co-decision-making, to lay down the measures necessary for using the euro as the single currency (Article 133 TFEU), to increased power for the Council to ‘strengthen the coordination and surveillance of the budgetary discipline’ of the member states of the eurozone; and ‘to set out economic policy guidelines for them, while ensuring that they are compatible with those adopted for the whole of the Union and are kept under surveillance’ (Article 136(1) TFEU). Furthermore, the Euro group (a gathering of the finance ministers of the eurozone member states) gained official recognition and obtained Treaty status (Article 137 TFEU and Protocol 14 of the Euro group) but has no competence to adopt legally binding acts. The European Central Bank (ECB) was also formally recognised as a European institution (Article 13(1) of the Treaty on European Union (TEU)) enabling the European Council to make appointments to the executive board of the ECB by qualified majority voting (Article 283(2) TFEU) and amendments to the ECB statutes subject to co-decision instead of unanimity (Article 129(3) TFEU). As for the decision-making process in the area of economic and monetary union, the Council will further coordinate national economic policies on European Commission recommendations instead of European Commission proposals, except in cases of excessive government deficits for which a European Commission proposal is still necessary (Article 126(6) TFEU). The difference lies in the procedure of Article 293(1) TFEU according to which the Council may amend European Commission proposals only unanimously, while in the case of European Commission recommendations, qualified majority voting rules apply (as set out in Article 238(2)). II  A RETROSPECTIVE LOOK AT THE MAIN EUROPEAN INSTITUTIONAL REACTIONS TO THE CRISIS

By the spring of 2009 the European Council had adopted a decision and issued recommendations based on Article 126 TFEU on the existence of an excessive deficit in Greece;6 in 2009, the Greek deficit was well above the convergence criteria laid down by the Treaty on European Union (TEU) in Article 104(c). Following Greece’s failure to comply with the European Council’s recommendation,7 the Economic and Financial Affairs Council (Ecofin) notified Greece in February 2010 to (i) correct its excessive deficit by 2012 with the adoption of budgetary consolidation measures according to a specific agenda; (ii) align its economic policies with the EU broad economic policy guidelines so as to secure the further 6   Council Decision of 27 April 2009 on the existence of an excessive deficit in Greece (2009/415/ EC). 7   2981st Economic and Financial Affairs Council meeting held on 2 December 2009, press release 16838/09 (Presse 352).

14  Isabelle Schömann functioning of the economic and monetary union (EMU);8 while (iii) inviting the EU heads of state or government to make available an assistance package with coordinated bilateral loans and International Monetary Fund (IMF) financing but subject to strong conditionalities, based on an assessment by the European Commission (EC) and the ECB.9 This assistance package took the form, in early May 2010, of a ‘Memorandum of Understanding’ (MoU) between Greece and the European Union, acting on behalf of the member states of the eurozone.10 The legal nature and outcome of the MoU is still controversial, in particular for the MoU agreed on before the entry into force of the European Stability Mechanism Treaty (ESMT), as they fall outside EU law, although involving European institutions, and have led to violations of the (Revised) European Social Charter (RESC) and of ILO Conventions (see Andreas Fischer-Lescano in this volume). In the same period, Ecofin presented a comprehensive package of measures to maintain financial stability in Europe, such as a temporary European framework,11 including the establishment of two additional sources of financial assistance. First, the European Financial Stabilisation Mechanism (EFSM) adopted by the European Council,12 based on Article 122(2) TFEU that foresees financial support for a member state ‘in difficulties or . . . seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control’.13 The EFSM is an intergovernmental agreement to provide financial assistance subordinated to strong conditionality in the context of joint EU and IMF support. Second, the eurozone members set up the European Financial Stability Facility (EFSF), which is a temporary credit-enhanced mechanism in the form of a private company under Luxembourg law.14 On 16 December 2010, when Greece’s economic and financial situation was still deteriorating, the European Council agreed to amend Article 136 TFEU15 to give the ESM legal legitimacy.16 The changes were adopted on 25 March 2011 by Council Decision 2011/199/EU17 and amend the EU Treaties to allow a permanent mechanism to be established by adding a third paragraph to Article 136 TFEU:   Council of the European Union, press release 6477/10 (Presse 28), 16 February 2010.   Statement by the Heads of State and Government of the Euro Area, 25 March 2010, available at: www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/113563.pdf. 10   Memorandum of understanding between the European Commission, acting on behalf of the EAMS and the Hellenic Republic, dated 3 May 2010, available at: ec.europa.eu/economy_finance/ publications/occasional_paper/2010/op61_en.htm. 11   Council of the European Union, Extraordinary Council Meeting, 9–10 May 2010, press release 9596/10 (Presse 108). 12   Council Regulation 407/2010 [2010] OJ L118/1. 13   See: eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0047:0199:en:PDF. 14   EFSF Framework Agreement: www.efsf.europa.eu/about/legal-documents/index.htm approved by all member states, European financial facility (11 October 2011), available at: www.efsf.europa. eu/mediacentre/news.2011/2011-0110-efsf-amendements-approved-by-all-member-states.htm. 15   European Council, 16–17 December 2010, Conclusions, available at: www.consilium.europa. eu/uedocs/cms_data/docs/pressdata/en/ec/118578.pdf#page=6. 16   See: euobserver.com/economic/31535. 17   See: eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:091:0001:0002:EN:PDF. 8 9



Changes in the General European Legal Framework  15 The Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.

Following the Conclusions of the European Council, adopted on 25 March 2011 on the establishment of a European Stability Mechanism, the Treaty of the same name was adopted on 2 March 2012 (ESMT).18 It is a separate eurozone only treaty adopted to create a permanent stability mechanism, as an extra­ ordinary mechanism; that is, a European Stability Mechanism to protect the financial stability of the euro area by a limited treaty change without modifying the ‘no-bail-out’ clause included in Article 125 TFEU. Its implementation was planned for 1 January 2013, but had to be postponed until 1 May 2013, because the Czech Republic only ratified it on 23 April 2013. The ESM Treaty first restates the importance of the EU framework and its economic governance rules, but stresses that it should be seen as an extraordin­ ary mechanism – which requires the active technical and financial participation of the IMF – to safeguard the financial stability of the euro area as a whole and for this reason access to financial assistance has to be linked to strict economic policy conditionality within a macroeconomic adjustment programme and a rigorous analysis of public debt sustainability. Furthermore, the ESM Treaty makes it clear that member states accept a binding obligation to deliver their financial contribution to the authorised capital stock, which is the limit of their liabilities, while member states may additionally provide financial assistance on an ad hoc basis.19 In addition, the 27 member states authorise the member states of the eurozone to delegate to the European Commission and the ECB the management of the ESM, while the EC and the EU Council are entrusted with post-programme surveillance duties within the framework laid down in Article 121 and Article 136 TFEU. The ESM has a governance structure comprising a board of governors, a board of directors and a managing director, with extensive immunities. Finally, disputes related to the interpretation and application of the Treaty should be submitted first to the board of governors. If the decision of the board of governors is challenged, the dispute shall be submitted to the jurisdiction of the CJEU on the basis of Article 273 TFEU. In parallel, the member states of the eurozone met in December 2011 to come up with a treaty to provide for stronger measures to reinforce stability in the euro area and in particular to strengthen fiscal discipline through the ‘balanced budget rule’ and an automatic correction mechanism. The Fiscal Treaty20   See: www.european-council.europa.eu/media/582311/05-tesm2.en12.pdf.   eg, Denmark, Sweden and the United Kingdom providing bilateral assistance to Ireland to complement the EFSM/EFSF/IMF programme. 20  See: www.european-council.europa.eu/home-page/highlights/fiscal-compact-enters-into-forceon-1-january-2013?lang=en. 18 19

16  Isabelle Schömann entered into force on 1 January 2013,21 following its ratification by Finland and it is the most significant for the ESMT, as its ratification is a political precondition for receiving financial assistance from the ESMT. According to Article 1 of the Fiscal Treaty, the contracting parties whose currency is the euro agree, as Member States of the European Union, to strengthen the economic pillar of the economic and monetary union by adopting a set of rules intended to foster budgetary discipline through a Fiscal Treaty, to strengthen the coordination of their economic policies and to improve the governance of the euro area, thereby supporting the achievement of the European Union’s objectives for sustainable growth, employment, competitiveness and social cohesion.

Member states bound by the fiscal provisions of the Treaty are required to enact, within one year of the Fiscal Treaty entering into force for them, a domestic ‘implementation law’ establishing a self-correcting mechanism, guided by monthly surveillance by a governmentally independent fiscal advisory council, which shall guarantee that their national budget is in balance or surplus under the Treaty’s definition. The Treaty states that the signatories shall attempt to incorporate the Fiscal Treaty into the EU’s legal framework, on the basis of an assessment of its implementation, by 1 January 2018 at the latest. Article 2 of the Fiscal Treaty stipulates that: (1)  This Treaty shall be applied and interpreted by the Contracting Parties in conformity with the Treaties on which the European Union is founded, in particular Article 4(3) of the Treaty on European Union,22 and with European Union law, including procedural law whenever the adoption of secondary legislation is required; (2)  This Treaty shall apply insofar as it is compatible with the Treaties on which the European Union is founded and with European Union law. It shall not encroach upon the competence of the Union to act in the area of the economic union. This Treaty shall apply in full to the Contracting Parties.

Furthermore, all treaty provisions function as an extension of existing EU regulations, with the same reporting instruments and organisational structures created within the EU in three areas: budget discipline enforced by the Stability and Growth Pact (extended by Title III); coordination of economic policies (extended by Title IV); and governance within the EMU (extended by Title V). If a ratifying state bound by the fiscal provisions of the Fiscal Treaty fails to enact the required ‘implementation law’ within one year of the Treaty’s entry into force, it can ultimately be fined up to 0.1 per cent of its GDP by the CJEU. 21   The Treaty on Stability, Coordination and Governance in the Economic and Monetary Union is legally binding as an international agreement that is supposed to be incorporated into the existing EU Treaties within the next five years. 22   That reads: ‘Pursuant to the principle of sincere cooperation, the Union and the Member States shall, in full mutual respect, assist each other in carrying out tasks which flow from the Treaties. The Member States shall take any appropriate measure, general or particular, to ensure fulfilment of the obligations arising out of the Treaties or resulting from the acts of the institutions of the Union’.



Changes in the General European Legal Framework  17

Additionally, in the context of the excessive deficit procedure, the member state in question will have to put in place a budgetary and economic partnership programme to be submitted to the Council and to the European Commission for endorsement. Moreover, the decision-making procedure will be more automatic as the euro area member states agree to support the European Commission’s recommendations and proposals for Council acts except where a qualified majority of them are opposed. The Fiscal Treaty strengthens further coordination as member states will have to report their public debt issuance plans to the European Commission and to the Council, as well as any major economic reforms that they plan to undertake. Finally, governance in the euro area is reinforced by at least two ‘Euro Summit’ meetings per year, together with the European Commission, with the participation of the President of the European Central Bank and the possibility of inviting the President of the European Parliament. The institutional responses of the European Union to the economic and financial crisis appear multi-fold, even excessive, when considering the ‘powers’ and immunities attributed by the ESMT to the governance structure of the ESM for the management of the crisis, in contrast to the clear lack of any considerations of EU law and values in the ESMT in comparison at least with the Fiscal Treaty. The short timeline for such major amendments to the Lisbon Treaty was motivated by the ‘emergency situation’ of the financial and economic crisis and by the extent of the sovereign debt crisis and implemented partly via simplified revision procedures, partly via Council regulations and decisions. The choice of specific procedures and legal instruments, such as intergovernmental agreements, which put legally binding acts and measures issued by the European Commission acting on behalf of the member states outside the remit of EU law, has contributed to the general mistrust within EU member states and to judicial complaints. III  AMENDING THE EXISTING FRAMEWORK: A POLITICAL STRATEGY BEYOND LEGAL REQUIREMENTS?

The adoption of the above described range of mechanisms and treaties, as well as amendments to the Lisbon Treaty, was subject to substantial criticism, in particular due to the legal uncertainty surrounding some of the mechanisms, but also to the procedures used. For example, the legal framework setting up the EFSM and the EFSF has proved controversial as on the one hand, the no-­­bailout clause of Article 125 TFEU is interpreted as prohibiting financial aid among eurozone member states. Only Article 122(2) TFEU allows the Council to grant financial support ‘Where a Member State is in difficulties or is seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control’.23 However, doubts were expressed whether the Greek   See: eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:C:2008:115:0047:0199:en:PDF.

23

18  Isabelle Schömann sovereign debt crisis falls under such ‘exceptional occurrences beyond [Greece’s] control’.24 Concerning the procedural aspects, for instance, questions were raised about the recourse to the newly introduced simplified revision procedure of Article 48(6) TEU to amend Article 136 of the Lisbon Treaty, in particular to set up a far-reaching and permanent financial support mechanism. In particular, the new simplified revision procedure allows member states to amend the Treaty without convening an intergovernmental conference, which was the case prior to the changes brought with the Lisbon Treaty. Article 48(6) paragraph 1 stipulates that: The Government of any Member State, the European Parliament or the European Commission may submit to the European Council proposals for revising all or part of the provisions of Part 3 of TFEU relating to the internal policies and action of the Union.

In paragraph 2 it stipulates that: The European Council may adopt a decision amending all or part of the provisions of Part 3 TFEU. The European Council shall act by unanimity after consulting the European Parliament and the European Commission, and the European Central Bank in the case of institutional changes in the monetary area. That decision shall not enter into force until it is approved by the Member States in accordance with their respective constitutional requirements.

In paragraph 3 it mentions that: The decision referred to in the second subparagraph shall not increase the competences conferred on the Union in the Treaties.

In this context, Council Decision 2011/199/EU amending Article 136 TFEU was subject to ratification by the member states in accordance with their respective constitutional requirements. All ratifications should be completed before any changes can be enforced.25 Due to the objections of the Czech Republic, the ratification process was delayed, as was the enforcement of Article 136(3), originally planned for 1 January 2013, but implemented on 1 May 2013. However, the ESMT entered into force on 27 September 2012, although this permanent mechanism is based on the new Article 136(3) TFEU, and was not fully ratified by all member states. This raises the question of the legality of the establishment of the ESM and the potential judicial recourses in case of misuse of EU procedure. Furthermore, the legal validity of adopting crisis measures in the form of intergovernmental acts in an area of exclusive competence of the EU (monetary 24   eg, L Knopp, ‘Griechenland-Nothilfe auf dem verfassungsrechtlichen Prüfstand’ (2010) 63 Neue Juristische Wochenschrift 1778, 1779–80. 25  See: www.europarl.europa.eu/webnp/webdav/site/myjahiasite/users/fboschi/public/esm%20 tscg/art.%20136%20ESM%20fiscal%20compact%20ratprocess.pdf.



Changes in the General European Legal Framework  19

union being an exclusive EU competence for the member states that have adopted the euro) and where the TFEU assigns particular functions to the EU institutions is questionable in terms of the legality under EU law of the ESMT. In the same vein, it is interesting to see that the ESMT and the Fiscal Treaty have different relationships with EU law: Article 2 of the Fiscal Treaty stipulates that: (1)  This Treaty shall be applied and interpreted by the Contracting Parties in conformity with the Treaties on which the European Union is founded, in particular Article 4(3) of the Treaty on European Union, and with European Union law, including procedural law whenever the adoption of secondary legislation is required; (2)  This Treaty shall apply insofar as it is compatible with the Treaties on which the European Union is founded and with European Union law. It shall not encroach upon the competence of the Union to act in the area of the economic union.

While the hierarchy of norms is fairly clear in the Fiscal Treaty, the ESMT does not foresee any relationship to EU law except, and indirectly, in its Article 13(3) paragraphs 1 and 2 on the Procedure for granting stability support, where it is stipulated that when ‘the European Commission – in liaison with the ECB and, wherever possible, together with the IMF – negotiate with a Eurozone member state in financial difficulty a memorandum of understanding detailing the conditionality attached to the financial assistance facility’, and whereby ‘the content of the Memorandum of understanding shall reflect the severity of the weaknesses to be addressed and the financial assistance instrument chosen’, ‘the Memorandum of understanding shall be fully consistent with the measures of economic policy coordination provided for in the TFEU, in particular with any act of European Union law, including any opinion, warning, recommendation or decision addressed to the ESM Member concerned’. The lack of reference to the TEU and TFEU next to the substantial immunities conferred on the members of the board of governors and the board of directors, as well as on the managing director and other dedicated staff of the ESMT, raise further concerns about the lack of legal security and administrative and judicial reviews for the member states involved. The institutional framework governing the response – in principle in the form of the ESMT – to the eurozone economic and financial crisis is challenged in many instances, although with little success so far. Besides the imbroglio of sorting out whose acts can be challenged, and by whom, the CJEU has shown a reluctance to interfere in executive or policy decisions in the case of complicated economic decisions, confining itself to manifest errors or procedural irregularities, as in the case of competition law enforcement and reviews of wider economic policy decisions in the field of the common agricultural policy.26

26   R Smits ‘Judicial challenges of measures to overcome the crisis’ (2012), available at: renesmits. eu/Judicial%20challenges%20of%20measures%20to%20overcome%20the%20crisis.pdf.

20  Isabelle Schömann IV  GENERAL FRAMEWORK UNDER PRESSURE: CJEU CASE PRINGLE V GOVERNMENT OF IRELAND

A recent landmark judgment of the CJEU, for the first time, addressed the issue of the compatibility of the ESMT with EU law, based on a preliminary question of the Irish Supreme Court in a case challenging its ratification of the grounds that it was incompatible with the Irish Constitution and the EU Treaties. In comparison with previous national constitutional reviews in the Netherlands,27 Germany,28 Greece,29 Ireland,30 Austria31 and Poland,32 as well as Estonia,33 Pringle v Government of Ireland34 directly addressed the compatibility of the EMST with EU law and in particular with the no-bail-out clause in Article 125 TFEU. Furthermore, the Court was requested to assess the legal significance of the new paragraph 3 of Article 136 TFEU introduced by the Council Decision of 25 March 2011,35 which provides that [t]he Member States whose currency is the euro may establish a stability mechanism to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.36

The entry into force of the ESMT prior to the formal amendment of the Treaty conditioned by the ratification of all member states, as well as the recourse to the simplified revision procedure (Article 48(6) TEU) to amend the Treaty, raised the question of the legal validity of adopting crisis measures in the form of intergovernmental acts, and in particular the terms and operations of the ESMT, in the area of exclusive competences of the EU as a matter of ‘exceptional urgency’, especially in respect of compatibility with the principles and provisions of the EU Treaties.   The Hague District Court of 1 June 2012 (Wilders ea v State of the NL).   BVerfG Case No 2 BvR1390/12 September 2012, 2012 NJW 3145. 29   Greek Constitutional Court (7 November 2012) (Areios Pagos). 30   Case C-370/12 Pringle v Government of Ireland – Irish case – directly addresses the compatibility of the EMS with the ‘no-bail-out’ clause plus the legal validity of adopting crisis measures in the form of intergovernmental acts in the area of exclusive competences of the EU (recourse to an accelerated procedure). 31   Strache v ESM (G104/12-8). 32   Case K-33/12 Sejm, 11 February 2013, available at: orka.sejm.gov.pl/stanowiskaTK.nsf/nazwa/ Stanowisko_K_33_12/$file/Stanowisko_K_33_12.pdf. 33   Judgment of the Estonian Supreme Court published in English, available at: /www.riigikohus. ee/?id=1348. 34   Case C-370/12 Pringle v Government of Ireland [2012] ECR I, available at: curia.europa.eu/ juris/document/document.jsf?doclang=EN&text=&pageIndex=0&part=1&mode=lst&docid=13 0381&occ=first&dir=&cid=1702925. 35  See: eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:091:0001:0002:EN:PDF. 36  European Council Decision of 25 March 2011 amending Article 136 of the Treaty on the Functioning of the European Union with regard to a stability mechanism for Member States whose currency is the euro, available at: eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:091: 0001:0002:EN:PDF. 27 28



Changes in the General European Legal Framework  21

The CJEU ruled that it found ‘nothing capable of affecting the validity of European Council Decision amending Article 136 of the TFEU with regard to a stability mechanism for Member States whose currency is the euro’. Furthermore, none of the Treaty provisions and the general principle of effective judicial protection preclude the conclusion between the Member States whose currency is the euro of an agreement such as the ESMT, concluded at Brussels on 2 February 2012, or the ratification of that treaty by those Member States . . . The right of a Member State to conclude and ratify that Treaty is not subject to the entry into force of the Council Decision.

The CJEU judgment, taken in a plenary form, appears ambiguous37 with regard to a large part of the doctrine, in particular regarding the interrelation between ESMT and EU law. On the one hand, the CJEU reaffirms its competence to secure the compliance of acts of the institutions (Council Decision amending Article 136 TFEU) and in particular their validity of the provision of primary law. It further ruled that the Council Decision falls within the scope of the economic policy of the EU and does not affect the EU’s exclusive competence in monetary policy defined as a safeguard of price stability. Compliance with EU law is further ensured as Article 136(3) imposes strict conditionality on the granting of financial assistance by the ESMT. In conclusion, member states are free to adopt the ESMT while guaranteeing compliance with EU law in doing so. On the other hand, the CJEU ruled that strict conditionalities are not instruments of coordination of economic policy. Additionally, the no-bail-out clause of Article 125 TFEU should not be interpreted as a general ban as such financial assistance does not prevent a member state from conducting a sound budgetary policy. According to the CJEU, when a member state might be called on to pay additional capital within the framework of the ESMT to support a member state in financial difficulties, such an obligation under the ESMT does not lead the supporting member states to assume the debt of the member states in difficulty that bear the responsibility for paying their own capital. In addition, the ESMT has been concluded outside the EU legal order by the member states, as the EU has no exclusive competence to set up a permanent stability mechanism of this kind. However, member states may entrust EU institutions (the European Commission, the ECB) with the task of administering the granting and super­ vision of financial support under the ESMT to a EU member state of the eurozone in financial difficulties. In doing so, and while member states may not disregard their duty to comply with EU law when setting up the ESMT, they, de facto, through the recourse to an international agreement and the delegation of management tasks to the EU institutions, bypassed EU law, putting the EU institutions beyond the duties and obligations imposed by the Treaty. In the same vein, to the preliminary question raised by the Irish Supreme Court to the CJEU 37   P-A van Malleghem, ‘Pringle: A Paradigm Shift in the European Union’s Monetary Constitution’ (2013) 14(1) German Law Journal 141.

22  Isabelle Schömann on whether the ESMT would affect the principle of effective judicial protection as anchored in Article 47 of the Charter of Fundamental Rights of the EU, the Court stated that under Article 51(1) of the Charter, its provisions are addressed to the member states only when they are implementing Union law, which is not the case as the ESMT falls outside EU law. In practical terms, a decision taken by the ESMT – among others the Memoranda of Understanding and their supplements (for example, those for Cyprus in 2013,38 Greece in 2010,39 Hungary in 2008,40 Ireland in 2010,41 Latvia in 2009 and 2010,42 Portugal in 2011,43 Romania in 2009 and 2010,44 Spain in 2012)45 that directly violate EU citizens’ rights as guaranteed in the Treaty and the Charter of Fundamental Rights (right to fair remuneration, the right of young persons to protection, right to social security) – might well not be reviewed by the CJEU as it does not fall under EU law, hence downgrading fundamental rights to a mere vision on a piece of paper. However, and even more striking the CJEU does not mention that European institutions are bound by the European Charter of Fundamental Rights, as stated in Article 51(1) of the Charter: The provisions of this Charter are addressed to the institutions, bodies, offices and agencies of the Union with due regard for the principle of subsidiarity and to the Member States only when they are implementing Union law. They shall therefore respect the rights, observe the principles and promote the application thereof in accordance with their respective powers and respecting the limits of the powers of the Union as conferred on it in the Treaties.

Following Article 51(1), at least the European Commission and the ECB fall under the scope of application of the Charter of Fundamental Rights. Thus, the Pringle case raises at least four major concerns. First is the extent to which the EU can allow that member states’ residual competences in establishing a Treaty (on the European Stability Mechanism), by amending the (Lisbon) Treaty provision (Article 136 TFEU) via an international agreement, may lead to the bypassing of EU law and the violation of fundamental rights. The ambiguous relationship between the ESMT and the TEU needs urgent clarification, as the CJEU ruling leaves this question unresolved. Hence, the second key fear relates to the immunity of EU institutions with regard to EU law when acting on behalf of member states within the EMST framework that allocates financial support to member states, in particular given their central role in the drafting,   See: ec.europa.eu/economy_finance/publications/occasional_paper/2013/op149_en.htm.  See: ec.europa.eu/economy_finance/articles/financial_operations/2011-07-02-greece-review_en. htm. 40   See: ec.europa.eu/economy_finance/articles/financial_operations/article15382_en.htm. 41   See: /ec.europa.eu/economy_finance/assistance_eu_ms/ireland/index_en.htm. 42   See: ec.europa.eu/economy_finance/articles/financial_operations/2010-02-26-mou-latvia_en.htm. 43  See: ec.europa.eu/economy_finance/crisis/2011-05_en.htm and ec.europa.eu/economy_finance/ publications/occasional_paper/2013/op153_en.htm. 44   See: ec.europa.eu/economy_finance/articles/financial_operations/article15406_en.htm as well as ec.europa.eu/economy_finance/articles/financial_operations/2010-02-25-mou-romania_en.htm. 45   See: ec.europa.eu/economy_finance/publications/occasional_paper/2012/op118_en.htm. 38 39



Changes in the General European Legal Framework  23

controlling and monitoring of the MoU and other documents under the umbrella of the wider package of regulatory reforms.46 Indeed, the strict conditionality linked to the granting of a bail out has now gained constitutional value in the new paragraph 3 of Article 136 TEU and will definitively alter the bargaining power of member states requesting financial support and reduce their autonomy, as the conditions specify in detail the measures to be implemented to achieve the objectives laid down. The third main worry concerns the intensified democratic deficit in the EU decision-making process in the management of the financial and economic crisis. How can the European Union allow a permanent mechanism (the ESMT) in which decisions falling outside EU law are not subject to European Parliament consultation, when such a mechanism implies, among other things, a loss of fiscal and social sovereignty on the part of the member states? How can such power be given to representatives of the European Commission, the ECB and IMF without any (legal) means of recourse with regard to their initiatives and actions, in particular when the legality (as in the case of the Troika) is controversial? Finally, the fourth and probably paramount concern is the resulting increasing distance between the EU and national institutions and European citizens on the basis of a purely economic and fiscal management of the crisis, in which the social dimension has not been taken into consideration, let alone respect for fundamental social rights. The consequence of the conditionality imposed on the relevant member states, as well as the recommendations to member states, are reflected in the drastic deregulation of national labour and social acquis; cuts in real wages; even more precarious employment; high unemployment; rising social inequality; increasing poverty; and the dismantling of social welfare systems. This indicates that the European social model is surviving on very precarious foundations. CONCLUSIONS

The EU institutions’ reactions to the economic and financial crisis, followed by the sovereign debt crisis, have led the European Union to amend the Lisbon Treaty architecture with the aim of establishing the ESM as an intergovernmental organisation under public international law, as well as a Treaty on Stability, Coordination and Governance in the Economic and Monetary Union – the Fiscal Treaty. These changes to the Lisbon Treaty, adopted as emergency measures in a crisis context, raise a series of legal issues in terms of competences, scope and possible judicial review as such amendments have led in many cases to infringements of fundamental social rights anchored at international, European and constitutional levels. Indeed the link between, on the one hand, the ESMT and the Fiscal 46  See European Commission, EU Economic Governance, available at: ec.europa.eu/economy_ finance/economic_governance/index_en.htm.

24  Isabelle Schömann Treaty and, on the other, the Lisbon Treaty and their respective different relationships to EU law create much confusion and generate a European hegemony of economic governance principles and structures over member states and other fields of European law. Such developments are not in compliance with the European values and principles of economic, social and territorial cohesion: solidarity among member states; social justice and protection; equality between women and men and solidarity between generations; a sustainable development of Europe based on balanced economic growth and price stability; a highly competitive social market economy aiming at full employment and social progress; and a high level of protection. Furthermore, they profoundly disregard other sources of primary European law such as the European Charter of Fundamental Rights, despite its equality with the Lisbon Treaty, as they ignore international labour standards ratified by member states. Finally, concerns have been expressed about the circumvention of democratic procedures at national and European level in carrying out such reforms with a view to providing a quick and merely economic solution to the crisis.

2 A New Economic Governance through Secondary Legislation? Analysis and Constitutional Assessment: From New Constitutionalism, via Authoritarian Constitutionalism to Progressive Constitutionalism LUKAS OBERNDORFER

Finally, the crisis has shown the need to strengthen [the Economic and Monetary Union’s] ability to take rapid executive decisions to improve crisis management in bad times and economic policymaking in good times. Herman Van Rompuy, ‘Towards a Genuine Economic and Monetary Union’ (5 December 2012).1

INTRODUCTION2

T

HIS AVOWAL BY the President of the European Council to want to ‘solve’ the crisis by means of executive decisions is reminiscent of the economic and judicial policies of the Weimar Republic. After the costs of the crisis (from 1929) had ripped a huge hole in the budget, German industrialist associations and intellectuals of the ‘new liberalism’ attempted to retell the crisis as one of state debt. The ‘over-exploitation’ of the state by welfare policies

  See: www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/134069.pdf.   The views and opinions expressed in this chapter are those of the author.

1 2

26  Lukas Oberndorfer and the ‘overburdening’ of the economy with the tax burden had to be revised3 by means of ‘structural reforms’ and a ‘debt ceiling’. In the absence of parliamentary majorities, these policies, which involved drastic social consequences, were pushed through by ‘presidential cabinets’ assisted by Carl Schmitt as their legal adviser. Ultimately, all the measures mentioned were adopted by the executive using emergency regulations, which were justified on the basis of an ongoing state of emergency.4 Even if the current crisis in the European Union (EU) cannot be compared to the Weimar Republic in many aspects, some parallels are obvious: in Greece and Spain, the austerity policies ordered by the European executive have caused massive economic collapses. Unemployment in these two countries is 27 per cent and more than 55 per cent of young people are without work, figures surpassed in the Weimar Republic in only one year.5 With these developments, the ‘rift between the represented and the representatives’6 is widening ever faster: the unfolding crisis of capitalism – the most severe since the 1930s – is taking the shine off neoliberal imaginaries and is eroding the aura of those neoliberal projects that were implemented in the context of the European Union.7 As a result, the present neoliberal mode of integration, which was based on consensus, is sliding into an ever deeper crisis of hegemony.8 This becomes blatantly obvious when some of the ‘organic intellectuals’9 of the dominant ideology, whose role it is to constantly universalise and rejuvenate it, are starting to defect from their previous beliefs. Discursive elements such as ‘The left might actually be right’10 and ‘Among the bourgeoisie, doubts are growing whether they were right all their lives’11 therefore represent much more than a storm in a newspaper teacup. But the crisis is not just causing the production of a ‘world view’12 and ‘visions of Europe’ to slow down; it is also affecting the second aspect of consensusbased rule: bank bail outs and the recession-induced reduction in tax revenues have made public debt explode, drastically reducing the scope for ‘material concessions’. One after another, subaltern groups in various EU member states 3  P-C Witt, ‘Finanzpolitik als Verfassungs- und Gesellschaftspolitik. Überlegungen zur Finanzpolitik des Deutschen Reiches in den Jahren 1930 bis 1932’ (1982) 8(3) Geschichte und Gesellschaft 386, 388. 4   L Oberndorfer, ‘Die Renaissance des autoritären Liberalismus? Carl Schmitt und der deutsche Neoliberalismus’ (2012) 42(3) PROKLA 413. 5   Eurostat, available at: epp.eurostat.ec.europa.eu. 6  Gramsci, Gefängnishefte, Band 7 (1996) 1577. 7   H-J Bieling and J Steinhilber, ‘Hegemoniale Projekte im Prozess der europäischen Integration’ in H-J Bieling and J Steinhilber (eds), Die Konfiguration Europas. Dimensionen einer kritischen Integrationstheorie (Münster, Westfälisches Dampfboot, 2000) 102, 106 ff. 8  Gramsci, Gefängnishefte, Band 7 (1996) 1576 f. 9   ibid, 1557. 10   Thatcher biographer (and former editor of the conservative Daily Telegraph) Charles Moore, ‘I’m starting to think that the Left might actually be right’ Daily Telegraph (22 July 2011). 11   Editor of the leading conservative newspaper FAZ Frank Schirrmacher, ‘Ich beginne zu glauben, dass die Linke recht hat’ FAZ (15 August 2011). 12  Gramsci, Gefängnishefte, Band 4 (1992) 719.



A New Economic Governance through Secondary Legislation?  27

are being targeted by austerity programmes. In contrast, however, to the neo­ liberal austerity measures that accompanied the implementation of Economic and Monetary Union (EMU), current cuts are supported by neither the people’s active nor their passive consent.13 This can be seen in the increasingly vocal opposition and protest that has ignited strongly, parallel in spatial terms to the unequal but combined development of European capitalism. While things remained comparatively calm in the ‘world champion export countries’, which were able to externalise14 the problem of insufficient demand by wage restraint and job market flexibility, intense social battles arose in the countries on the economic periphery. Nevertheless, the political crisis, unfolding asymmetrically in the member states, is being felt at a European level. For, at the latest, the deep economic and monetary political integration related to the euro has brought about the formation of a European ensemble15 that is closely attached to the national and European institutions and their (in-)stabilities, not least through European law. This crisis of hegemony, as the thesis goes, expresses itself in the replacement of consensus, which has become brittle, by executive legislation and force on various scale levels. What has burst open with the slogan ‘real democracy now!’ is, at the same time, more than a little flurry of social protest. For in this demand lies unease about a process of de-democratisation and the reduction of social rights that has achieved a new quality with the greatest crisis in the world economy since the 1970s: while the neoliberalisation of all fields of society and life since the beginning of the 1980s has been accompanied by a creeping erosion of the moment of substantive democracy fought for and won in the past – a process described by Colin Crouch as post-democracy,16 – the EU’s attempts to manage the crisis are intensifying this process into an authoritarian turn that is also breaking with elements of formal democracy. This is articulated not least in the fact that the central building blocks of neoliberal crisis policy – such as the so-called ‘new economic governance’17 (and/or its constituent parts: the ‘Six-pack’ passed in autumn 2011 and the ‘Two-pack’ passed in May 2013), or the Fiscal Treaty – have no adequate legal basis in the ‘European Constitution’ and could be established18 only through bypassing the  Gramsci, Gefängnishefte, Band 3 (1992) 481.   G Feigl and S Zuckerstätter, ‘Wettbewerbsorientierung als europäischer Irrweg’ (2012) 4 Infobrief eu & international 1. 15   Buckel, Georgi, Kannankulam and Wissel are speaking in this context of a European ensemble of state apparatuses cf ‘Kräfteverhältnisse in der europäischen Krise’ in Forschungsgruppe Staatsprojekt Europa (ed), Die EU in der Krise (Münster, Westfälisches Dampfboot, 2012) 11. 16   C Crouch, ‘Post-democracy and the crisis’ (2013) 1 Juridikum 41. In this article Crouch, however, presents the argument, in contrast to those represented here, that institutions of formal democracy remain intact during and after the crisis (2008 ff) and therefore can still be described in terms of ‘post-democracy’. 17   cf L Oberndorfer, ‘Eine Krisenzählung ohne Kompetenz – Economic Governance rechtswidrig?’ (2011) 3 Infobrief eu & international 7. 18  A Fischer-Lescano and L Oberndorfer, ‘Fiskalvertrag und Unionsrecht – Unionsrechtliche Grenzen völkerverträglicher Fiskalregulierung und Organleihe’ (2013) Neue Juristische Wochenschrift 9. 13 14

28  Lukas Oberndorfer ordinary revision procedure (Article 48 of the Treaty on European Union (TEU)). Not only the justifying statements made, such as that of Van Rompuy, but also the ‘juristic’ argumentation and techniques, such as the use of Article 136 of the Treaty on the Functioning of the European Union (TFEU) as a blanket clause for the creation of almost unlimited emergency law19 seem to give Carl Schmitt ‘alarming topicality’.20 Characteristic of the previous instruments of crisis policy is also that they entail a massive upgrade of the executive apparatus and have equipped it with comprehensive decision and sanction-making competences. At the same time, the parliamentary arena has been decisively weakened, at a national as well as a European level. The suggestions raised by leading figures of the European ensemble of state apparatuses so far within the framework of the debate started in June 2012 on deepening the EMU21 are also marked by this direction of impact. After the rules for a strict austerity policy by means of an authoritarian constitutionalism all over Europe were given permanence, and thus made immune from a democratic challenge, we are now concerned with a ‘Europeanisation’ of structural reforms22 tested in southern European laboratories. In ‘contracts for competitiveness’, according to German Chancellor Angela Merkel, member states should, with respect to the European Commission, commit themselves to deregulating the labour market, to reforming their pension systems and to lowering their wages. The European Commission declares openly that the planned contracts aim at overcoming political resistance. Legal structures are excellent indicators of shifts in the democratic system, as was emphasised from a neo-Gramscian perspective23 by Stephen Gill back in the 1990s when he described the legal reframing of the neoliberal reorganisation of the economy and society at the transnational level with his concept of ‘new constitutionalism’. According to the political scientist, new constitutionalism is leading to a European juridification by which economic policies to a great extent evade popular-democratic controls.24 This is occurring with the establishment of internal and external practical constraints, which include binding limits and rules for fiscal and economic policy, and aim at making neoliberal capitalism the only model for the future. The new constitutionalism grants ‘corporate capital’ privileged rights, ‘while constraining the democratisation process that has involved struggles for representation for hundreds of 19   U Häde, ‘Art 136, N 4’ in C Calliess and M Rüffert (eds), EUV/AEUV – Kommentar, 4th edn (München, CH Beck, 2011). 20   C Joerges, ‘Europas Wirtschaftsverfassung in der Krise’ 51(3) (2012) Der Staat 357, 377. 21   The ‘Report of the Four Presidents’ gave the starting signal: ec.europa.eu/economy_finance/ crisis/documents/131201_en.pdf. 22   C Hermann, ‘Die Finanzkrise und ihre Auswirkungen auf Sozialstaaten’ (2012) 5 Infobrief eu & international 2. 23   cf B Opratko and O Prausmüller, ‘Neogramscianische Perspektiven in der IPÖ’ in B Opratko and O Prausmüller (eds), Gramsci Global (Hamburg, Argument, 2011) 11. 24   S Gill, ‘European Governance and New Constitutionalism’ (1998) 10(1) New Political Economy 5.



A New Economic Governance through Secondary Legislation?  29

years’.25 Thus, an institutional and operational establishment of the independence of political and judicial decision-making processes is accompanied by a curtailment of democratic controlling rights.26 In light of the present social rupture, the concept of new constitutionalism must, however, be radicalised. The shifts taking place in the field of ‘European law’ have to be reconceptualised in parallel with developments across the whole of society that are tending in the direction of ‘authoritarian competitive statism’27 and are increasingly difficult to describe with the topos of post-democracy, since it posits an incremental process up to the crisis, that left the procedures and institutions of formal democracy untouched.28 It is my view that the new constitutionalism, with which Gill described the legal codification of neoliberal dogmas in a manner that abides by European law and is supported by an at least passive consensus, is evolving into an authoritarian constitutionalism. In order to be able to illustrate these developments and ruptures in the European judicial system, I shall depict the primary legal bases of European economic policy in section I. Here, on the one hand, those ‘constitutionally legal’ assurances of neoliberal policies will become tangible, which Gill terms ‘new constitutionalism’. On the other hand, this is also an illustration of the legal foundations on which the legal acts of the ‘new economic governance’ and the contracts for competitiveness lie. On this basis, the essential instruments of the crisis policy will be explained (section II) and legal issues will be addressed which show a pattern: in order to promote the neoliberal ‘processing of the crisis’, despite a collapsing consensus, the ordinary revision procedure is being circumvented and the appropriate instruments are being pressed into the ‘European Constitution’ illegally (section III). Theoretical deliberations on the character of the exposed authoritarian constitutionalism and the dangers and chances for democracy in Europe follow. I  THE NEW CONSTITUTIONALISM – OR THE EUROPEAN LEGAL BASIS OF ECONOMIC POLICY?

The primary legal structure of the economic policy of the European Union was set down by the Treaty of Maastricht (1992; in effect since 1993) and has since essentially remained unchanged.29 The fact that the pertinent Articles (120 to 25   S Gill, Power and Resistance in the New World Order (Basingstoke, Palgrave Macmillan, 2003) 131 f. 26   H-J Bieling, ‘Europäische Verfassung als ‘neuer Konstitutionalismus’ (2013) 1 EuR – Beiheft 216 f. 27  L Oberndorfer, ‘Hegemoniekrise in Europa – Auf dem Weg zu einem autoritären Wettbewerbetatismus?’ in Forschungsgruppe Staatsprojekt Europa (ed), Die EU in der Krise (Münster, Westfälisches Dampfboot, 2012) 50. 28   See above (n 16). 29   The Treaty of Lisbon (2007/2009) led to a renumbering of pertinent Articles, upgraded the role of the Commission in the sanction procedures of Arts 121 and 126 TFEU and took away the right of member states threatened by sanctions to vote on relevant decisions.

30  Lukas Oberndorfer 126) of the TFEU were conceived in the phase of ‘euphoric neoliberalism’30 becomes clear in the principles that prefix the chapter on economic policy. Thus, the Union and the member states are obliged to create their economic policy in ‘accordance with the principle of an open market economy with free competition’ (Article 120 TFEU) and to comply ‘with the following guiding principles: stable prices, sound public finances and monetary conditions and a sustainable balance of payments’ (Article 119, paragraph 3 TFEU). These elements of neoliberal theory petrified into a ‘constitution’ are complemented by the statement that through free competition ‘an efficient allocation of resources’ is favoured (Article 120 TFEU) – a determination that is little more than a ‘constitutional’ reference to an economic theoretician.31 The conviction, clearly prominent in these principles, of constitutionally anchoring economic ideologemes refers to the theory of ‘economic constitution’32 that understands itself to be an overall decision about the economic life of a community and not to be subject to a democratic challenge.33 Ordoliberal intellectuals34 developed this concept in the 1930s and brought it into position against the increasing demands for democratisation of the economy.35 At the latest, by the 1970s, a Europeanisation of the approach arose, in which a ‘constitutionally legal’ binding of economic policy on a European level was called for that should conform strictly to justiciable criteria in its execution.36 How much this conception could be realised in the EU’s principles of economic policy is also reflected in the juridical commentary literature. In the face of the relevant provisions, Ulrich Häde comes to the conclusion that the European Treaties are close to the neoliberal concept of an ‘economic constitution’,37 understood as an anti-interventionist legal framework.38 Häde here recognises no general prohibition of intervention that aims at correcting the market, but sees that a special obligation of justification for special measures has been established in the principles of economic policy.39

  Bieling and Steinhilber, above (n 7) 112.   FA von Hayek, ‘Wettbewerb als Entdeckungsverfahren’ in FA von Hayek, Freiburger Studien (Tübingen, Mohr, 1969) 249. 32   C Joerges, ‘Markt ohne Staat? Die Wirtschaftsverfassung der Gemeinschaft und die regulative Politik’ in R Wildenmann (ed), Staatswerdung Europas? Optionen einer Europäischer Union (Baden-Baden, Nomos, 1991) 225. 33   W Eucken, Die Grundlagen der Nationalökonomie (1940) 86. 34  Ordoliberalism is the German variety of neoliberalism, cf principally R Ptak, Vom Ordoliberalismus zur Sozialen Marktwirtschaft – Stationen des Neoliberalismus in Deutschland (Opladen, Leske and Budrich, 2004). 35   cf Oberndorfer, ‘Die Renaissance des autoritären Liberalismus?’, above (n 4). 36   E-J Mestmäcker, ‘Macht-Recht-Wirtschaftsverfassung’ (1973) 137(2) Zeitschrift für das gesamte Handelsrecht und Wirtschaftsrecht 97, 109. 37   cf For an affirmative illustration, see P Behrens, ‘Die Wirtschaftsverfassung der EG’ in G Brüggemeier (ed), Verfassung für ein ziviles Europa (Baden-Baden, Nomos, 1994) 73. 38   U Häde, ‘Art 4 EGV, N 8’ in C Calliess and M Ruffert (eds), EUV/ EGV – Kommentar, 3rd edn (München, CH Beck, 2007). 39   ibid, N 9. 30 31



A New Economic Governance through Secondary Legislation?  31

Apart from the economic principles, the chapter on economic policy has three essential objects of regulation. Article 121 TFEU contains the procedure for coordinating the economic policy of the member states and establishes the competences of the relevant institutions of the European Union. Article 126 regulates behaviour in case of excessive deficit. Articles 123 to 125 TFEU, finally, contain prohibitions of public refinancing away from the financial markets. A  The Comprehensive Prohibition of Public Refinancing to Release Market Power and for Disciplining the Welfare State The last mentioned prohibitions entail that those member states whose currency is the euro can no longer finance themselves cheaply through their central banks. In addition, a direct injection of funds by the European Central Bank (ECB) and a common European debt and/or liability is forbidden. This monetary regime was described by legal science long before the economic crisis and its specific unfolding in the EU as the legal establishment of the disciplining of the public sector by the market: The state should, just as any other debtor, face the laws of the market when borrowing money. If the buyers of government bonds see the debt as problematic, then the state should be confronted with rising credit costs. Thus the ‘classic’ method of eliminating debt from a highly indebted state by heading for the money printing press . . . is ruled out.40

The fact that this European constitutionalisation of the ‘monetarist revolution’41 has not only been driven forward by global market financiers and the European Commission (especially by its Directorate General for Economic and Financial Affairs – DG ECFIN), but also in a massive way by national state apparatuses, in particular the neoliberally-oriented finance ministries, which thus try to weaken welfare state-oriented institutions (such as social ministries and the Directorate General for Employment, Social Affairs and Inclusion), can be seen in the history of the origins of the pertinent provisions: it was the present Economic and Financial Committee (Article 134 TFEU), to which each member state sends two members, who are to be selected ‘from among senior officials from the administration and the national central bank’,42 who introduced a comprehensive prohibition of financing away from the capital markets, in the course of preparations for the Treaty of Maastricht.43 40   E Gnan, ‘Art 104, N 3’ in H von der Groeben, J Thiesing and C-D Ehlermann (eds), Kommentar zum EU-/EG-Vertrag Vol 5 (Baden-Baden, Nomos, 1997/1999). 41  The term comes from the monetarist Karl Brunner. cf also K Brunner, ‘The “Monetarist Revolution” in Monetary Theory’ (1970) 105 Weltwirtschaftliches Archiv 1. 42   cf Art 3 of Council Decision of 21 December 1998 on the detailed provisions concerning the composition of the Economic and Financial Committee, [1998] OJ L358/109. 43   E Gnan, ‘Art 104 EGV, N 12’ in H von der Groeben, J Thiesing and C-D Ehlermann (eds), Kommentar zum EU-/EG-Vertrag Volume 5 (Baden-Baden, Nomos,1997/1999).

32  Lukas Oberndorfer Articles 123 and 125 TFEU concern the main options for budget financing and ‘therefore close all the loopholes . . . that could aid the member states . . . to credit supplies independent of capital markets’.44 According to Article 123, neither the ECB nor the central banks of the member states may give credit directly or purchase debt instruments directly, that is to say without mediation of the financial markets. This prohibition played a not insignificant part in the escalation of the crisis in Europe: in contrast to the media view, state debt in the eurozone in 2007 was much lower, at 80 per cent of aggregated GDP, than that of the United States (110 per cent). Even the Greek state debt stood at ‘only’ 107 per cent at the start of the economic crisis, just below the national debt of the United States – not to mention countries such as Spain and Ireland, which in 2007 had total debts of only 25 per cent and 36 per cent respectively. And although the economic collapse in the United States in 2008 and 2009 turned out to be considerably more dramatic than in the eurozone, a strong rise in spreads on government bonds occurred not there but in some countries of the Union: the interest rate for 10-year government bonds rose to over 7 per cent for Spain and over 6 per cent for Italy. The main cause of this was that the financial markets assumed that the ECB would obey the prohibition on direct purchase of government bonds. A reduction of interest rates was introduced only when the ECB announced in September 2012 that if necessary it would buy unlimited government bonds from secondary markets (indirect purchase).45 To save the euro, the prohibition of Article 123 was broken, but only at the last minute and at immense cost. Even though we are dealing with an indirect purchase of bonds, it is obvious that an abusive circumvention of a judicial prohibition is being used; for the programme aims only at achieving the goals possible by direct purchase of government bonds.46 Nevertheless, this procedure does not have the same advantages as ‘public refinancing’ through a direct purchase of government bonds, since the seigniorage – profit obtained from the ‘creation of money’ – is passed on, through buying bonds on the financial markets, to banks and other finance market dealers. The course of the financial crisis in the United States has been completely different: at the very beginning of the crisis, the Federal Reserve sought financing at a distance from the capital markets and invested in government bonds in order to reassure all market actors and to keep interest rates on the national debt within a reasonable framework.47

44   U Häde, ‘Art 123, N 4’ in C Calliess and M Ruffert (eds), EUV/AEUV – Kommentar, 4th edn (München, CH Beck, 2011)). 45   See: epp.eurostat.eceuropa.eu/. 46   cf also Recital 7 of Regulation (EC) 3603/93 of 13 December 1993 specifying definitions for the application of the prohibitions referred to in Arts 104 and 104b, para 1. 47   cf M Marterbauer and L Oberndorfer, ‘Federating Competition States vs Building Europe from Below – EU Treaty Revisions as an Opportunity for the Democratization of Economy and Politics’ (2012) 3(9) Queries 76.



A New Economic Governance through Secondary Legislation?  33

The ‘no-bail-out’ clause (Article 125 TFEU) follows the same logic, with its mutual disclaimer of liability, as Article 123 TFEU: the aim is to force ‘the public sector with a balance of budget deficits into the mechanism of a free market and thereby activating its disciplinary effect’.48 Article 125 explains that the Union, as well as every member state is prohibited from taking on a liability for a(nother) member state. In order to be able to save endangered banks, and then indirectly endangered states and in the end the euro as a neoliberal project, the countries of the eurozone had to support the rescue packages (European Financial Stabilisation Mechanism (EFSM), European Financial Stability Facility (EFSF) and European Stability Mechanism (ESM)) on partially questionable legal foundations49 because of Article 125 and to set up treaties based on private and international law. Beyond the illustrated legal basis, the chapter on economic policy, as pre­ viously mentioned, regulates the process of economic coordination (Article 121 TFEU) and the excessive deficit procedure (Article 126 TFEU). Finally the chapter contains Article 136 TFEU, which aims to enable the member states of the eurozone to achieve a stronger coordination in the areas of Articles 121 and 126. The European Commission has chosen these three provisions as a legal basis for the new economic governance (Six-pack and Two-pack) and is planning to propose a regulation for establishing the contracts for competitiveness on the basis of these Articles as well. B  Economic Coordination: Principles, Proceedings and Sanctions (Article 121 TFEU) The member states agreed in the Treaty of Maastricht that they would ‘regard their economic policies as a matter of common concern and shall coordinate them within the Council’ (Article 121, paragraph 1). The complete communitisation of monetary policy therefore finds in the field of economic policy no equivalent. The term, ‘their economic policies’ rather expresses that this remains the responsibility of the member states.50 They still create and implement, according to Article 121, economic policy in their own jurisdiction (‘their economic policies’) but they are by law bound to fall in line with the procedures and content of a coordinated economic policy. This is evident from the fact that ‘even the sharpest sanctions in the course of economic supervision consist of merely a reprimand’,51 which as a recommendation, according to Article 288, paragraph 5 TFEU, is not legally binding. 48   B Kempen, ‘Art’ 125, N 1’ in R Streinz, EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäische Union – Kommentar, 2nd edn (München, CH Beck, 2012). 49   Art 122, para 2 and Art 136, para 3 TFEU. 50   M Koch, ‘Arts 120–122, N 3’ in C-O Lenz and K-D Borchhardt (eds), EU-Verträge. Kommentar nach dem Vertrag von Lissabon, 5th edn (Köln, Bundesanzeiger, 2010). 51   B Kempen, ‘N 1’ in R Streinz, EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäischen Union – Kommentar, 2nd edn (München, CH Beck, 2012).

34  Lukas Oberndorfer The pivotal point of the process is marked by the ‘broad guidelines of the economic policies of the Member States and of the Union’. These features are adopted by the Council in the form of a recommendation at the suggestion of the European Commission and after argumentation in the European Council (paragraph 2). The Council, in what follows, is the EU body in which coordination is to take place, according to Article 121. If the Council reaches the conclusion, on the basis of reports by the European Commission, that the economic policy of a member state does not correspond to the ‘broad guidelines of the economic policies’, or risks ‘jeopardising the proper functioning of the economic and monetary union’, then it can direct a recommendation to that member state. The Council is not obliged to give such a reprimand (‘can’). Rather, it is granted a ‘wide political discretionary power’.52 In order to create a certain ‘pillory effect’, the Council can also publish its recommendations (paragraph 4). But the sanctions arsenal does not go beyond this ‘naming and shaming’: ‘The Council can do no more; its possibilities end here’.53 The European Commission, which up to the Treaty of Lisbon was called on only to prepare the groundwork for the Council, was slightly upgraded by the Treaty of Lisbon. It now has the possibility, according to Article 121, paragraph 4 TFEU, of independently directing a warning to the member state – inasmuch as can be determined within the framework of the above described process – that the economic policy of the member state is not compatible with the ‘broad guidelines of the economic policies’. The Council makes the above mentioned decision by qualified majority, without considering the vote of the relevant member state. Finally, Article 121 TFEU contains, in paragraph 6, the power to issue a regulation that grants only the determination of ‘details’ of the process. In marked agreement with the ordoliberal concept of an economic constitution, which wanted to safeguard the free market economy from ‘attacks’ by the ‘parliamentary-democratically composed mass society’,54 the European Parliament is informed only about the coordination of economic policy and the deficit procedures (Article 121, paragraph 2 and Article 126, paragraph 11). In order to make multilateral surveillance of their economic policy possible, the member states have an obligation to provide information. Thus, they are to transmit to the European Commission details of important measures of their economic policies and any further data considered necessary (Article 121, paragraph 3 TFEU). 52   D Hattenberger, ‘Art 99 EGV, N 15’ in J Schwarze (ed), EU-Kommentar, 2nd edn (BadenBaden, Nomos, 2009). 53   U Häde, ‘Art 99, N 15’ in C Calliess and M Ruffert (eds), EUV/EGV – Kommentar 3rd edn (München, CH Beck, 2007). 54   In this way, the ordoliberal theoretician Walter Eucken castigated the world economic crisis as a result of attacks by the ‘parliamentary-democratically composed mass society’. cf R Ptak, ‘Freiburger Schule’ in H-J Urban (ed), ABC zum Neoliberalismus. Von ‘Agenda 2010’ bis ‘Zumutbarkeit’ (Hamburg, VSA, 2006) 83.



A New Economic Governance through Secondary Legislation?  35

C  Proceedings and Sanctions Regarding Excessive Deficits (Article 126 TFEU) The proceedings regulated by Article 126 TFEU achieved fame through the socalled ‘Maastricht criteria’. According to this Article, the member states are obliged to avoid excessive deficits. Significant for evaluation are two reference values: the government debt and government deficit as a percentage of GDP. The currently valid figures of 60 per cent and 3 per cent are however, not set down in the Treaties, but rather in a ‘Protocol on the excessive deficit procedure’, which is referred to in Article 126, paragraph 2. The goal of this treaty determination is to make an ‘expansive budgetary policy’ impossible.55 But, in contrast to frequent presentations in the media, neither the Treaties nor the deficit protocol contain a defined establishment of the term ‘excessive deficit’. Transgression of one or both of the Maastricht criteria is one indicator, but one that alone does not meet the criterion of ‘excessive deficit’.56 In fact, the European Commission must consider ‘all other relevant factors’ in its reports, according to Article 126, paragraph 3 TFEU, and even the Council can, according to paragraph 6, determine a deficit only ‘after overall assessment’. The fact that the member states, according to Article 121, are fundamentally afforded responsibility for economic policy becomes especially apparent within the framework of Article 126 (paragraph 10), that clarifies that proceedings for failure to fulfil an obligation cannot be made on the basis of deficit procedures. ‘In place of judicial verification comes the decision of the Council, provided with judgemental and prognostic leeway’,57 and the Council decides ‘in the composition of finance ministers’ (ECOFIN Council). In order to balance the exclusion of judicial control with political supervision, Article 126 contains a multi-staged procedure whose steps build on and depend on each other. To be able to justify ‘hard sanctions’ (for example, fines) which can be imposed by the Council in Article 126 (in contrast to Article 121 TFEU) and in order to give the member states the time and opportunity to reduce their excessive deficits, all procedural steps must be passed before the Council can finally decide about administering sanctions. In the first step, the European Commission prepares a report if a member state does not meet one of the Maastricht criteria (paragraph 3). If the European Commission is of the opinion that an excessive deficit exists in a member state, or could arise, it addresses an opinion to the member state (paragraph 5). Building on this, the Council decides, after an overall assessment, whether an excessive deficit exists (paragraph 6). If this is the case, it addresses a recommendation to 55   M Schulze-Steinen, Rechtsfragen zur Wirtschaftsunion – Möglichkeiten der gemeinschaftlichen Gestaltung mitgliedstaatlicher Wirtschaftspolitik nach dem EG-Vertrag (Baden-Baden, Nomos, 1998) 234. 56   B Kempen, ‘Art 126, Rn 15’ in R Streinz, EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäische Union – Kommentar, 2nd edn (München, CH Beck, 2012). 57   B Kempen, ‘Art 126, Rn 46’ in R Streinz, EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäische Union – Kommentar, 2nd edn (München, CH Beck, 2012).

36  Lukas Oberndorfer the relevant member state ‘with a view to bringing that situation to an end within a given period’ (paragraph 7). Only when the Council recognises that its recommendation has led to no appropriate measures can it make its recommendation public (paragraph 8). Now the Council can, if a member state persists in failing to put into practice the recommendations, decide to give notice to the member state to take, within a specified time limit, measures for deficit reduction (paragraph 9). If a member state fails to comply with a decision taken in accordance with paragraph 9, the Council may impose ‘hard sanctions’, especially the deposit of a noninterest-bearing capital contribution and the payment of fines (paragraph 11). Parallel to the modus in the coordination of economic policy, the Council makes its decisions by qualified majority and in exclusion of the relevant member state (paragraph 13). Paragraph 14 also authorises the Council to lay down detailed rules and definitions for the excessive deficit procedure. D  The Stability and Growth Pact In order to further develop the procedure for economic coordination and the excessive deficit procedure, the Stability Pact was adopted in 1997. Because the chair of the French socialists at that time, Lionel Jospin, saw the Stability Pact as furthering the juridification of neoliberal economic policy, he demanded a renegotiation of the Pact, adopted at the European Council in Amsterdam. In the end he managed only to implement a new title: the pact of two regulations has been since called the Stability and Growth Pact.58 The Regulation ‘on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies’,59 also denoted the preventive component in the Pact and was decreed on the basis of Article 121, paragraph 6 TFEU which authorises the Council to determine the ‘details’ of proceedings. It makes the obligation to inform on the part of the member states (Article 121, paragraph 3 TFEU) more concrete by prescribing the submission of so-called stability programmes containing medium-term budgetary objectives. In the case of substantial deviations from these medium-term budgetary objectives, the Council can,60 according to Article 6, paragraph 2 of the Regulation, direct a recommendation to the relevant member state ‘at an early stage’ to effect the implementation of necessary measures. The Regulation denoted as the corrective component (Regulation on speeding up and clarifying the implementation of the excessive deficit procedure)61 was decreed on the basis of Article 126, paragraph 14 TFEU. The Regulation 58   S Halimi, ‘Das Spardiktat, Was in Frankreich zur Wahl steht’ LE MONDE diplomatique (13 April 2012). 59   Regulation (EC) 1466/97 of 7 July 1997. 60   B Kempen ‘Art 121 AEUV, N 20’ in R Streinz, EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäische Union – Kommentar, 2nd edn (München, CH Beck, 2012). 61   Regulation (EC) 1466/97 of 7 July1997.



A New Economic Governance through Secondary Legislation?  37

established, calculated from the announcement of the budget data, a 10-month time limit for the decision to level sanctions, as well as additional interim deadlines for the procedural steps of Article 126 TFEU (Article 7, Regulation 1467/97). In addition, they tried to achieve a tightening of the proceedings through a narrowing of the interpretive leeway of inexact judicial terms (especially the evaluation of the Maastricht criteria, Article 126, paragraph 2(a) and 2(b) TFEU). In regard to the sanctions, the Regulation contains clarification: as a rule, a fixed, interest-free annual deposit at a rate of 0.2 per cent of GDP should be imposed (Article 12, Regulation 1467/97). The sum is converted by the Council into a fine, if the excessive deficit has not been corrected two years after the sum has been fixed (Article 13, Regulation 1467/97).62 After Germany and France in 2002 and 2003 exceeded the deficit limit of the Maastricht criteria, a slight softening of the Regulation63 occurred due to polit­ ical pressure, in which especially the 10-month deadline was lengthened to 16 months and the discretionary leeway for evaluation of the Maastricht criteria (Article 126, paragraph 2(a) and (b) TFEU) was relaxed again. In return, the preventive component was tightened in that, by means of a Regulation,64 the country-specific medium-term budgetary objectives should be set in a range between 1 per cent of GDP new indebtedness and a balanced or surplus budget (Article 2(a) Regulation 1055/2005). E  Article 136 TFEU: Option for Intensified Obligations for Coordination and Information in the Eurozone Article 136 TFEU was created anew with the Treaty of Lisbon and enables the Council to decree measures for the eurozone in order (i) ‘to strengthen the coordination and surveillance of their budgetary discipline’ and (ii) ‘to set out economic policy guidelines’ for the eurozone ‘while ensuring that they are compatible with those adopted for the whole of the Union’ (Article 136, paragraph 1 TFEU). Furthermore, this may occur only within the framework of the pertinent Articles (Articles 121 and 126 TFEU) and according to the procedure provided there. F  Surveillance and Neoliberal Normalisation By means of this – now concluded – illustration of the primary law and secondary regulation of the economic policy until the crisis, we can confirm Gill’s thesis: the new constitutionalism constructs a governmental surveillance system of 62   B Kempen, ‘Art 126 AEUV, N 18’ in R Streinz, EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäische Union – Kommentar, 2nd edn (München, CH Beck, 2012). 63   Regulation (EC) 1056/2005 of 27 June 2005. 64   Regulation (EC) 1055/2005 of 27 June 2005.

38  Lukas Oberndorfer national economic policy that corresponds to Michel Foucault’s concept of control by ‘surveillance and normalisation’.65 Even when there is no direct control, economic policies are ‘surveilled’ by European and international financial institutions and thus are subject to a neoliberal ‘self-rule’.66 This statement must, however, be differentiated, as in the chapter on economic policy, we find, upon closer examination, two different logics that enable economic policy to divest itself of ‘popular-democratic control’ to differing degrees of intensity and through diverging spatial jurisdictions. In the procedure of economic coordination (Article 121 TFEU), with regard to excessive deficits (Article 126 TFEU) and intensified coordination and information in the eurozone (Article 136 TFEU), the member states retain certain discretionary powers, even if to differing degrees, within which they can shape their budgetary and economic policy. Popular-democratic powers still have the chance to problematise the respective policies of their state apparatus, because they are, at least formally, responsible for them and have decision-making powers. Nevertheless, the fairly effective limitation and/or partitioning of these powers functions entirely in accordance with the governmental pattern of ‘surveillance and normalisation’ described by Gill: neoliberal path dependency is created by rule-based economic policy, competitive evaluation and self-evaluation and a discursive separation of member states into model students and sinners, although this cannot be imposed unconditionally. However, the prohibition on public refinancing outside the financial markets (Articles 123 to 125 TFEU) extends beyond the logic of surveillance and normalisation. In connection with the spatial shift of monetary politicy to the European level laid down by the Maastricht Treaty (competence now lies with the explicitly independent ECB), access to public refinancing away from the financial markets remains blocked for states even during crises and prohibited for the ECB – even if ‘popular-democratic powers’ could exercise effective pressure on their decision makers. Therefore, Gill’s remarks regarding the blockade of public refinancing are to be put into concrete terms: the new constitutionalism in this area not only operates through surveillance and normalisation, but has in this field made national economic policy immediately subject to dis­ cipline by markets; a connection which became generally tangible during the crisis. In Foucault’s terms, this area has rather become a system of ‘surveillance and punishment’.67 This ‘retardation’ of governing technologies ‘back’ to direct domination, which detaches itself even more strongly from ‘self-rule’ and consensus, now comes to a head – as the following sections will show – in authoritarian constitutionalism and is transferred to other fields of economic policy.

65   M Foucault, Security, Territory, Population (London, Palgrave Macmillan, 2007) and M Foucault, The Birth of Biopolitics (London, Palgrave Macmillan, 2008). 66   Gill, ‘European Governance and the New Constitutionalism’, above (n 24) 13. 67   M Foucault, Discipline and Punish – The Birth of the Prison (New York, Vintage Books, 1977).



A New Economic Governance through Secondary Legislation?  39

II  NEW ECONOMIC GOVERNANCE AND CONTRACTS FOR COMPETITIVENESS AS AUTHORITARIAN CONSTITUTIONALISM What is going on is a silent revolution – a silent revolution in terms of stronger governance by small steps. The member states have accepted – and I hope they understood it exactly – . . . very important powers of the European institutions regarding surveillance, and much stricter controls of the public finances. José Manuel Barroso, speech to the European University College (18 June 2010).

This announcement by the President of the European Commission has become reality. In separate steps, and for the most part aside from public debate and academic discussion, a ‘silent neoliberal revolution’68 is taking place, which will entail a profound restructuring of European economic policy. So far we have established three stages in which the new economic governance has been set up. In autumn 2011, the so-called Six-pack went into effect, a package of five regulations and a directive. In May 2013, the Two-pack, consisting of two decrees, followed and in 2014 the next step is planned – the contracts for competitiveness. A  The Tightening of the Stability and Growth Pact Three of the six legal acts of the so-called Six-pack are aimed at tightening the Stability and Growth Pact (SGP). With Regulation 1175/2011,69 based on Article 121, paragraph 6 TFEU, the preventive component of the SGP is tightened, especially by the following reforms: (i) if the debt level of a member state is higher than 60 per cent of GDP, the annual improvement of the cyclically-adjusted budget balance must be at least 0.5 per cent of GDP (Article 5, paragraph 1 Regulation 1466/97 as amended by Regulation 1175/2011); (ii) the Regulation introduces a rule to limit spending growth. Thus, the annual expenditure growth must not exceed the ‘reference medium-term rate of the potential GDP growth’ (Article 5, paragraph 1(a) Regulation 1466/97 as amended by Regulation 1175/2011); (iii) the process of establishing significant deviation from the adjustment path towards the mediumterm budgetary objective also has time limits (Article 6, paragraph 2 Regulation 1466/97 as amended by Regulation 1175/2011); (iv) in resolving whether the concerned member state has failed to take remedial measures, the European Commission has received upgraded support from the ‘introduction’ of Reverse Majority Voting. Thus, the resolution ‘shall be deemed to be adopted by Council unless it decides, by simple majority, to reject the recommendation within 68   E Klatzer and C Schlager, ‘Europäische Wirtschaftsregierung – Eine stille neoliberale Revolution’ (2011) 1 Kurswechsel 61. 69   Regulation (EU) 1175/2011 of 16 November 2011 amending Council Regulation (EC) 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies.

40  Lukas Oberndorfer 10 days of its adoption by the European Commission’ (Article 6, paragraph 2 Regulation 1466/97 as amended by Regulation 1175/2011). The corrective component of the SGP is tightened in particular by means of Regulation 1177/2011,70 (enacted on the basis of Article 126, paragraph 14) so that in future the development of the government debt will have the same importance as that of the budget deficit. This was achieved by inserting a new section that more closely defines just what is to be understood by sufficient regressiveness of the level of government debt (Article 126 paragraph 2(b) TFEU): it exists when the difference from the reference value (now 60 per cent) has decreased in the past three years ‘on an annual average by one twentieth’ (Article 1(a) Regulation 1467/97 as amended by Regulation 1177/2011). Ultimately, the SGP ‘effectuated’ to effectively enforce budgetary surveillance by means of a new Regulation (1173/2011)71 which is based on Article 121, paragraph 6 in conjunction with Article 136 TFEU. The Regulation determines a sanction system for the preventive and corrective components of the SGP, but it is valid ‘only’ for those member states whose currency is the euro (Article 1, Regulation 1172/2011). In the preventive arm of the SGP, the concerned member state will be obliged to deposit an interest-bearing security of 0.2 per cent of GDP, when the decision (Article 6, paragraph 2 Regulation 1466/97 as amended by Regulation 1175/2011) has been made that it has failed to undertake appropriate measures against a considerable deviation from the adjustment path (Article 4, paragraph 1 Regulation 1173/2011). Here the position of the European Commission is again upgraded by Reverse Majority Voting in its decision making (Article 4, paragraph 2). But this time the Council needs not just a simple but a qualified majority in order to veto the decision within 10 days. As an executive measure for the corrective component of the SGP, the Regulation further provides that, following the decision of the Council according to Article 126, paragraph 8 TFEU (see above for an explanation) a fine of 0.2 per cent of GDP can be levied with a further decision (Article 6, paragraph 1 Regulation 1173/2011). Here as well, the Regulation for decision initiates Reverse Majority Voting, which again demands a qualified majority for a veto by the Council (Article 6, paragraph 2 Regulation 1173/2011). In spite of the comprehensive enhancement of the role of the European executive branch (Directorate General for Economic and Financial Affairs of the European Commission – DG ECFIN), in the ‘renewed’ SGP and the tightening of its austerity rules, the abovementioned Regulations provide for no co-­decision rights for the European Parliament. Under the title of ‘Economic Dialogue’, the Parliament is granted only limited consultation rights in the preventive (Article 2(a), Regulation 1466/97 as amended by Regulation 1175/2011) and in the cor70   Regulation (EU) 1177/2011 of 8 November 2011 amending Regulation (EC) 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure. 71   Regulation (EU) 1173/2011 of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area.



A New Economic Governance through Secondary Legislation?  41

rective (Article 2(a), Regulation 1467/97 as amended by Regulation 1177/2011) components. At this point I would like to pause the presentation of the instruments of the new economic governance and subject the tightening of the SGP to a brief economic and judicial interim evaluation. If one observes the tightening of the SGP critically and from an economic or political science perspective, it seems that the trend that Gill described as ‘new constitutionalism’ is continuing. By tightening a rule-based economic and budgetary policy defined mainly by the European executive branch, this policy can avoid nearly all popular-democratic control. In addition, a turning from the path of neoliberal austerity policies – despite increasing criticism – is becoming ever more subject to preconditions. At the same time, the pro-cyclical effect of the illustrated provisions is further tightened with the ‘reforms’: the obligation to implement austerity measures even during an economic downturn leads to a further breakdown of (state) demand, and so to a continued decline in the economy and finally to a spiral of debt. This again emphasises that the new constitutionalism, despite constant repetition of its ‘saving’ mantra, is not aimed primarily at debt reduction. Rather, it aims at preventing an expansive economic and social policy, which could shift the power relationship in favour of trade unions and social movements. If one looks at the tightening of the SGP from a jurisprudential perspective, it becomes clear that the central instruments of the new SGP were passed without the necessary basis of competence. This ‘radicalisation’ of the new to an authoritarian constitutionalism becomes particularly obvious in the Macroeconomic Imbalance Procedure (explained in detail below), but it appears even in the ‘further development’ of the SGP, because some of the new components could only have been introduced in compliance with law, by an ordinary revision procedure (Article 48 TEU). The ‘introduction’ of a reverse majority voting in the different regulations is manifestly illegal. Article 121, paragraph 6 TFEU, used to substantiate these changes, allows, as we showed in section I, only the possibility of adopting a regulation with ‘detailed rules for the multilateral surveillance procedure referred to in paragraphs 3 and 4’. A quick look at these paragraphs of Article 121 TFEU makes it clear that here only the Council – without any restriction – is granted the possibility of directing a recommendation to the member states. Article 121 TFEU neither provides for the legal act of a decision (Article 288 TFEU), nor calls on the European Commission to adopt such a decision, which consequently receives its validity through the inactivity of the Council, as provided by reverse majority voting. Just as little does Article 121 recognise sanctions that go beyond ‘naming and shaming’ by recommendations and making these public (explained in detail in section I). Therefore, the introduction of ‘hard’ sanctions in the form of interest-bearing deposits for effectuating the preventive components is inadmissible. In addition, we are dealing here with a binding legal act that is simply not provided for in the system of Article 121. The series of manifest illegalities that distinguish the tightening up of the SGP is concluded by the bringing forward of imposing fines in the corrective component. As previously

42  Lukas Oberndorfer illustrated, Article 126 provides a strict procedural course at the primary law level, which allows for the possibility of imposing fines (paragraph 11) only when the member state has failed to meet the obligations of paragraph 9. Shortening this procedure through secondary law, as provided for by Article 6, paragraph 1 Regulation 1173/2011 is therefore illegal. B  European Semester A further component that the European lawmaker has incorporated in secondary law by means of Article 2(a), Regulation 1175/2011 is mainly unproblematic, however.72 The European Semester concerns a temporal structuring of and agreement on the procedures developed so far within the framework of the EU on the coordination of economic and employment policies on which a political consensus has been reached within the framework of the ‘Europe 2020 Strategy’. C  Directive on the Requirements for Budgetary Frameworks of the Member States The fourth legal act of the so-called Six-pack, Directive 2011/85/EU,73 due to be implemented by the end of 2013, aims at reducing the leeway for unrealistic budget prognoses, increasing transparency and obliging the member states to enact ‘numeric fiscal rules’. The member states must in future guarantee that all sub-sectors of general government (Article 3) and all contingent liabilities (Article 4) that could considerably affect their finances are included statistically in their financial planning. While comprehensive and sustainable statistical compilation is welcomed from the viewpoint of the critical economy, it appears problematic that the Directive also obliges the member states to pass ‘numeric fiscal rules’ that should maintain values in ‘compliance with the reference values on deficit and debt’ (Article 5(a)) and should ensure the introduction of a ‘multiannual fiscal planning horizon’ to pursue the ‘medium-term budgetary objectives’ (Article 5(b)). The competence basis used here (Article 126, paragraph 14, sub-­paragraph 3) does not provide for an analogous binding introduction of national budget rules. Rather, Article 126, paragraph 14, sub-paragraph 3 TFEU enables the Council only to ‘lay down detailed rules and definitions for the application of the provisions’ for carrying out the Protocol on the excessive deficit procedure annexed to the Treaties (see section I). Article 3 of the Protocol, however, pro72   Whether the authorisation of the Commission to issue a warning according to Art 121, para 4 TFEU outside its area of use is legally allowed is at least questionable (see for this authorisation Art 2(a), para 3(b)). 73   Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States.



A New Economic Governance through Secondary Legislation?  43

vides only that member states must ensure that their budgetary law will not endanger fulfilment of the obligations that arise from the Treaties. A Council competence concerning numeric fiscal rules for member states can just as little be extracted from Article 126, paragraph 14, sub-paragraph 3 TFEU as a competence to order the monitoring of adherence to the rules by ‘independent analysis carried out by independent bodies or bodies endowed with functional autonomy vis-a-vis the fiscal authorities of the Member States’ (Article 6, paragraph 1(b) Directive 2011/85/EU). D  Macroeconomic Imbalance Procedure: Neoliberal Restructuring and Interventionism in the Area of Wage Policy The official title of the ‘Regulation on the prevention and correction of macroeconomic imbalances’74 was purloined from heterodox economists who have stressed for decades that the introduction of EMU without common policies on wages, taxation, transfers and social welfare will accelerate capitalism’s inherent tendency to create uneven development. They further argued that the imbalances in the distribution of income and foreign trade would have to be reduced to deal with a principal cause of crisis. To that end, the countries that are running a current account surplus due to wage moderation or labour market deregulation (for example, Hartz IV in Germany), and that are therefore partly responsible for the indebtedness of those countries with a current account deficit should signific­ antly increase their wages and thus labour costs.75 The above-mentioned Regulation, however, tries to establish an entirely different meaning of ‘uneven development’. This becomes obvious where the legal act declares that ‘the need for policy action is particularly pressing in Member States showing persistently large current-account deficits and competitiveness losses’.76 ‘Corrections’ in the area of ‘wage policies’ and deregulation of ‘labour markets, product and service markets’ are to be undertaken77 until ‘competitiveness’78 is restored. The juridical interpretation of this package of laws leaves little doubt that, by mandating a race to the bottom, economic governance aims to create a permanent competition state in and through the legal form and that ‘stable prices, sound and sustainable finances and monetary conditions’79 are to be implemented in authoritarian fashion if necessary. By drafting this Regulation as a largely undetermined framework, the European legislature makes the European executive the sole judge of what 74   Regulation (EU) 1176/2011 of 16 November 2011 on the prevention and correction of macroeconomic imbalances, OJ L306/12. 75  E Stockhammer, O Onaran and S Ederer, ‘Functional Income Distribution and Aggregate Demand in the Euro Area’ (2009) 3(1) Cambridge Journal of Economics 139. 76   Recital 17. 77   Recital 20. 78  ibid. 79   Recital 1.

44  Lukas Oberndorfer constitutes a macroeconomic imbalance. The executive enjoys an almost unlimited latitude to directly push through dominant interests. The Directorate General for Economic and Financial Affairs of the European Commission (DG ECFIN) decides whether an imbalance exists in a member state through the use of a ‘scoreboard’ consisting of ‘macroeconomic and macrofinancial indicators’. The European Commission decides in an annual update80 on the composition of these indicators that guide European economic policies. The Council and the European Parliament have the right only to comment.81 With regard to substance, the European executive apparatus is bound only by a few general provisions. Even if the balance of forces on the European level should change significantly, their wording would give little support to attempts at reducing these imbalances in the alternative way favoured by heterodox economics. According to the Regulation, the indicators will be used to detect imbalances ‘in price and cost developments’, as well as ‘non-price competitiveness’ at an early stage.82 The wording is unambiguously neoliberal, too, with regard to the crucial question of the current account: the fairly neutral term ‘current account positions’, which would arguably include surpluses, is still used. In interpreting the Regulation, however, recitals have to be taken into account that require action primarily in the case of ‘current-account deficits and competitiveness losses’.83 While, according to the Regulation, the European Commission (DG ECFIN) alone de jure is appointed to create a scoreboard with macroeconomic indicators,84 it establishes the objectives of European economies and then evaluates the economic performance of member states without the right of codetermination on the part of the European Parliament. If the European Commission reaches the conclusion that a macroeconomic imbalance exists in a member state, it initiates a thorough examination, combined with ‘monitoring missions in the concerned Member State’.85 If the European Commission, during this examination, reaches the conclusion that an excessive imbalance exists in a member state, the Council can, at the suggestion of the European Commission, adopt a recommendation with the statement that an excessive imbalance exists and that corrective action should be taken.86 This leads to the consequence that the concerned state must present a ‘corrective action plan’ in which exact structural reforms and a timetable for their implementation must be included.87

  Art 4, para 8.   Recital 12. 82   Art 4, para 3(b). 83   Recital 17. 84   Art 4, para 8. 85   Art 5, para 1. 86   Art 7. 87   Art 8, para 1. 80 81



A New Economic Governance through Secondary Legislation?  45

If the Council reaches the conclusion that the plan for corrective action is sufficient, it shall ‘endorse the plan by way of a recommendation’88 (sic!). Inasmuch as the intended action and the timetable for its implementation are considered insufficient, the Council directs a recommendation to the member state to present a new corrective action plan.89 The European Commission checks on the implementation of the action plan and can carry out ‘enhanced surveillance missions’. The concerned member state is to submit regular progress reports.90 Formally, the decision on whether the member state is implementing the corrective action plan properly belongs to the Council; de facto, however, the European Commission decides by reverse majority voting: ‘The European Commission’s recommendation on establishing non-compliance shall be deemed to have been adopted by the Council, unless it decides, by qualified majority, to reject the recommendation within 10 days of its adoption by the European Commission’.91 In order to effect the orderly implementation of competitive restructuring in a timely manner within the eurozone, the sixth legal provision of the so-called Six-pack was decreed.92 By means of this procedure, for the first time in European economic policy (aside from the excessive deficit procedure), sanctions have been provided that go beyond mere ‘naming and shaming’ by publicising decisions.93 For eurozone countries, annual fines of 0.1 per cent of GDP, a substantial sum, can be levied if the corrective action is not implemented properly.94 This fine can also be levied when the member state has twice submitted an insufficient corrective action plan.95 The preceding recitals entail that the fine should be imposed until the Council determines that the member state ‘has taken corrective measures in compliance with its recommendations’.96 And the sensitive decision about levying sanctions should take place according to the Regulation by way of reverse majority voting and thus mainly by the European Commission alone. Although the package of laws also contains some clauses that protect basic and fundamental human rights, closer examination reveals that economic governance will interfere substantially with formal freedoms. Through reciprocal references, the various levels of the European ensemble of state apparatuses mutually take the burden off each other. Article 1 of the Regulation on competitive restructuring declares that any recommendation must respect trade unions right to collective bargaining. The European Commission, however, does   Art 8, para 2.  ibid. 90   Art 9, paras 1 and 3. 91   Art 10, para 4. 92   Regulation (EU) 1174/2011 of 16 November 2011 on the enforcement measures to correct of excessive macroeconomic imbalances in the euro area. 93  ibid. 94   Art 3, para 2(b) in conjunction with para 5 Regulation (EU) 1174/2011. 95   Art 3, para 2(a). 96   Recital 12. 88 89

46  Lukas Oberndorfer not need to interfere directly with basic rights: in keeping with the Regulation’s wording,97 it needs only to demand that ‘competitiveness’ be enhanced in the area of ‘wage policies’. The national level within the European ensemble of state apparatuses (for example, a member state government), which, under this provision, is required to submit concrete corrective measures, can in turn invoke the ‘implementation of EU requirements’ when interfering with basic rights. The fact that the DG ECFIN is willing to use the competences granted to it by the Regulation for further neoliberal restructuring of Europe became apparent on close examination of the Communication of May 2013, which will be dealt with in part here.98 The Communication recommends that Spain implements further employment market reforms because ‘rigidities in product and labour markets contribute to high unemployment’.99 In Slovenia and France the minimum wage should be lowered; otherwise – according to DG ECFIN – further competitive losses loom and the profits of corporations would be put under pressure.100 Alluding to collective bargaining negotiations taking place mainly at sectoral level, the European Commission demands that Italy creates a general framework that is friendlier to big business.101 The DG ECFIN is here obviously attempting to convert its theory into practice outside the countries under the Troika regime: already in 2012, DG ECFIN recorded in a study that the new economic–political control instruments must be used to reduce the ‘wage-­ setting power of trade unions’.102 Thorsten Schulten and Torsten Müller therefore come to the correct conclusion that ‘(t)he new system of European economic governance with its newly introduced mechanisms for monitoring sanctions and intensified coordination has led to a new European interventionism in the area of wage policy’.103 Before submitting the Macroeconomic Imbalance Procedure to a legal analysis, I would first like to illustrate the latest plans for consolidating the EMU by establishing contracts for competitiveness. Because these are to be decided on the same deficient judicial foundation as the Macroeconomic Imbalance Procedure (Article 121 in conjunction with Article 136), it is possible to show how both instruments feature the pattern that I conceptualise as authoritarian constitutionalism.

  Recital 20.   Communication from the Commission of 10 April 2013 on the results of the in-depth review under Regulation 1176/2011 on the prevention and correction of macroeconomic imbalance COM (2013) 199. 99   ibid, 6. 100   ibid, 8 and 11. 101   ibid, 9. 102   DG ECFIN, Labour Market Developments in Europe 2012 (European Commission) 104. 103  T Schulten and T Müller, ‘A New European Interventionism? The Impact of the New European Economic Governance on Wages and Collective Bargaining’ in D Natali and B Vanhercke (eds), Social Developments in the European Union (Brussels, ETUI, 2013). 97 98



A New Economic Governance through Secondary Legislation?  47

E  Contracts for Competitiveness The substance of crisis policy to date, especially of the planned contracts for competitiveness, is illustrated particularly well by a keynote speech on the future of the EU given in Davos at the end of January 2013 by a central figure of the European ensemble of state apparatuses.104 The European Union, according to Angela Merkel, has been coming along well on a stability path whose guardrails are strict fiscal discipline, on the one hand, and structural reforms for more competitiveness, on the other. The establishment of the necessary instruments would have been ‘unimaginable’ only a few years ago. But what is missing now is an instrument for competitiveness throughout Europe that must create a global competitiveness. The time factor is central, because, on the one hand, it must be ensured that the structural reforms become effective before the political situation escalates further and, on the other, experience shows that pressure is needed for such reforms. The massive increase in unemployment in Europe is therefore an opportunity, because in Germany too, only the existence of five million unemployed made a competitiveness drive possible. Following the implementation of strict fiscal discipline, the next big European issue is the question of competitiveness: I see it like this – and this is what we are talking about in the European Union – that, analogous to the Fiscal Treaty, we resolve on a pact for competitiveness in which the nations conclude contracts with the European Commission in which they oblige themselves to improve elements of competitiveness that do not yet comply with the necessary state of competitiveness.

In this regard, areas such as ‘unit wage costs (and) supplementary wage costs’ must get in the focus. What exactly is meant by ‘pact for competitiveness’ is made clear in, among other sources, a detailed Communication on the deepening of EMU, which the European Commission completed at the end of 2012.105 If the European executive branch has its way, the new instrument should be fitted into the Macroeconomic Imbalance Procedure.106 Despite the largely unrestricted position on competitive restructuring of European economies accorded the European Commission since the resolution on the new economic governance, the contracts for competitiveness would once more strengthen the influence of the European executive and national governments in relation to the European Parliament. The contracts for competitiveness, according to the concept, are to be concluded directly between the member 104  See: www.bundesregierung.de/ContentArchiv/DE/Archiv17/Reden/2013/01/2013-01-24-merkeldavos.html. 105   Commission, ‘A Blueprint for a Deep and Genuine Economic and Monetary Union’ COM (2012) 777. 106   Regulation (EU) 1176/2011 of 16 November 2011 on the prevention and correction of macroeconomic imbalances, OJ L306/12.

48  Lukas Oberndorfer states and the European Commission. In order to further the passing and implementation of reforms ‘by overcoming . . . political and economic deterrents to reform,107 financial support should be given if the timetable set in the treaty is met. In this way, the “short-term impact of reforms raising the flexibility in the labour market” could be compensated’.108 The appropriate financing should be arranged through a special fund into which the countries of the euro area must pay.109 With the contracts for competitiveness, a gap in previous crisis policy is to be filled. If a given country does not come under the sway of the Troika and no ‘excessive imbalances’ are determined by the European Commission, the way to a corrective action plan and thus an eased crackdown on social rights and public services remains closed. This gap is now to be filled. Even a brief look at these plans makes clear what is supposed to be achieved. The practice of ‘Memoranda of Understanding’, developed in the southern European laboratory of neoliberalism, which grants financial support in return for detailed ‘structural reforms’ (ranging from decentralising collective bargaining to the privatisation of the water supply)110 should be Europeanised. While the contracts for competitiveness seem largely undisputed among the leading figures of the European ensemble of state apparatuses, the judicial configuration will still be subject to struggle: in contrast to the German Chancellor, who would like to conclude ‘a pact for competitiveness’ in accordance with international law, analogous to the Fiscal Treaty, the European Commission prefers a solution through European secondary law. F  Article 136 TFEU: An Unrestricted General Clause? In its concept for the deepening of the EMU, the European Commission explains that Article 136 TFEU, upon which it had already based the Macroeconomic Imbalance Procedure, forms a suitable basis for the contracts for competitiveness.111 This argumentation is more than doubtful. Article 136 empowers the Council to enact measures for the euro area to (i) ‘strengthen the coordination and surveillance of . . . budgetary discipline’ and (ii) to ‘set out economic policy guidelines for [the euro-zone states], while ensuring that they are compatible with those adopted for the whole of the Union’.112 In addition, this must happen only within the framework of the relevant provisions (Articles 121 and 126 TFEU) and according to the procedure laid down therein. This means that the specific rules for the euro area must be within the framework of the boundaries   COM (2012) 777, 22.   ibid, 22. 109   ibid, 45. 110   fn 22. 111   COM (2012) 777, 26. 112   Art 136, para 1 TFEU. 107 108



A New Economic Governance through Secondary Legislation?  49

established by the Treaties, which ‘reduces the meaning of the Article to a minimum’.113 Thus, it follows that Article 136 TFEU allows nothing more and nothing less than existing primary law.114 It is a matter of fact that it does not contain ‘any authorisation for further intervention in the economic competences of the member states’.115 On this basis, at the very most, more intensive coordination and information obligations for the euro area can be established.116 Therefore, it does not take a legally trained eye to recognise that Article 136 TFEU does not establish a foundation for either the essential components of the Macroeconomic Imbalance Procedure, already concluded, or for the intended contracts for competitiveness. The relevant Article 121, to which Article 136 refers in matters of economic policy, does not provide either for sanctions in the form of fines in the Macroeconomic Imbalance Procedure, or for a reverse majority voting. Neither can authorisation be found in Articles 121 and 126 for the European Commission to conclude contracts for competitiveness nor any competences for surveillance of implementation of the ‘reforms’ agreed to. Furthermore, no financial support for the implementation of agreements can be drawn from the Treaties. With regard to Article 121 TFEU, the incompatibility with European law of these contracts for competitiveness is thus obvious. Furthermore, does the aspired instrument not fulfil the condition required by Article 136 TFEU, because it represents neither a measure of budgetary discipline, nor the adoption of economic policy guidelines. G  Out of the Pandora’s Box Opened by the Fiscal Treaty: The Contracts for Competitiveness Perhaps it is this obvious incompatibility with EU law that moved the European Commission to leave a back door open in its concept: ‘Intergovernmental solutions should therefore only be considered on an exceptional and transitional basis where an EU solution would necessitate a Treaty change’.117 Here, the European Commission is alluding to the flight from European law according to the ‘Fiscal Treaty model’. In any case, a preference for this repeated use of a treaty of international law to circumvent those consensus requirements that are demanded to change the European Treaties can be inferred from the German Chancellor’s Davos speech. But it is precisely because this approach would be congruent with the Fiscal Treaty that the legal arguments118 brought against it 113   B Kempen, ‘Art 126 AEUV, Rn 2’ in R Streinz, EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäische Union – Kommentar, 2nd edn (München, CH Beck, 2012). 114   J-V Louis, ‘The Economic and Monetary Union’ (2004) 41 Common Market Law Review 575; U Häde, ‘Art 136 AEUV – eine neue Generalklausel für die WWU?’ (2011) 66 Juristenzeitung 333. 115   Häde, ‘Art 136, Rn 4’, above (n 19). 116   B Kempen, ‘Art 126 AEUV, Rn 2’ in R Streinz, EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäische Union – Kommentar, 2nd edn (München, CH Beck, 2012). 117   COM (2012) 777, 13. 118   Fischer-Lescano and Oberndorfer, above (n 18).

50  Lukas Oberndorfer can also be transferred to a great extent to a ‘pact for competitiveness’. This is especially true for the central role of the European Commission, whose deployment (borrowed administration) outside European law, without the explicit consent of the member states ‘is inadmissible from the standpoint of European Union law’.119 The verdict dominating among European law scholars that the Fiscal Treaty is contrary to European Union law therefore applies to the contracts for competitiveness, too. H  Two-Pack: An Attempt at Legalising the Troika and the Need for Authorisation of National Budget Plans In contrast to the contracts for competitiveness, the so-called Two-pack has been in effect since May 2013. The first of the two Regulations120 represents, in essence, an attempt to put the previous role of the European Commission on a legal basis within the framework of the Troika. This venture also fails, however, due to its deficient legal basis. Article 2 of the Regulation empowers the European Commission to resolve to put those member states that receive financial aid from the rescue packages (EFSM, ESM, EFSF) or other sources, or are in serious difficulties in regard to their financial stability under enhanced surveillance. If a member state requests financial aid from another member state, third countries, of the rescue packages or the IMF, then it must prepare the macroeconomic adjustment programme according to Article 7, paragraph 1, in agreement with the European Commission. The adjustment programme must then be approved by the Council with a qualified majority (paragraph 2). If the financial aid comes from the rescue packages, this provision should probably assure that, in addition to the respective institution (such as the Board of Governors of the ESM, Article 13, paragraph 4 ESM Treaty), an organ of the European Union is also called on for approval. In the case of financial aid from non-EU states, the provision should probably try to limit the (economic) political influence of third countries. However, none of these competences and duties of the European Commission with regard to content can be recognised in Article 121 TFEU, which is used as the legal basis for the Regulation through Article 121, paragraph 6 in conjunction with Article 136. As already shown in section I, on the basis of Article 121, paragraph 6, only the ‘details of the procedure of economic coordination’ can be specified. Article 121 contains neither the competences in the Regulation regarding content (negotiation, decision, surveillance of the adjustment programme), nor an empowering of the European Commission and the Council for a binding 119   C Calliess and C Schoenfleisch, ‘Auf dem Weg in die europäische “Fiskalunion?”’ (2012) 67(10) Juristenzeitung 477. 120   Regulation (EU) 472/2013 of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability.



A New Economic Governance through Secondary Legislation?  51

legal act (Article 288 TFEU), but instead allows only non-binding recommendations. The path to authoritarian constitutionalism seems to have been established as the Six-pack took effect and will be pursued anew towards a ‘juridification’ of a so far extra-legal ‘crisis policy’ of the European executive branch. The second Regulation121 of the Two-pack aims at surveillance and coordination of the budgetary policies of the eurozone member states (Article 1, paragraph 1). Thus, it complements the European Semester (see above) with further requirements and deadlines. The member states have until 15 October of every year to publish a budget plan for the following year and submit this to the European Commission (Article 4, paragraph 2 in conjunction with Article 6, paragraph 1). The corresponding budget should be determined by 31 December (Article 4, paragraph 3). After the member states have submitted their draft budget, the European Commission adopts – before 30 November – its opinion. If it notes a grave violation of the Stability and Growth Pact, the European Commission demands that the member state concerned presents a revision as soon as possible, but in any event within three weeks of the date of its opinion (Article 7, paragraph 2). In this way, the European Commission is granted substantial power in an area that was previously termed the ‘royal right of parliaments’.122 This rests not on decision making in a narrow sense, because the opinion is a non-binding ‘legal act’ of the Union (Article 288 TFEU), but the European Commission can in future exercise considerable discursive pressure if it ‘rejects’ the draft budget of a member state as insufficient. While most of the Regulations of the new economic governance – as far as their content is concerned – are at least loosely related to the legal basis they are built on, this is not discernible with regard to the Regulation on draft budgetary plans. The basis for competence chosen by the European Commission – Article 121 TFEU (in conjunction with Article 136 TFEU) – deals with the coordination of economic policy, which includes ‘employment policies, structural policies, innovation policies, as well as wage and income policies’,123 but not budgetary and fiscal policies, even if these are naturally closely intermeshed with economic policy.124 The only field in which EU competence exists in the area of budgetary policy – and this is very limited – is the procedure in case of an excessive deficit. Article 126, relevant to this topic, has however neither been used as a legal basis for the Regulation, nor does it provide for the competence of the European Commission to comment on draft budgets with position statements and, if need be, to reject them. 121   Regulation (EU) 473/2013 of 21 May 2013 on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area. 122   D Riedel, ‘Merkel verlangt Preis für Griechenlandrettung’ Handelsblatt (16 October 2012). 123   B Kempen, ‘Art 119, Rz 12’ in R Streinz, EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäische Union – Kommentar, 2nd edn (München, CH Beck, 2012). 124   Schulz-Steinen, above (n 55) 90 f.

52  Lukas Oberndorfer The obvious lack of effort made by the legal staff of the European Commission and the Council to embed the two Regulations of the Two-pack in European law shows that the authoritarian constitutionalism within the European ensemble of state apparatuses is, for the most part, indisputable. This is also shown by the fact that the legal means of the action for annulment, to which the member states and the institutions of the EU have privileged access, in contrast to natural or juristic persons (Article 263), has until now not been brought into play against a single legal action of the new economic governance. III  CONSTITUTIONALISM AS A CONTESTED, STRATEGIC PROJECT

The new economic governance, the Fiscal Treaty and the intended contracts for competitiveness without doubt display characteristic features of the new constitutionalism. Like the establishment of the EMU, these instruments are aimed at securing the neoliberal mode of integration ‘by means of political and legal mechanisms that can be altered only with difficulty’.125 Yet, new constitutionalism has become radicalised in several ways and is increasingly taking on an authoritarian form. In my concluding theses I shall try to illustrate and discuss these shifts and the fact that such developments represent a challenge to and, at the same time, an opportunity for the establishment of European democracy. 1. With his conceptual approach, Gill has drawn attention to the introduction of neoliberal economic (constitutional) law in a manner that is legally permissible and has been supported by the at least passive consensus of the subaltern.126 However, since the consensus in favour of the neoliberal mode of integration and the deepening of economic union is growing ever weaker, moves are being seen away from those sediments of law that are themselves the product of the new constitutionalism. In order to bypass a treaty revision and the requirements of consensus it would entail, instruments of neoliberal economic policy are being unlawfully inserted into the ‘European Constitution’ or even – following the model of the fiscal Treaty – established with complete avoidance of European law. While up until the European crisis of hegemony, national compromise balances were circumvented and challenged by the shifting of policy fields into European law, now even the power relations condensed in the European legal form are becoming too tight for the radicalisation of the neoliberal project. Since – as became apparent after the elections in Greece in June 2012 – the hegemonic crisis of the European ensemble of state apparatuses has resulted in whole states threatening to break out of the neoliberal consensus, it 125  S Gill, ‘Theoretische Grundlagen einer neo.gramscianischen Analyse der europäischen Intergration’ in H-J Bieling and H Steinhilber (eds), Die Konfiguration Europas. Dimensionen einer kritischen Integrationstheorie (Münster, Westfälisches Dampfboot, 2000) 44. 126   Drawing on Gramsci, critical theory uses ‘subaltern’ to denote groups that are subordinated by societal power relations (Latin: subalternus).



A New Economic Governance through Secondary Legislation?  53

is to be expected that the deepening of the EMU will be pursued for the time being using the methods of authoritarian constitutionalism. After all, each member state has the power to veto any ‘revision of the Constitution’ under the ordinary revision procedure. 2. The new constitutionalism intended to make economic policy more independent of the necessity of subaltern agreement. However, the open resistance to the radicalisation of the neoliberal mode of integration is now to be broken by an almost complete decoupling of the European ensemble of state apparatuses from the requirements of consensus. A return to the new constitutionalism will only be made once the deepening of the EMU has been widely completed by authoritarian constitutionalism. This is suggested, for example, by the fact that the European Commission merely aspires to a treaty revision that would create ‘a means of imposing budgetary and economic decisions on its members’ over the medium to long term.127 In view of the instruments that have been or are about to be put in place by authoritarian constitutionalism, which are tantamount to a de facto sidelining of Europe’s national parliaments, the actors would be able to live with the failure of constitutional steps to strip the legislative of its powers using the methods of the new constitutionalism. 3. Authoritarian constitutionalism is associated with increasing encroachments on the procedures of formal democracy and the rule of law in the nation states. Contrary to national populist contentions, this is not directed at individual states. Rather, such encroachments are intended to place the European ensemble of state apparatuses, with its neoliberal configuration, of which the national executives are part, in a position to chip away at the social rights that are still anchored in the national legal systems. This is another common denominator of the Fiscal Treaty, the new economic governance and the contracts for competitiveness: they especially weaken those terrains on which the subaltern are still able to assert their interests comparatively easily (in particular national parliaments). At the same time, there has as yet been no enhancement of the European Parliament’s status and power. The central axis of conflict in authoritarian constitutionalism is therefore not the European Union versus the nation state, but the European ensemble of state apparatuses versus (representative) democracy. 4. The abovementioned upgrading of the executive must be further differentiated. No general strengthening of the executive is occurring. Instead, it is especially those state apparatuses whose configuration is particularly neoliberal and masculinist that are gaining in status and power: the national finance ministries represented on the ECOFIN Council and the European Commission’s Directorate General for Economic and Financial Affairs (DG ECFIN).128 5. Gill argues that the new constitutionalism sets up a governmental surveillance system of state economic policy that corresponds to Foucault’s concept of   COM (2012) 777, 31.   E Klatzer and C Schlager, ‘Genderdimensionen der neuen EU Economic Governance’ (2012) 3 Kurswechsel 23. 127 128

54  Lukas Oberndorfer control by ‘surveillance and normalisation’.129 Even though no direct inter­ vention takes place, economic policies are being monitored and thus subject to neoliberal ‘self-government’.130 The crisis of hegemony is leading to a shift in this area, too. With economic governance, repressive measures have been introduced into EU economic policy and both the Fiscal Treaty and the new economic governance force those member states which are affected by unequal development and deficits to presentation and approval of structural reforms. Because the neoliberal hegemony has become fragile, governmentality in the field of economy is no longer sufficient for the necessary control. In Foucault’s terms, authoritarian constitutionalism often involves a retardation, which leads to a system of ‘surveillance and punishment’131 in the area of European economic policy. 6. While the new constitutionalism left basic and fundamental human rights for the most part untouched, at least in their formal dimension, its authoritarian intensification is aimed especially at breaking through at that point where defence of social rights is guaranteed. By establishing austerity and competitiveness as the new basic norms, authoritarian constitutionalism reclassifies basic and fundamental human rights, such as the right to collective bargaining (Article 28 of the EU Charter of Fundamental Rights), and legitimises their elimination. European interventionism, brought forth by authoritarian constitutionalism in the area of wage policy, therefore aims not coincidentally at those institutions and apparatuses (collective agreement systems, labour rights and unions) that are at least objectively capable of protecting the interests of the subaltern and/or effectively representing them. 7. However, it is certainly open whether the authoritarian turn will succeed, or the new constitutionalism could actually be disrupted by the struggles for ‘real democracy’ in Europe. The demand raised by these movements for an assembly that would found Europe anew could be a project that paves the way to a form of progressive constitutionalism,132 one that would give the people of Europe the opportunity to argue about alternatives and shape their common future. In any event, the expansion of repressive techniques of rule and their constitutionalisation must not be understood as purely strengthening the neoliberal societal formation. Even though it has probably never been more dominant than it is today, the loss of its leading, hegemonial moments, is making it become brittle and ossified. Stephen Gill’s thesis that the new constitutionalism is much more a strategic project than a concluded historical process, which implies its existence is contingent and disputed133, therefore remains valid as far as its authoritarian further development is concerned as well. 129  Foucault, Security, Territory, Population (above (n 65); Foucault, The Birth of Biopolitics above (n 65). 130   Gill, ‘European Governance and New Constitutionalism’, above (n 24) 13. 131  Foucault, Discipline and Punish – The Birth of the Prison, above (n 67). 132   Marterbauer and Oberndorfer, above (n 47). 133   S Gill, ‘Inequality and the Clash of Globalizations’ (2002) International Studies Review 47, 47.

3 Competencies of the Troika:1 Legal Limitations of the Institutions of the European Union ANDREAS FISCHER-LESCANO

INTRODUCTION

S

INCE THE BEGINNING of the crisis in the financial markets, some EU member states, in collaboration with the ‘Troika’ composed of the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF), have been pursuing a strict retrenchment or austerity policy. With the European Financial Stabilisation Mechanism (EFSM), the European Financial Stability Facility and the Treaty establishing the European Stability Mechanism (ESM Treaty), the policy has rapidly developed instruments through which the countries concerned have instituted and implemented austerity measures and structural reforms on the basis of ‘Memoranda of Understanding’ (MoUs). The MoUs contained detailed timetables for austerity measures and structural reforms, to which the countries had to adhere in order to receive the relevant credit tranches. The MoUs were negotiated by the Troika. According to Article 13(4) of the ESM Treaty, for instance, the European Commission negotiates the MoUs in liaison with the ECB and the IMF, establishes the funding conditions and signs the MoUs. The Board of Governors then makes the MoUs the basis for financial assistance payments under the ESM. The legal basis for the action by the European institutions, the ECB and the European Commission, is debatable. In that context, it first has to be considered (section I below) whether European law is applicable to the financial crisis emergency at all. Section II answers the question of whether the institutions of the Union are bound by Union fundamental rights in signing the MoUs and which fundamental and human rights, if any, are affected by the MoUs. The most 1   The full report conducted at the request of the AK Wien, the ETUC and the ETUI will be available on the ETUI website. The views and opinions expressed in this chapter are those of the author.

56  Andreas Fischer-Lescano important codifications of human rights for the examination are the Charter of Fundamental Rights of the European Union (CFR), which is binding under Article 6 of the Treaty on European Union (TEU), the European Convention on Human Rights (ECHR) and Protocol 1 to the Convention (Protocol 1 ECHR) in the version of Protocols 11 and 14,2 the European Social Charter of 1961 (ESC),3 the Revised European Social Charter of 1996 (RESC),4 the International Covenant on Civil and Political Rights (UN Civil Covenant),5 the International Covenant on Economic, Social and Cultural Rights (UN Social Covenant)6 and the UN Convention on the Rights of Persons with Disabilities (UN Disability Convention).7 Finally, the examination needs to include the core labour standards of the International Labour Organization (ILO), as set out in eight Conventions: the Freedom of Association and Protection of the Right to Organise Convention (1948); the Right to Organise and Collective Bargaining Convention (1949); the Forced Labour Convention (1930); the Abolition of Forced Labour Convention (1957); the Equal Remuneration Convention (1951); the Discrimination (Employment and Occupation) Convention (1958); the Minimum Age Convention (1973); and the Worst Forms of Child Labour Convention (1999), together with the operative content of those Conventions in the ILO Declaration on Fundamental Principles and Rights at Work summarising the Conventions.8 Finally, it has to be considered (section III) whether the encroachment on those fundamental rights by the MoUs is justified. I  LAW, POLICY AND THE ECONOMY IN THE CRISIS

Two arguments are put forward in particular for the view that Union law cannot set any limits on financial policy at European level: (1) supporters of the state of emergency view contend that the law should generally not play a part; and (2) advocates of national primacy maintain that, in the crisis, sovereign nation states should organise the primary framework of obligations. With the claim that the economic and financial crisis has created a state of emergency, a suspension of law is sometimes called for in the crisis. Insofar as the law stands in the way of effective crisis management, it should not be involved. An ‘emergency mentality’ has developed in the crisis policy.9 Austerity policy has, it is argued, led to a breakdown of the rule of law at European

  Protocol 14: ETS No 194; Protocol 11: ETS No 155.   ETS No 35. 4   ETS No 163. 5   UNTS 999, 171. 6   UNTS 993, 3. 7   UNTS 2515, p. 3. 8   ILO Conventions 87, 98, 29, 105, 100, 111, 138 and 182. The ILO adopted its Declaration on Fundamental Principles and Rights at Work at its 86th Session in Geneva on 18 June 1998. 9   For a critical view, see F Rödl, ‘EU im Notstandsmodus’ (2012) 5 Blätter 5 ff. 2 3



Competencies of the Troika  57

level.10 While Ernst Fraenkel fiercely criticised the juxtaposition and interconnection of the prerogative and the normative system in National Socialist ‘law’ as a ‘dual state’11 and Franz Neumann, in his structural analysis of National Socialism, Behemoth, pluralistically radicalised that criticism by showing that in the prerogative state the rule of law as such collapsed into a mixture of different power complexes and actors,12 current analyses in the Carl Schmitt tradition seek to revive the idea of primacy of the prerogative system not bound by law as against the normative system.13 According to that school of thought, there is no longer any independent law. The law becomes an instrument of European governance – of political executives, global economic players and strong interest groups, which, in the state of emergency, organise what is necessary from nothing. That deprives Europe, as a community based on the rule of law, of its raison d’être: The President of the European Commission would no longer have a mandate, Heads of State, Ministers, Members of Parliament could no longer take binding action on our behalf, since their mandate is a legal one. The loan agreement would no longer be binding; we would be released from all our debts. But the price would be too high. Internal peace would be jeopardised. The economy would lose its foundations in the binding Treaty.14

Therefore the European legal system cannot accept a state of emergency. Neither can it allow a system of legal competencies to be supplanted by practical political considerations. When an authority takes decisions independently of the law, there is no law.15 As long as the European Treaties are in force, the Charter of Fundamental Rights applies and the regional and international Conventions on Human Rights are binding, the rule of law cannot be suspended by political and economic decision-makers. Crisis management measures are not admissible irrespective of the normal legal system, but only when they are justified within that system. The second objection sometimes made to Union law control of the austerity measures is statist provenance. This holds that crisis policy has led to the restoration of nation states. The interests of nation states’ primary law systems should take precedence over European law. The European institutions should be involved as little as possible in the social arguments provoked by the crisis. The   R Vaubel, ‘The Breakdown of the Rule of Law at the EU Level’ Working Paper (4/2013).   E Fraenkel, Der Doppelstaat. Recht und Justiz im Dritten Reich (Frankfurt, Fischer, 1974). 12   FL Neumann, Behemoth. Struktur und Praxis des Nationalsozialismus 1933-1944 (Frankfurt, Fischer, 1984); see also essays in O Kirchheimer, Von der Weimarer Republik zum Faschismus: Die Auflösung der demokratischen Rechtsordnung (Frankfurt, Suhrkamp, 1976). 13   M Barbato, ‘Integration als Revolution: Souveränität und Legitimität der EU im Ausnahmezustand der Eurokrise’ (2013) 6 Zeitschrift für Außen- und Sicherheitspolitik 249 ff; for a critical view of the Schmitt revival, see L Oberndorfer, ‘Die Renaissance des autoritären Liberalismus? Carl Schmitt und der deutsche Neoliberalismus’ (2012) 42 PROKLA 413 ff. 14   P Kirchhof, ‘Stabilität von Recht und Geldwert in der Europäischen Union’ (2013) (1–2) Neue Juristische Wochenschrift 1 ff, 1. 15   N Luhmann, Das Recht der Gesellschaft (Frankfurt, Suhrkamp, 1995) 414. 10 11

58  Andreas Fischer-Lescano European Commission, the European Central Bank (ECB), the European Parliament and the Court of Justice of the European Union (CJEU) should give the national ‘masters of the Treaties’ a free hand. According to Martin Nettesheim: ‘Crisis periods are periods in which national sovereignty comes to the fore . . . It would be almost negligent for supporters of integration to oppose the involvement of states to uphold integration for their own institutional interests’.16 That sovereign interpretation advocates the suspension of Union law control mechanisms on the grounds of national sovereignty. However, in view of the dual structure of austerity policy, that is inadequate. The ESM Treaty provides a mechanism through which some member states, with the involvement of the European Commission and the ECB, seriously undermine the sovereignty of other member states on a long-term basis. The ESM Treaty creates a hybrid of intergovernmental and Union governance, which massively curtails the supposed sovereignty of the member states affected by the MoUs. If, in this hybrid regulatory structure, the control functions of the European Parliament and the CJEU are excluded but the regulatory functions of the European Commission and the ECB are included, that creates a ‘façade of democracy’ in which the European Parliament and the CJEU exist but have no function.17 Instead it is the government representatives on the ESM Board of Governors who determine the fate of supposedly sovereign European nation states and their populations after the MoU has been negotiated by the European Commission and the ECB. The perpetuation of that façade of democracy creates a risk that in future unlawful and undemocratic measures by the EU institutions will no longer be corrected by the democratic and legitimate institutions of the European Union but through nation states. In future, the European Union and not just the euro will be exposed to that risk.18 Institutionally, such a release of social and national centrifugal forces by Europe’s executives cannot be in the interests of the Union’s institutions. The visionary European project is based on the ambitious idea of achieving peaceful integration for the benefit of citizens, transcending nation states. Without a Europe that respects the social and democratic achievements of nation states and is organised to take account of those achievements, it will be impossible to develop a transnational strategy that points the way for the future and satisfies the need for justice.19 On that point, Jürgen Habermas has rightly 16   M Nettesheim, ‘Europarechtskonformität des Europäischen Stabilitätsmechanismus’ (2013) 66 Neue Juristische Wochenschrift 14 ff, 16. 17   J Habermas, P Bofinger and J Nida-Rümelin, ‘Einspruch gegen die Fassadendemokratie’ FAZ (3 August 2012). 18  W Streeck, Gekaufte Zeit. Die vertagte Krise des demokratischen Kapitalismus (Berlin, Suhrkamp, 2013). 19   A Fischer-Lescano and K Möller, ‘Europäische Grundrechte und die Konstitutionalisierung sozialer Demokratie in Europa’ in A Fischer-Lescano, F Rödl and C Schmid (eds), Europäische Gesellschaftsverfassung. Konstitutionalisierung sozialer Demokratie in Europa, Schriftenreihe des ZERP (Baden-Baden, Nomos, 2009) 313 ff.



Competencies of the Troika  59

emphasised that the scandal of increasing child poverty, widening gaps in income and property distribution and a growing low‑wage sector is to be seen as part of the problem ‘which we can only solve if we reverse the global trend of markets over which there is no political control’.20 The emphasis on national sovereignty in the crisis is no help in solving these international problems. The pressure on nation states is growing. Transnational political action is impossible without a strong Europe, independent of the partial interests of its member states and acting instead in the interests of its people.21 It is therefore in the interests of the European Union institutions to respect the diversity of European social and employment systems, to improve standards of social protection and become an advocate for the excluded. The EU institutions should develop a feeling for the social circumstances of citizens of the Union. At the moment they have no insight into the issues affecting the lives of European workers, pensioners, small savers and students, who are in the same situation. Instead of becoming involved in bringing national systems into competition and playing them off against each other, the European institutions should try to improve the lives of the Union’s citizens. The European crisis is not a conflict between nation states. The national context of the lines of conflict, setting national economies against each other, the workers of southern Europe against the workers of northern Europe,22 distorts social issues into inter­ national issues.23 The rapidly growing loss of respect for the European institutions as a result of the unsuccessful austerity policy, the apparently unbridgeable gap between the Europe of administrative machinery and the Europe of citizens, can only be overcome if the European institutions also recognise that social problems are part of their responsibility. Without social stability there can be no economic and financial stability in the European Union. This nexus of social and economic stability must be reflected in the way the European institutions organise their responsibilities. The European institutions have an obligation not only to states, as ‘masters of the Treaties’, but also to the citizens of Europe to obey the law and respect democratic principles. If the institutions feel permanently unable to deal with social issues and continue to participate in an inhumane crisis policy without social solidarity,24 the public will increasingly reject the idea of Europe.   J Habermas, Ach Europa (Frankfurt am Main, Suhrkamp, 2008) 127.   C Franzius, ‘Recht und Politik in der transnationalen Konstellation’ (2013) 138 Archiv des Völkerrechts 204 ff. 22   In the words of Angela Merkel: ‘The point also is that people in countries like Greece, Spain and Portugal cannot retire earlier than in Germany, everyone must put in more or less the same effort. That is important . . . We cannot have a single currency and some people get a lot of leave and others very little. In the long run that can’t work’ (quoted in J Aumüller and J Cáceres, ‘Ausflug ins Populistische’ Süddeutsche Zeitung (18 May 2011). 23  Also argued by J Habermas, ‘Demokratie oder Kapitalismus’ in J Habermas, Im Sog der Technokratie (Berlin, Suhrkamp, 2013) 138 ff. 24  See the strong criticism in C Joerges and F Rödl, ‘Das soziale Defizit des Europäischen Integrationsprojekts’ (2008) 2 Kritische Justiz 149 ff. 20 21

60  Andreas Fischer-Lescano It is the European Commission and the ECB which, in the legal form of the ESM but ultimately on behalf of Europe, lay down the conditions that are driving millions of Europeans to despair. Although the ESM Treaty was concluded by nation states, the European Commission and the ECB, as institutions of the Union, have undertaken in the Treaty to establish and monitor the austerity plan. So far that has been done in a way in which the framework of responsibility for democratic and human rights is not clarified. However, the European institutions should not allow themselves to become a political football for national governments in the crisis. The governments of the EU member states should not dictate the course of austerity policy and disregard the European Parliament and the mandatory rules of Union law on human rights and competencies. Those mistakes cannot be corrected at national level alone. Structurally, the constitutional containment of the transnational austerity policy places too great a burden on the national constitutional courts and national parliaments.25 Robert Uerpmann-Witzack was justified in his criticism that the national parliaments in the ESM were unable to exercise effective control and for that reason control by the European Parliament was needed. ‘Real influence could only be exercised by a European Parliament with appropriate co-decision powers which meets other negotiating partners on an equal footing’.26 A social and democratic Europe will only be achieved if the European Parliament and the CJEU jointly take on the core task of imposing legal and democratic standards on the combined executives of Europe at European level. That is not merely a question of transforming evolutionary constitutional achievements into the transnational context; it is at the same time genuinely in the interests of the European institutions. If the citizens of the Union continue to turn away from Europe, to apply a quotation from Niklas Luhmann to the European crisis, the European Union might soon need a ‘huge Amnesty International’ itself. A European Union in which ‘individuals themselves no longer have any interest’27 will be eroded. II  TROIKA BOUND BY FUNDAMENTAL AND HUMAN RIGHTS

If, therefore, it is assumed that the Troika is also bound by law in the crisis, the first question which arises is this: what is the specific legal framework for the Troika or its members? The Troika as such is not an accountable subject in international law. As a channel for cooperation between international organisa25   Structurally they cannot devise any (social and democratic) alternatives in Europe but only normally on Europe. A symptomatic example is the German Federal Constitutional Court’s statist eternity clause in disputes on Europe; for a critical view see, for instance, D Halberstam and C Möllers, ‘The German Constitutional Court says “Ja zu Deutschland!”’ (2009) 10 German Law Journal 1241 ff. 26   R Uerpmann-Wittzack, ‘Völkerrecht als Ausweichordnung – am Beispiel der Euro-Rettung’ in A Hatje (ed), Die Einheit des Unionsrechts im Zeichen der Krise, Europarecht Beiheft 2/2013 (Baden-Baden, Nomos, 2013) 49 ff, 55. 27   Luhmann, above (n 15) 489.



Competencies of the Troika  61

tions (ESM, EU and IMF), it does not itself fulfil the conditions for an inter­ national organisation, as defined by the International Court of Justice (ICJ) in the Bernadotte Advisory Opinion.28 In fact, Troika measures are joint measures by different subjects of international law (the EU, the ESM and the IMF). In view of that complex structure, responsibility for the encroachment on human rights under the MoUs can lie with different international law subjects, which might be jointly liable: (1) the member state in respect of the implementation measures; (2) the member states represented on the ESM Board of Governors; (3) the ESM; (4) the IMF; (5) the nation states represented on the IMF Board of Governors; and (6) the EU itself, since EU institutions were involved in the negotiation of the MoUs with the European Commission and the ECB in accordance with Article 13 of the ESM Treaty, through a specific form of delegation of functions in which responsibility was not fully transferred. Fundamental and human rights obligations apply to all those actors. I shall focus below on the fundamental and human rights framework for measures by the European Commission and the ECB, which, as European Union institutions, are bound by the fundamental rights provisions contained in Union law. That is in accordance with Article 6 TEU. A  Binding Charter of Fundamental Rights The CFR referred to in Article 6(1) became legally binding through the Treaty of Lisbon. It sets out in detail the framework for binding fundamental rights under Union law. However, in a series of decisions on the financial crisis the CJEU has clearly exercised restraint and, as regards austerity measures, restricted the scope of the CFR, which according to the first sentence of Article 51(1) CFR applies to ‘the institutions, bodies, offices and agencies of the Union with due regard for the principle of subsidiarity and to the Member states only when they are implementing Union law’. For instance, in Pringle29 the CJEU ruled that, in view of the Treaty structure of the ESM Treaty, nation states which signed the ESM Treaty under inter­ national law outside the Union legal order were not in any case ‘implementing’ Union law. The ESM Treaty is deliberately operating outside the framework of Union law. In other cases too, the CJEU has ruled that the Charter is not applicable, citing Article 51 CFR.30 However, the issue of whether the institutions of the Union as part of the Troika are themselves bound by the CFR is structurally distinct from the issue of whether member states are bound in the implementation of MoUs which was decided in those preliminary ruling proceedings. Article 51 CFR provides that the institutions are bound by the CFR quite  ICJ, Bernadotte (Advisory Opinion) [1949] ICJ Rep 1 ff.   ECJ Case C-370/12 Pringle [2012], para 179 f. 30   Order in ECJ Case C-128/12 Sindicatos dos Bancarios [2013], para 9 f; Case C-434/11 Corpul National al Politistilor [2012], para 12 ff. 28

29

62  Andreas Fischer-Lescano irrespective of the specific context. Even ultra vires acts by the institutions should comply with the Charter.31 From the point of view of Union law, it is also immaterial whether, as regards the delegation of functions, the integration of the EU institutions into the ESM justifies not a change in the accountable object but joint liability, since the EU institutions, through their integration into the ESM, are not intended to carry out its tasks but to safeguard Union law. All those issues are irrelevant from the point of view of Union law, since that provides that the EU institutions are bound by the CFR, which is applicable even where there has been a delegation of functions. Advocate General Kokott also took that position in her view on Pringle, emphasising that ‘the European Commission remains, even when it acts within the framework of the ESM, an institution of the Union and as such is bound by the full extent of European Union law, including the Charter of Fundamental Rights’.32 That conclusion appears compelling. Fundamental and human rights obligations cannot be circumvented on the pretext of delegation of functions.33 Article 51 CFR applies to the EU institutions always and at all times. Action by the EU institutions is to be measured solely by the CFR. The CJEU has consistently held, with regard to the ESM, that the mechanism must operate in a way that will comply with European Union law.34 That also includes the fundamental and human rights that are binding on the EU institutions. For the EU institutions, that means that even when they are performing tasks under the ESM they are still bound by the fundamental and human rights provisions of Union law. B  Binding International Codifications of Human Rights The institutions of the European Union are also bound by other codifications of human rights. That applies first to the ECHR. It is true that the EU is not yet a formal member of the ECHR, even though Article 6 of the EU Treaty requires its accession and a draft accession agreement has now been drawn up.35 Since the Wachauf judgment the CJEU assumes, even without the EU being bound by international conventions, that measures which are incompatible with the fundamental rights recognized by the constitutions of those States may not find acceptance in the Community. International 31   C Barnard, ‘The Charter, the Court – and the Crisis’ Cambridge Legal Studies Research Paper Series 18 (2013), text before fn 52: ‘the EU institutions which are “borrowed” under both the ESM and TSCG, especially the European Commission and the ECB, must surely need to act in compliance with the Charter since the Charter is addressed to the EU institutions’. 32   View of Advocate General Kokott in Case C-370/12 Pringle [2012], para 176. 33   See also, to that effect, P-A van Malleghem, ‘Pringle: A Paradigm Shift in the European Union’s Monetary Constitution’ (2013) 14(1) German Law Journal 141 ff, 158 f. 34   ECJ Case C-370/12 Pringle [2012], para 69. 35   See Draft Accession Agreement: Council of Europe, Final Report to the CDDH (10 June 2013): 47+1(2013)008rev2.



Competencies of the Troika  63 treaties concerning the protection of human rights on which the Member states have collaborated or to which they have acceded can also supply guidelines to which regard should be had in the context of Community law.36

That is reflected in the emphasis on the importance of the ECHR in Article 6 of the EU Treaty and Article 52(3) of the Charter of Fundamental Rights. The standards set by the ECHR and the European Court of Human Rights (ECtHR) are the main criterion for the protection of fundamental and human rights in Union law.37 With the opening up of Union law, the ECHR is therefore a second essential fundamental rights criterion for action by the EU institutions. The European Commission and the ECB are also bound by the UN Civil Covenant. The EU is not formally a member of that either. However, the CJEU is also guided in its case law by human rights established by international conventions to which the EU has not formally acceded.38 The UN Civil Convention and also, for instance, the Convention on the Rights of the Child39 are therefore referred to repeatedly by the Court.40 The European Commission and the ECB also have human rights obligations derived from the UN Civil Covenant. For the protection of human rights, the EU institutions are also bound by the social human rights enshrined in the UN Social Covenant and in the Revised European Social Charter (RESC).41 It is true that the EU is not formally bound by the UN Social Covenant or the ESC or indeed the RESC. However, it is bound by Article 53 of the Charter of Fundamental Rights, according to which nothing in the Charter shall be interpreted as restricting or adversely affecting human rights and fundamental freedoms as recognised, in their respective fields of application, by Union law and international law and by international agreements to which the Union, the Community or all the member states are party. Since not all the member states have ratified the 1996 RESC,42 it is debatable whether the level of protection clause in Article 53 of the Charter is applicable, especially since, according to the wording, it will only apply when ‘all Member states’ have acceded to the Convention. The position is the same with the 1961 ESC. Here, too, not all EU member states have acceded to the Convention.43 However, in the past the European Court of Justice (ECJ) was satisfied that the comparative law in Article 53 should apply if all the member states were party   ECJ Case 5/88 Wachauf v Bundesanstalt für Ernährung und Forstwirtschaft [1989], para 17.   ECJ Case C-368/95 Familiapress [1997], para 26. 38   ECJ Case C-540/03 Parliament v Council [2006], para 35. 39   ibid, para 37. 40   ECJ Cases C-540/03 Parliament v Council [2006], para 37; C-374/87 Orkem v Commission [1989], para 31; C‑297/88 and C‑197/89 Dzodzi [1990], para 68; C-249/96 Grant [1998], para 44. 41   For an overview see, E Eichenhofer, Soziale Menschenrechte im Völker-, europäischen und deutschen Recht (Tübingen, Mohr Siebeck, 2012); M Krennerich, Soziale Menschenrechte: Zwischen Recht und Politik (Schwalbach, Wochenschau-Verlag, 2013). 42   The Federal Republic of Germany has signed the Convention but not ratified it. Croatia, the Czech Republic, Denmark, Greece, Latvia, Poland, Spain and the United Kingdom are also not included. 43   Bulgaria, Estonia, Romania and Slovenia are not included. 36 37

64  Andreas Fischer-Lescano to the signature of the international agreement.44 Whatever view is taken of that as regards the RESC, the situation is clear as regards the UN Social Covenant, to which all the EU member states have acceded. Article 53 CFR establishes a favourability principle which chiefly implies that the Charter does not affect the level of the obligations laid down in particular in international treaties.45 The decisions by the supervisory institutions for the UN Social Covenant and the RESC can provide important points of reference for the definition of rights under the CFR. Therefore, the three codifications of social human rights and the legal opinions by the supervisory bodies in individual recommendations and General Comments at least provide guidance for the interpretation of the formally binding fundamental and human rights under Union law. That is the reflection in Union law of the international obligation on the EU to respect social human rights. For instance, in its General Comment on social secur­ ity the UN Social Committee assumes a direct obligation on international organisations (IOs).46 This basic structure for the involvement of IOs in the obligation to protect human rights has now also been recognised in the Maastricht Principles on Exterritorial Obligations of States in the area of Economic, Social and Cultural Rights, which were laid down in a joint declaration by recognised human rights experts.47 Thus, the Maastricht Principles, like the UN Social Committee, assume a structure of binding human rights imposing an obligation not only on the signatory states when acting in IOs, but also on the IOs themselves.48 This indirect tie of obligation, which is enshrined in international law and in the ‘level of protection’ clause in Article 53 CFR, is complemented by a genuine Union law binding structure. For instance, Article 21(1) TEU provides ‘indirect guidance’49 and the first paragraph of Article 151 TFEU lays down a programmatic obligation,50 which indicates how Union law is to be interpreted in the light of the stated aims. However, programmatic clauses are not the only indication of the significance of social human rights codifications in Union law. According to Article 6(3) of the EU Treaty, fundamental rights in the Union are based not just on the ECHR and the CFR, but also on general legal principles. 44  T von Danwitz, ‘Art 53, para 17’ in PJ Tettinger and K Stern (eds), Kölner Gemeinschaftskommentar zur Europäischen Grundrechte-Charta (München, CH Beck, 2006). 45   T Kingreen, ‘Art 53 CFR, para 4’ in C Calliess and M Ruffert (eds), EUV/TFEU – Kommentar, 4th edn (München, CH Beck, 2011). 46   CESCR, General Comment No 19 (2008), UN Doc E/C.12/GC/19, para 38; see also CESCR, General Comment No 15 (2002), UN Doc E/C.12/2002/11, para 38. 47   Maastricht Principles on Exterritorial Obligations of States in the Area of Economic, Social and Cultural Rights, 28 November 2011, paras 15 and 16; see also RT Hoffmann and M Krajewski, ‘Staatsschuldenkrise im Euro-Raum und die Austeritätsprogramme von IWF und EU’ (2012) 45 Kritische Justiz 2, 11. 48  Explanation by C Janik, Die Bindung internationaler Organisationen an internationale Menschenrechtsstandards (Tübingen, Mohr Siebeck, 2012) 146 ff. 49   M Krajewski, ‘Human Rights and Austerity Programmes’ in T Cottier et al (eds), The Rule of Law in Monetary Affairs (Cambridge, Cambridge University Press, forthcoming 2014) 8. 50   See U Khaliq, ‘EU and the European Social Charter: Never the Twain shall meet?’ (2013–14) 15 Cambridge Yearbook of European Legal Studies 169 ff.



Competencies of the Troika  65

As Article 6(3) of the EU Treaty explicitly indicates, the institutions of the Union are bound by the general principles even after the entry into force of the CFR. The general principles are also a legal source of human rights protection in Union law, in addition to the other sources of human rights.51 The CJEU consistently takes account of the international codifications of human rights when applying the general principles in its settled case law. For instance, it has invoked the UN Convention on the Rights of the Child and also the UN Civil Covenant.52 Thus, the CJEU not only develops the general legal principles with regard to the constitutional traditions of the member states, but also includes the human rights conventions to which the member states have acceded.53 It is consistently argued in the field of social human rights which is relevant in this case that the binding nature of social human rights is derived in the form of general principles from the fundamental rights obligation on the EU under Article 6(3) TEU.54 The general principles include social human rights as well as liberal human rights.55 Hence the Court also cites the ESC in particular in its case law,56 just as the ECtHR expressly refers to the RESC in Demir and Baykara v Turkey in relation to the interpretation of Articles 12 and 28 ECHR.57 Social human rights, as set out in the RESC and the UN Social Covenant, are therefore binding on the institutions of the Union as general principles.58 C  Binding ILO Conventions The ILO Conventions are also relevant to the institutions of the Union. Almost 190 ILO Conventions are now in existence. Unlike its member states, the EU is not a member of the ILO. It merely has observer status, but is not involved in legislative proceedings and the ILO agreements do not apply directly to the EU. Nonetheless, EU law also contains a number of references to ILO agreements. For instance, Article 151 TFEU refers to the 1989 Community Charter of the Fundamental Social Rights of Workers,59 the Preamble of which states that ‘inspiration should be drawn from the Conventions of the International Labour Organization and from the European Social Charter of the Council of Europe’. 51  HD Jarass, ‘Introduction’ in Charta der Grundrechte der Europäischen Union, 2nd edn (München, CH Beck, 2013) para 30. 52   ECJ Case C-540/03 European Parliament v Council [2006], para 37. 53   Settled case law, see for instance Case 4/73 Nold v Commission [1974], para 13. 54  European Parliament, ‘Fundamental Social Rights in Europe’ Working Paper EP 168.629 (1999), available at: www.europarl.europa.eu/workingpapers/soci/pdf/104_en.pdf. 55   F Coomans, ‘Application of the International Covenant on Economic, Social and Cultural Rights in the Framework of International Organisations’ (2007) 11 Max Planck Yearbook of United Nations Law 359 ff, 376. 56   In particular ECJ Case 149/77 Defrenne [1978]. 57  ECtHR Demir and Baykara v Turkey, App no 34503/97 (12 November 2008) § 140 ff. 58   K Heikki Tuori, ‘The European Financial Crisis: Constitutional Aspects and Implications’ EUI Working Papers LAW 28/2012, 49. 59   COM (1989) 248 final.

66  Andreas Fischer-Lescano Like social human rights, the ILO Conventions, which have been signed by all the member states, are at least included in the general legal principles binding on the EU institutions under Article 6(3) TEU.60 In addition, the fundamental commitment of the EU to ILO law is also indicated in the ECJ opinion61 on ILO Convention 170.62 By analogy with the structure of obligations relating to social human rights, with the ILO standards there is also a binding commitment through the CFR. That is derived, first, from Article 52(3) CFR, which ensures consistency between the Charter and the ECHR. Since the ECHR incorporates the ILO rules for the interpretation of the ECHR rules,63 within the scope of the ECHR an indirect commitment to the ILO rules is also derived through the corresponding rules of the ECHR.64 That also applies to the EU institutions, which are bound by the level of protection in the ILO Conventions in the scope of protection of the ECHR rights, since Article 52(3) CFR provides for that as a minimum guarantee. In the field of industrial dispute law, for instance, the Union is bound by ILO Convention 87 on Articles 28 and 52(3) CFR in conjunction with 11 ECHR.65 Finally, according to the structure a binding effect also follows from Article 53 CFR, as with the above human rights. The ILO Conventions are to be taken into account through Article 53 CFR in the interpretation of the rights guaranteed by the CFR.66 D  Binding Customary International Law The institutions of the EU are also bound by the human rights provisions of customary international law. The CJEU has ruled in a whole series of judgments that the EU institutions must respect general international law.67 In the light of that case law, the human rights which are relevant in customary international law are also binding on the EU institutions. That must apply at least to the norms enshrined in the International Bill of Rights set out in the Universal   J Heuschmid, Mitentscheidung durch Arbeitnehmer (Baden-Baden, Nomos, 2009) 184 ff.   ECJ Opinion 2/91, ILO Convention No 170 (19 March 1993).  J Kokott, ‘Art 351, para 30’ in R Streinz (ed), EUV/TFEU EUV/AEUV. Vertrag über die Europäische Union und über die Arbeitsweise der Europäischen Union – Kommentar, 2nd edn (München, CH Beck, 2012) (‘it is obviously intended that the Union should be bound’); for an assessment of Union case law, see J Heuschmid and T Klebe, ‘Die ILO-Normen in der Rechtsprechung der EU’ in W Däubler and R Zimmer (eds), Arbeitsvölkerrecht. FS für Klaus Lörcher (Baden-Baden, Nomos, 2013) 336 ff. 63  ECtHR Demir and Baykara v Turkey (12 November 2008) §§ 147 and 166; Enerji Yapi-Yol Se v Turkey, App no 68959/01 (21 April 2009) § 40 f. 64   A Nußberger, ‘Auswirkungen der Rechtsprechung des EGMR auf das deutsche Arbeitsrecht’ (2012) Recht der Arbeit 270 ff. 65   K Lörcher, ‘Internationale Grundlagen des Streikrechts’ in W Däubler (ed), Arbeitskampfrecht, 3rd edn (Baden-Baden, Nomos, 2011) § 10, para 65 ff. 66   Heuschmid and Klebe, above (n 62) 351; on that point see also A Trebilcock, ‘An ILO viewpoint on EU development in relation to fundamental labour principles’ (2013) 6 Europäische Zeitschrift für Arbeitsrecht 178 ff. 67   Basic ECJ Case C-286/90 Poulsen [1992], para 9; expressly referring to that, ECJ joined Cases C-402/05 P and C-415/05 P Kadi [2008], para 291. 60 61 62



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Declaration of Human Rights, the International Covenant on Civil and Political Rights (UN Civil Covenant) and the International Covenant on Economic, Cultural and Social Rights (UN Social Covenant) of 16 December 1966, which have customary international law status. That core set of rules under customary international law imposes an obligation not only on states but also, as indicated in the Preamble to the Universal Declaration of Human Rights, on ‘every individual and every organ of society’. As customary international law, the rules in question are also binding on the institutions of the Union. On the basis of the structural characteristics of human rights rules, which are distinct from the international economic law system in their individual orientation, they are generally assumed to establish directly subjective rights.68 Even if they do not extend the competencies of the EU, the human rights obligations of the EU based on customary international law go ‘further than current EU law understandings of the EU’s human rights obligations’.69 The customary law obligation of the international organisations relates to a core set of social human rights rules.70 The EU institutions are bound by those customary law human rights.71 The ILO core labour standards are also part of customary international law.72 Even if it is not accepted that the EU has its own obligation as an IO to safeguard those rights, the EU institutions still have a duty not to repudiate national efforts to safeguard them. III  ENCROACHMENT ON FUNDAMENTAL RIGHTS BY THE MoUs

The question, however, is whether the institutions of the Union are already encroaching on the above fundamental and human rights through their cooperation in the MoUs and hence whether the MoUs are already encroaching on those rights in a legally relevant manner. The structure of the MoUs as an agreement supporting the grant of credit lines is derived from a common practice in international law, particularly with credit granted by the IMF and the World Bank. In the past those institutions, too, imposed certain conditions on lending, for which they obtained assurances from the states concerned in a letter of intent. The purpose of a letter of intent or MoU is always to impose certain macroeconomic principles on the grant of the loan. The precise classification of such agreements in (international) law has always remained controversial. 68   On the distinction, see also A von Bogdandy, ‘Rechtsgleichheit, Rechtssicherheit und Subsidiarität im transnationalen Wirtschaftsrecht’ (2001) Europäische Zeitschrift für Wirtschaftsrecht 363. 69   T Ahmed and I de Jesús Butler, ‘The European Union and Human Rights: An International Law Perspective’ (2006) 17 European Journal of International Law 777 ff, 801. 70   Krajewski, above (n 49). 71   UN Office of the High Commissioner for Human Rights (OHCHR), The European Union and International Human Rights Law (2010) 22 ff. 72   Lörcher, above (n 65) § 10, para 45, with further citations; P Alston, ‘Core Labour Standards and the Transformation of the International Labour Rights Regime’ (2004) 15 European Journal of International Law 457 ff, 493.

68  Andreas Fischer-Lescano A  Lawfulness of the MoUs As regards the question of whether the MoUs in this case can themselves prejudice human rights, the main issue is whether they do in fact constitute an encroachment. First, it might be problematic that in many cases the MoUs allow the member states a margin of discretion in their implementation.73 And even if the MoUs do not allow a margin of discretion but lay down specific measures, the regulatory structure of the MoUs could preclude their being considered to prejudice human rights if they did not impose legal obligations. The CJEU regularly classes even indirect and de facto effects of legal acts as encroachment on fundamental rights if they are intended to encroach on fundamental rights or at any rate have the effect of causing encroachment by third parties.74 In order to be covered by that case law, which has been developed authoritatively with regard to encroachment by directives allowing a margin of discretion in their implementation, MoUs should be regarded as legal acts. The fact that these are treaties under international law would be taken into account. According to Article 216 TFEU, the EU may conclude international agreements within the meaning of Article 38(1) of the ICJ Statute. Whether an international document constitutes a treaty under international law depends on the circumstances. Since treaties may be implied, their treaty status is not dependent on their ratification.75 In fact, subjects of international law are free to decide how they wish to express their consent to be bound by a treaty.76 That is indicated by Article 11 of the Vienna Convention on the Law of Treaties (VCLT). The deciding factors are the circumstances and the content of the document in question. Its title (for example, treaty, MoU, convention) may be an indication for or against its classification as a treaty, but the crucial factor is whether the content of the agreement clearly indicates that the international law subjects concerned consent to be legally bound by it. In practice, the choice of the MoU form is indeed intended to preclude binding effects under international law,77 although at the same time the possibility is recognised that international law behaviour can also have an unintended legal effect. Some authors even go so far as to class all MoUs as international law treaties. That view is based on a decision by the ICJ in which an agreement not in traditional treaty form was nonetheless considered to be an international law treaty.78 On that basis, any agreement between international law subjects with   See Order in European General Court Case T-541/10 Adedi and others v Greece [2012], para 69 f.   ECJ Case C-200/96 Metronome [1998], para 30. 75  ICJ Maritime Delimitation and Territorial Questions between Qatar and Bahrain (Jurisdiction and Admissibility) [1994] ICJ Rep 112. 76  M Fitzmaurice, ‘Expression of Consent to be Bound by a Treaty as Developed in Certain Environmental Treaties’ in J Klabbers and R Lefeber (eds), Essays on the Law of Treaties. A Collection of Essays in Honour of Bert Vierdag (The Hague, Martinus Nijhoff, 1998) 59. 77   A Aust, Modern Treaty Law and Practice, 2nd edn (Cambridge, Cambridge University Press, 2007) 32 ff. 78  ICJ, Qatar v Bahrain (Judgment on Jurisdiction and Admissibility) (1994) ICJ Rep 112. 73

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Competencies of the Troika  69

any kind of legislative structure would be classed as a treaty if it set out expectations of behaviour.79 In that sense the Portuguese Constitutional Court, for instance, has emphasised the legally binding effect of the MoU.80 Even if it is not accepted that MoUs are contractually binding, in inter­ national law practice legal consequences must in any case be attached to MoUs, in which expectations of payment are linked to conditionality.81 The binding effect of the MoUs is then based on the principle of legitimate expectations.82 In that form, MoUs such as the Troika MoUs, which provide such com­ prehensive and detailed support for the terms and conditions of financial transactions, create confidence, set out reciprocal expectations of behaviour and are the basis for the resulting synallagmatic relationships. In the context of the ESM, the MoUs are negotiated by the European Commission in consultation with the ECB, in accordance with Article 13 of the ESM Treaty, and signed by the European Commission. They thereby create obligations and legally protected confidence. In that respect, in Pringle the CJEU held, with regard to Article 13(4) of the Treaty, that the function of the MoU was that its signature established ‘the conditions attached to any stability support’ and compliance with general Union law is guaranteed.83 The conditions were intended to impose a sound budgetary policy.84 It is true that at the same time the Court stresses that the ECB and the European Commission do not have ‘any power to make decisions of their own’ under the ESM Treaty.85 But that merely refers to the fact that the institutions of the Union have no decision‑making powers in this instance that are geared to the forms of action under Union law (Article 288 TFEU). Nonetheless, the MoUs are binding, since it is the European Commission that sets the binding conditions. Even the fact that under Article 13(4) of the ESM Treaty MoUs are subject to the consent of the Board of Governors does not mean that they are not legally binding, since in international law the legal obligation applies irrespective of the arrangements in the consent procedure within the organisation. For instance, Article 27(2) of the Vienna Convention on the Law of Treaties between States and International Organizations or between International Organizations,86 even if it is not yet in force, codifies the customary international law rule that the external obligation applies irrespective of internal procedural requirements. The MoU obligation in international law therefore arises from the fact that the 79   J Klabbers, The Concept of Treaty in International Law (The Hague, Kluwer Law International, 1996). 80   Tribunal Constitucional, Acórdão No 187/2013, Lei do Orçamento do Estado (5 April 2013) para 29. 81   Aust, above (n 77) 49 ff, 54. 82  ICJ, Cambodia v Thailand [1962] ICJ Rep 6 ff; C Möllers, ‘Transnationale Behördenkooperation’ (2005) 65 Zeitschrift für ausländisches öffentliches Recht und Völkerrecht 351 ff, 370. 83   ECJ Case C-370/12 Pringle [2012], paras 69 and 112. 84   W Weiß and M Haberkamm, ‘Der ESM vor dem EuGH’ (2013) 24 Europäische Zeitschrift für Wirtschaftsrecht 95 ff, 99. 85   (1990) II BGBl [Federal Law Gazette] 1430. 86  ibid.

70  Andreas Fischer-Lescano European Commission sets the conditions after negotiation with the Member states. The CJEU also takes that view. As the Court states in Pringle, ‘Further, the activities pursued by those two institutions within the ESM Treaty solely commit the ESM’.87 In other words, the institutions of the Union commit the ESM; they enter into legal commitments which differ in form from action under Union law but are legal acts. Signing the MoU produces binding effects with consequences in international law, which are precisely laid down in the relevant conditions and can give rise to reciprocal compensation claims. Hence if, as in the ESM context, MoUs as sui generis legal acts adversely affect fundamental rights when implemented by the nation states subject to the obligation in question, those are indirect and de facto consequences of legal acts held by the CJEU to be encroachments on fundamental rights. However MoUs, which are not to be classed as sui generis legal acts but merely recommendations or real acts, might also encroach on fundamental rights. In the past, the CJEU has consistently held that real acts are an encroachment on fundamental rights.88 That view is ultimately supported by a parallel with fundamental freedoms. The Court recognises in settled case law that ‘measures having equivalent effect’ can lead to encroachments on fundamental freedoms that need to be justified.89 On that basis, even indirect and de facto actual or potential encroachments on trade flows constitute an encroachment on fundamental freedoms. That is also indicated by the case law of the ECtHR, which has ruled that even letters not of a legislative nature constitute encroachments.90 Even for non-legal acts, the fundamental rights commitment is systematically based definitively on the obligation of the EU institutions to protect fundamental rights and means that the EU institutions must ensure that their behaviour, in conjunction with the behaviour of third parties, does not lead to encroachments on fundamental rights. Hence, they must be able to counter any allegation that they have not made preliminary arrangements for the behaviour of third parties through appropriate measures and legal acts to prevent encroachments on fundamental rights.91 Thus, the institutions of the Union are obliged under MoUs, when opting for that form of regulation, to prevent encroachments on fundamental rights by fulfilling their duty to protect and ensuring compliance with the CFR through appropriate legal or non-legal measures. The institutions cannot claim that the behaviour of member states might not fall within the scope of Article 51 CFR, since the institutions of the Union themselves have a duty to protect. It is immaterial which form of behaviour applies to any third party involved in enforcement of the rule. The EU institutions cannot   ECJ Case C-370/12 Pringle [2012], para 161, emphasis added.   For instance ECJ Case C-465/00 Österreichischer Rundfunk [2003], para 74. 89   Settled case law since Case 8/74 Dassonville [1974]. 90   ECtHR Brumarescu v Romania, App no 28342/95 (28 October 1999) para 43 ff. 91   H-W Rengeling and P Szczekalla (eds), Grundrechte in der Europäischen Union (Cologne, Heymanns, 2004) § 7, para 515 ff. 87 88



Competencies of the Troika  71

escape their fundamental rights obligations by choosing a ‘Memorandum of Understanding’ as their form of regulation. They must ensure that appropriate regulatory measures are taken to prevent either the member states or other third parties involved, such as private entities or international organisations, from encroaching on fundamental rights. B Encroachment Particularly when third parties are involved in the implementation of measures, the distinction between encroachments that do and do not affect fundamental rights is always problematic. Fundamental rights have undoubtedly been encroached on when a legal act directly causes the encroachment.92 However, that is not always the case with MoUs. Certainly the ECJ, in its case law on Union law directives, holds that even indirect and de facto effects of legal acts constitute encroachments on fundamental rights if they are for the purpose of encroachment or at any rate have the effect of making it necessary for third parties to encroach on fundamental freedoms.93 The ECtHR has a similarly broad concept of encroachment, holding that even mere announcements which have not at that stage had any legal consequences might affect the legal positions in the ECHR in a legally relevant manner. For instance, the ECtHR has in the past established that exclusion from a magazine distribution system was an encroachment on freedom of speech94 and also ruled that a letter giving notice of a sanction which was not legally binding was an encroachment.95 Thus, the ECHR concept of encroachment covers all measures adversely affecting the scope of protection of a fundamental right.96 The CJEU also requires ‘a significant effect’ on the exercise of human rights for an encroachment ruling.97 It has now been established on numerous occasions that the crisis management measures affect the rights guaranteed in universal and regional lists of fundamental and human rights.98 This concerns more difficult access to employment, the threat to the living wage and the non-availability of food, housing, water and other basic necessities.99 The MoUs negotiated by the Troika frequently provide   ECJ Case C-219/91 Ter Voort [1992], para 36 f.   ECJ Case C-200/96 Metronome [1998], para 28.  ECtHR Vereinigung demokratischer Soldaten v Austria, App no 15153/89 (23 January 1994) para 27. 95  ECtHR Brumarescu v Romania, para 43 ff. 96   Rengeling and Szczekalla, above (n 91) § 7, para 516. 97   ECJ Case C-435/02 Spiegel [2004], para 49. 98  For a general overview of relevant human rights, see Council of Europe – Commissioner for Human Rights, Safeguarding human rights in times of economic crisis, November 2013; MR Abouharb and D Cingranelli, Human Rights and Structural Adjustment: The Impact of the IMF and World Bank (New York, Cambridge University Press, 2007) 133 ff. 99  OHCHR, Report on the impact of the global economic and financial crises on the realization of all human rights and on possible actions to alleviate it (A/HRC/13/38); OHCHR, Background Paper (Bat-Erdene Ayush, Chief, Right to Development Section): Promoting a rights-based approach to economic stabilization, recovery and growth, April 2013. 92 93 94

72  Andreas Fischer-Lescano for interference with fundamental and human rights.100 In particular, they affect the rights to freedom to choose an occupation, collective bargaining autonomy and remuneration in accordance with Articles 27 to 32 CFR in conjunction with Articles 1 to 6 and 24 RESC, Articles 6 to 8 UN Social Covenant, Article 11 ECHR, Article 27 UN Disability Convention and the ILO core labour standards; the human right to housing und social security based on Article 34 CFR in conjunction with Articles 12 and 13 RESC, Articles 9 and 11 UN Social Covenant and Articles 2, 3, 8 and 14 ECHR; the human right to health care based on Article 35 CFR in conjunction with Article 11 RESC, Article 12 UN Social Covenant, Articles 2, 3 and 8 ECHR and Article 25 UN Disability Convention; the human right to education based on Article 14 CFR in conjunction with Articles 9 and 10 RESC, Article 2 Protocol I ECHR, Article 13 UN Social Covenant, Article 24 UN Disability Convention and Article 28 UN Convention on the Rights of the Child; the human right to property based on Article 17 CFR in conjunction with Article 1 Protocol I ECHR; and the right to good administration based on Article 41 CFR in conjunction with Article 6 ECHR.101 In that respect, the MoUs are often designed to encroach specifically on the fundamental rights referred to. They set out a detailed and mandatory framework for the encroachment. To cite two examples: 1. The following obligation is laid down in the MoU with Ireland: ‘Reduce by €1.00 per hour the nominal level of the current national minimum wage’.102 That definitely constitutes interference with Article 31 CFR (fair and just working conditions). The rule guarantees, in addition to a minimum standard of occupational safety, reasonable working conditions, the prevention of workplace risks, the introduction of maximum working hours, annual leave and rest period entitlements and the integrity of a fair wage.103 The MoU encroaches on that protected area. 2. In the MoU with Greece, the Greek Government undertakes ‘to reform wage bargaining system in the private sector, which should provide for a reduction in pay rates for overtime work and enhanced flexibility in the management of working time. Government ensures that firm level agreements take pre­ cedence over sectoral agreements which in turn take precedence over occu­ pational agreements. Government removes the provision that allows the Ministry of Labour to extend all sectoral agreements to those not rep­resented in negotiations’.104 That is an encroachment into Article 28 CFR (right of collective bargaining autonomy). The purpose of the rule is to guarantee a subjective individual and collective right to collective bargaining autono100  OHCHR report Austerity measures and economic, social and cultural rights, E/2013/82, 7 May 2013. 101   For details, see in particular Mélanie Schmitt’s chapter in this volume. 102   MoU on Specific Economic Policy Conditionality (Ireland) (28 November 2010) 5. 103  See pending case referred to the ECJ for a preliminary ruling, C-264/12 Companhia de Seguros. 104   MoU on Specific Economic Policy Conditionality (Greece) (6 August 2010) 34.



Competencies of the Troika  73 my.105 The undermining of national collective bargaining agreement systems by the introduction of temporal, spatial and personal restrictions on the validity of collective bargaining agreements106 is also contrary to the ILO Declaration on Fundamental Principles and Rights at Work, which provides for a minimum level of protection guaranteed by customary international law, explained mainly, in respect of collective employment law, in ILO Convention 98.107

In the MoUs, the states concerned undertake to implement the rules laid down in the MoU relating to fundamental rights. The MoUs are aimed at such encroachments and provide a specific framework for them. Only where the national implementation and hence the rules in the relevant MoUs go further is the accountability link broken. However, in so far as the MoUs are aimed at such encroachments, as soon as they are bindingly laid down by the European Commission and the member state, they encroach on fundamental rights. Accordingly, the MoUs constitute an encroachment as regards interference with fundamental rights. IV JUSTIFICATION

The encroachments on fundamental rights by the European Commission and the ECB associated with the signing of the MoUs are also not justified on the basis of the first sentence of Article 51(1) CFR. A  Compliance with the System of Competencies under Union Law The mandate of the European Commission and the ECB in the Troika, as currently organised, is incompatible with the competency conditions of primary law. It is not because the delegation of functions introduced in the ESM Treaty is inadmissible that it is contrary to primary law; at that fundamental level the CJEU has established, in Pringle, that the ESM Treaty is compatible with Union 105   For recognition of the right to strike, see decision contested on the grounds of the restriction applied in the assessment in relation to allegedly conflicting fundamental freedoms, ECJ Case 438/05 Viking [2007]. 106   Overview in B Waas, ‘Tarifvertragsrecht in Zeiten der Krise’ in JM Schubert (ed), Anforderungen an ein modernes kollektives Arbeitsrecht, Liber Amicorum in honour of Otto Ernst Kempen (BadenBaden, Nomos, 2013) 38 ff. 107   On that point and on the implications of European Court of Human Rights case law for austerity measures, see KD Ewing, ‘Austerity and the Importance of the ILO and the ECHR for the Progressive Development of European Labour Law: A Case Study from Greece’ in W Däubler and R Zimmer (eds), Arbeitsvölkerrecht. FS für Klaus Lörcher (Baden-Baden, Nomos, 2013) 361 ff; see also J Pagones, ‘The European Union’s Response to the Sovereign Debt Crisis: Its Effect on Labor Relations in Greece’ (2013) 36 Fordham International Law Journal 1517 ff; ILO, Report on the High Level Mission to Greece (Athens, 19–23 September 2011) para 304 ff.

74  Andreas Fischer-Lescano law. Specifically, however, the CJEU has laid down numerous conditions for action by the European Commission and the ECB under the ESM Treaty. For instance, the Court has emphasised the significance of Article 13(3) of the Treaty and imposed a condition that measures under the ESM must conform to Union law. In particular, the Court makes the transfer of tasks subject to the proviso that the new tasks ‘do not alter the essential character of the powers conferred on those institutions by the EU and FEU’.108 The Court thereby also makes the admissibility of action by the EU institutions under the ESM dependent on its supporting general economic policies in the Union, in accordance with Article 282(2) TFEU.109 The Court thus establishes a series of conditions to be fulfilled in order for the specific mandate of the European Commission and the ECB in the ESM activities to be lawful: (1) compatibility with the measures to coordinate the economic policies of the member states; (2) no distortion of the allocation of competencies in the EU by the introduction of new decision­making powers for the European Commission and the ECB; and (3) protection of the general interests of the Union. The present situation is problematic as regards MoU practice in the ESM and the preservation of collective and institutional competencies. The MoUs provide for wide-ranging measures in the fields of education, employment, health and social policy. According to the ECJ, the functions transferred by the ESM Treaty should be consistent with the tasks based on Union law. That is the case if the general economic policies of the union are supported in accordance with Article 282(2) TFEU.110 However, that competency is not unlimited. The Union cannot lay down detailed rules for health, employment, social and educational policy through the ‘economic coordination’ rules. The competency for economic coordination is restricted by the subsidiarity rule in Article 5(3) TEU and the principle of conferred powers. In particular, with regard to the specific provisions the relevant powers which cannot be undermined through a general competency rule are to be taken into account.111 In the case of the substantive connections governed by the MoU, that means that the EU institutions may be involved in the agreement and implementation of provisions only in so far as the EU also has collective competence. The ultra vires nature of the MoUs is therefore particularly apparent where they laid down detailed rules for the level of remuneration.112 The ECB and the European Commission have no competence to act in that area. In addition to pay, Article 153(5) TFEU also removes other areas from the competence of the EU, particularly with regard to regulation of the right to organise, the right to strike and the right to impose lock-outs. The   ECJ Case C-370/12 Pringle [2012], para 158.   ibid, para 165.  ibid. 111   ECJ Case C-376/98 Tabakwerberichtlinie [2000], para 83. 112   See, eg, MoU on Specific Economic Policy Conditionality (Greece) (9 February 2012) reproduced in European Commission, The Second Economic Adjustment Programme for Greece: First Review (December 2012) 187 ff, 250 f. 108 109 110



Competencies of the Troika  75

Union also does not have general competence for educational policy (Article 165 TFEU), health care policy (Article 168 TFEU) or social policy (Article 153 TFEU). Quite rightly, the Economic and Monetary Affairs Committee (ECON) of the European Parliament has insisted in its draft report on the Troika that ‘the mandate of the ECB is limited by the TFEU to monetary policy and that the involvement of the ECB in any matter related to budgetary, fiscal and structural policies is therefore on uncertain legal grounds’.113 The exercise of institutional competence in relation to the conclusion of the MoU is also problematic as regards the principle of democracy protected in primary law in Article 10 TEU. When the CJEU requires that the conclusion of MoUs should be compatible with primary law, that means, inter alia, that the European Parliament must be involved in the signature of the MoUs in such a way that the principle of democracy protected by Article 10 is upheld. However, the European Parliament is not at present as involved in the enforcement of the ESM Treaty as Union law requires.114 In that they prestructure normative expectations, MoUs as sui generis legal acts are similar to international law treaties, even though they are not international law treaties in the formal sense. Parliament should therefore be more involved in the legislative process, as provided for in Article 218(6) TFEU. If the European Parliament continues to be excluded from decision making through MoUs, any real control on equal terms remains impossible and Parliament’s participatory rights under primary law are removed, so that compatibility with the minimum democratic requirements of Union law would no longer be guaranteed. B  Substantive Justification for Encroachments The human rights encroachments are also unlawful if they are not substantively justified. According to the second sentence of Article 51(1) CFR, that assumes that the principle of proportionality has been adhered to in the encroachments – that they are therefore necessary and actually consistent with the aims of serving public policy or the requirements of protecting the rights and freedoms of others recognised by the Union. Even if the decision makers are to be allowed some discretion as regards decision making and future projections, compliance with all criteria is fully verifiable legally. The European Commission and the ECB have not taken sufficient account of those criteria with regard to MoUs. i  No Public Interest Hence, the austerity measures in their current form scarcely serve public interests. In the present case, public interests include the stabilisation of budgetary   ECON, Report (draft 16 January 2014), 2013/2277(INI) para 34.   P Starski, ‘Das supranational disziplinierte Völkerrecht’ (2013) 6 European Law Reporter 186 ff, 193. 113 114

76  Andreas Fischer-Lescano and financial policy. The CJEU requires that the conditions agreed in MoUs should be ‘such as to prompt that Member State to implement a sound budgetary policy’.115 It is true that the Court does not explain that criterion further,116 but it has to be said that measures that obviously have no objective connection with sound budgetary and financial policy or prove to be clearly dysfunctional as far as those aims are concerned cannot be considered appropriate. As a general rule, when scrutinising a measure to determine whether it is an appropriate means of achieving its aims, the CJEU requires that ‘it is appropriate for ensuring attainment of the objective pursued only if it genuinely reflects a concern to attain it in a consistent and systematic manner’.117 The IMF was the first to express doubts as to whether the measures were appropriate. For instance, it stated in a 2013 report on Greece: Market confidence was not restored, the banking system lost 30 percent of its deposits, and the economy encountered a much-deeper-than-expected recession with exceptionally high unemployment. Public debt remained too high and eventually had to be restructured, with collateral damage for bank balance sheets that were also weakened by the recession.118

But it is not only in the case of Greece that the appropriateness is questionable. It is generally doubted whether austerity is a suitable strategy for restoring budgetary and financial stability.119 Extensive research has shown that the austerity measures have made considerable incursions into social rights but that the declared objectives were not achieved by the measures and indeed could not be achieved, since the approach was wrong.120 Studies generally indicate that stable budgetary and financial policy depends on a stable social framework. In that respect, the aim of stabilising the budgetary and financial system calls for two capabilities, ‘to facilitate both an efficient allocation of economic resources – both spatially and especially intertemporally – and the effectiveness of other economic processes (such as wealth accumulation, economic growth, and ultimately social prosperity)’.121 Financial and budgetary stability are dependent on social stability.122 Without social stability there can be no financial stability.123   ECJ Case C-370/12 Pringle [2012], para 137.   Criticism on those grounds in Nettesheim, above (n 16) 16. 117   ECJ Case C-159/10 Fuchs [2011], para 85. 118  IMF, Country Report: Greece. Ex Post Evaluation of Exceptional Access under the 2010 Stand-By Agreement (13 June 2013), IMF Country Report No 13/156, 1. 119  D Desierto, ‘Growth versus Austerity: Protecting, Respecting, and Fulfilling International Economic and Social Rights During Economic Crises’ (2012) 57(2) Ateneo Law Journal 373 ff, 389 f. 120   K Armingeon and L Baccaro, ‘Political Economy of the Sovereign Debt Crisis: The Limits of Internal Devaluation’ (2012) 41(3) Industrial Law Journal 254 ff. 121   G Schinasi, ‘Defining Financial Stability’ IMF Working Paper 04/187, 8. 122   V Borger, ‘How the Debt Crisis Exposes the Development of Solidarity in the Euro Area’ (2013) 9 European Constitutional Review 7 ff, 26. 123   S Deakin, ‘From Constraining to Rebalancing: The Role of Transnational Social Rights in Shaping European Union Economic Policy’ in W Däubler and R Zimmer (eds), Arbeitsvölkerrecht. FS für Klaus Lörcher (Baden-Baden, Nomos 2013) 353 ff, 360. 115 116



Competencies of the Troika  77

When ‘populations frustrated by austerity policies may expand social unrest and public anger’,124 that affects financial stability as well as social stability. It is clear from the criticism by the European Social Committee of the excessive effects of the measures in Greece, leading to ‘large scale pauperisation of a significant segment of the population’125 that, in the combination of various austerity mechanisms, the appropriateness of the measures in stabilising the financial situation can be questioned. Even if decision makers have to be allowed discretion as regards future projections for complex economic trends, certain minimum conditions have to be set for the rules to ensure appropriateness to the objective. In particular, it has to be ensured when setting the conditions that it is possible to react promptly to dysfunctional developments. Again, in view of the close link between financial and social stability, that calls for monitoring of human rights.126 The possibility of making changes must be an essential component of MoUs; the procedures and rules must provide for the nexus of social and financial stability in the implementation procedure.127 ii Disproportionality Furthermore, the measures provided for in the MoU are to some extent dis­ proportionate. With regard to the condition of proportionality, the CJEU consistently states that that requires that ‘measures adopted . . . do not exceed the limits of what is appropriate and necessary in order to attain the objectives legitimately pursued by the legislation in question; when there is a choice between several appropriate measures recourse must be had to the least onerous, and the disadvantages caused must not be disproportionate to the aims pursued’.128 For the purposes of assessing proportionality, according to the non-regression principle that is relevant to social human rights, regressive measures can always only be proportionate in exceptional cases. Specific conditions and a reversal of the burden of proof therefore apply to regressive measures relating to the exercise of social human rights.129 It is incumbent on those responsible for fundamental 124   A Koukiadaki and L Kretsos, ‘Opening Pandora’s Box. The Sovereign Debt Crisis and Labour Market Regulation in Greece’ (2012) 41(3) Industrial Law Journal 276 ff, 303. 125   As in European Committee on Social Rights (ECSR), Federation of Employed Pensioners of Greece (IKA–ETAM) v Greece, Complaint No 76/2012, para 81; same criticism in ECSR, Panhellenic Federation of Public Service Pensioners (POPS) v Greece, Complaint No 77/2012; Pensioners’ Union of the Athens-Piraeus Electric Railways (ISAP) v Greece, Complaint No 78/2012; Panhellenic Federation of Pensioners of the Public Electricity Corporation (POS-DEI) v Greece, Complaint No 79/2012, para 77; Pensioner’s Union of the Agricultural Bank of Greece (ATE) v Greece, Complaint No 80/2012, para 77. 126  R Balakrishnan and D Elson, ‘Auditing Economic Policy in the Light of Obligations on Economic and Social Rights’ (2008) 5(1) Essex Human Rights Review 1 ff, 6. 127   O von Homeyer and S Kommer, ‘Verfassungsgericht kippt Sparhaushalt. Anmerkungen zum Urteil des Tribunal Constitucional de Portugal vom 5 April 2013’ (2013) 46 Kritische Justiz 325 ff, 317. 128   ECJ Case C-2/10 Franchini [2011], para 73. 129   CESCR, General Comment No 3, E/1991/23 (14 December 1990) para 10 and General Comment No 12, UN Doc E/C.12/1999/5 (12 May 1999) para 17.

78  Andreas Fischer-Lescano rights to ensure and if necessary to prove that ‘rights and obligations arising from external debt, particularly the obligation to repay external debt, do not lead to the deliberate adoption of retrogressive measures’.130 On that point, the MoUs contain a number of problematic provisions. For instance, it is argued that the increase in the payments for outpatient health care in Greece (from €3 to €5), the cut in resources to reduce unemployment and the restrictions on collective bargaining autonomy are incompatible with the non-regression principle.131 The fact that insufficient consideration was given to more lenient methods such as less stringent deficit limits and cutbacks is further evidence of dis­ proportionality. The MoUs lay down detailed rules for the trend in the budget deficit. For instance, the MoU with Portugal provides that the deficit for 2011, 2012 and 2013 is to be limited to 5.9, then 4.5 and 3.0 per cent.132 At times of economic crisis especially, such conditions further limit the scope for the exercise of fundamental and human rights. In its General Comment 2 on International Technical Assistance Measures, the UN Social Committee sets out detailed conditions for appropriate protection in the implementation of austerity programmes, stressing the common obligation on states and IOs to safeguard human rights in the context of financial measures.133 The avoidance of cutbacks, debt cancellation and compensatory schemes can therefore be a requirement for proportionality. The European Fundamental Rights Agency also lays down procedural conditions to that effect for implementation of the debt limit in Union law.134 Exceptional rules in the deficit procedure can be the more lenient method compared with regressive measures in the field of fundamental rights. Measures are also disproportionate if there is no long-term income protection. Privatisation conditions are a problem in that respect. On the contrary, it should be a requirement that lasting income protection is ensured by restricting privatisation.135 Even the possibility of alternative income mechanisms can be a more lenient measure in austerity policy. For instance, in view of the private 130   Human Rights Council, Report of the Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights, particularly economic, social and cultural rights: Cephas Lumina – Guiding principles on foreign debt and human rights (10 April 2012), A/HRC/20/23, para 19 f; see also D Elson, ‘The reduction of the UK budget deficit: A human rights perspective’ (2012) 26(2) International Review of Applied Economics 177 ff. 131   Hoffmann and Krajewski, above (n 47) 12 f. 132   MoU on Specific Economic Policy Conditionality (17 May 2011) No 1, Fiscal policy (Portugal): ‘Reduce the Government deficit to below EUR 10,068 million (equivalent to 5.9% of GDP based on current projections) in 2011, EUR 7645 million (4.5% of GDP) in 2012 and EUR 5224 million (3.0% of GDP) in 2013’. 133   CESCR, General Comment No 2, UN Doc E/1990/23 (2 February1990) para 9. 134   European Union Agency for Fundamental Rights, ‘Protecting Fundamental Rights during the Economic Crisis’ Working Paper 12/2010, 47. 135   On the admissibility of a prohibition on privatisation in service management, see ECJ Cases C-105/12 to C-107/12 Essent and others [2013]; on legal issues relating to the prohibition on privatisation in general, see H-P Bull, ‘Die “Privatisierungsbremse” in verfassungsrechtlicher Sicht’ (2012) Weiterdenken. Diskussionsimpulse des Julius-Leber-Forums der FES 4 ff.



Competencies of the Troika  79

wealth situation in Europe136 the introduction of a wealth tax137 might make a number of encroachments on fundamental rights unnecessary. Austerity measures can only be proportionate when those more lenient measures have been exhausted. The MoUs are also problematic if insufficient consideration was given to alternative reductions and recourse at least to transnational banks and undertakings whose behaviour is responsible for the development of the crisis. That is another rule of proportionality. For instance, it is rightly pointed out that the MoU with Greece is unlawful in that alternative cuts were not considered: ‘cuts in government spending on health and education, while not reducing expen­ diture on the armed forces arms is likely to violate the principle of nonretrogression’.138 iii  No Regard for Core Content The essential content of the Charter of Fundamental Rights is also to be taken into account in accordance with Article 52(1) CFR.139 The essential content will depend on the specific nature of the fundamental right in question. The essential content of specific social human rights in the UN is identified in each case by certain core obligations and social protection floors.140 Particularly relevant in this case are the core obligations relating to the right to social security,141 safeguarded in Article 34 CFR. In so far as the MoUs fail to fulfil those obligations by preventing access to health care, housing and social security systems, but also in so far as they require specific reductions in the minimum wage, which falls below the living wage, they are unlawful.142 When agreeing to cuts, brakes on deficits and other austerity measures, the EU institutions should also ensure that states are not deprived of the means to safeguard minimal rights. iv  Discriminatory Effect Furthermore, the measures should not contravene the prohibition on discrim­ ination referred to in Article 21 CFR, Article 14 ECHR, Article 9 TEU and in the programmatic clause in Article 3(3) TEU. The prohibition on discrimination is contravened not only directly, through the link to group characteristics in the stat136   ECB Survey, ‘The Eurosystem Household Finance and Consumption Survey’ Statistics Paper Series 2 (April 2013). 137   M Schratzenstaller, ‘Vermögensbesteuerung. Chancen, Risiken und Gestaltungsmöglichkeiten’ DiskuCase Expertisen und Dokumentationen zur Wirtschafts- und Sozialpolitik, FES (April 2011). 138   Krajewski, above (n 49). 139   Case C-402/05 P Kadi [2008], para 183. 140   AG Pillay, Chairperson, CESCR, Letter to States Parties (16 May 2012): ‘the policy must identify the minimum core content of rights or a social protection floor, as developed by the International Labour Organisation, and ensure the protection of this core content at all times’. 141   CESCR, General Comment No 19 (2008), UN Doc E/C.12/GC/19, para 59. 142   On a reduction in minimum income problematic in that respect, see the MoU on Specific Economic Policy Conditionality (Ireland) (28 November 2010) 5.

80  Andreas Fischer-Lescano utory rules, but also ‘when rules are not linked to any of the characteristics but the distinction in question ultimately always, or in the great majority of cases, amounts to use of the characteristic (indirect or covert unequal treatment)’.143 With social human rights in particular, there is a risk that especially vulnerable groups will be affected by specific cutbacks that contravene the prohibition on discrimination.144 In that respect, for instance, in its recommendations on Spain, the UN Social Committee took the view that austerity measures were unlawful if they infringed ‘the enjoyment of their rights by disadvantaged and marginalized individuals and groups, especially the poor, women, children, persons with disabilities, unemployed adults and young persons, older persons, gypsies, migrants and asylum seekers’.145. The Portuguese Constitutional Court, too, has made an overall assessment in relation to social groups and found the austerity measures to be unlawful on the grounds of seriously unequal treatment of social groups.146 Not only is that an issue of lawfulness with regard to the national implementation measures, it also concerns the MoUs themselves, in so far as they do not provide for adequate protection and measures to avoid such discrimination. v  No Regard for Participation Requirements Finally, the European Commission and ECB measures are not justified procedurally. That applies in particular to the rights provided for in Article 41 CFR in conjunction with Article 6 EHCR, including the right to be heard and participation in a general sense.147 In the case of social policy, particular emphasis has been placed on the right to good administration. Article 152 TFEU requires the Union to recognise the role of the social partners at Union level and to facilitate social dialogue, respecting the autonomy of the social partners. The minimum requirements for a procedure consistent with those rules are that the parties concerned should be heard, the circumstances thoroughly investigated and full reasons stated – principles that are also mentioned in Article 11(2) and (3) TEU. The ECB and the European Commission ignored those procedural requirements when negotiating the MoUs. The European Social Committee noted, with regard to Greece, that ‘the minimum level of research and analysis into the effects of such far-reaching measures that is necessary to assess in a meaningful manner their full impact on vulnerable groups in society’ had not been carried out.148 That criticism concerns not just the states implementing the measures,   Jarass, ‘Art 21 CFR, para 10 in Charta der Grundrechte der Europäischen Union, above (n 51).  ILO, Report on the High Level Mission to Greece, above (n 107) para 304 ff. 145   CESCR, Concluding Comments, fifth periodic report of Spain (18 May 2012), E/C.12/ESP/ C0/5, para 8. 146  Tribunal Constitucional, Acórdão No 187/2013, Lei do Orçamento do Estado, judgment (5 April 2013) para 37. 147   ECJ Case C-32/95 P Lisrestal [1996], para 21. 148  ECSR, Decision on the merits, 7 December 2012, Federation of Employed Pensioners of Greece (IKA-ETAM) v Greece, Complaint No 76/2012, observations on Art 12, § 3; see also Koukiadaki and Kretsos, above (n 124 ) 283: ‘There was no public consultation over the reforms’. 143 144



Competencies of the Troika  81

but also the EU institutions that negotiated the MoUs. The ILO claimed that Greece did not have an opportunity, in meetings with the Troika, to discuss the impact of the social security reforms on the spread of poverty, particularly for persons of small means and the social security benefits to withstand any such trend. It also did not have the opportunity to discuss the impact that policies in the areas of taxation, wages and employment would have on the sustainability of the social security system.149

The failure to take account of crucial factors and interested groups in the legislative process is an infringement of the right to good administration. It has therefore rightly been emphasised that, if the ILO findings on the failure by the Troika to discuss essential aspects are correct, ‘the participating EU institutions acted illegally’.150 CONCLUSION

In participating in the conclusion of the MoUs, the European Commission and the ECB have infringed Union law. The MoU procedure does not uphold the general principles of Union law, is not consistent with the requirements for collective and institutional competence under Union law. The European Commission is acting in areas, such as the setting of wages, for which it does not have competence. The European Parliament is not sufficiently involved. Furthermore, the encroachments into the human rights mentioned are disproportionate. They contravene the prohibition on discrimination and are not consistent with the procedural rules of good administration, as provided for in Article 46 CFR. In view of those breaches of the law, the MoUs are not binding. States are not required to implement them in so far as the provisions are unlawful. In future, pressure must be exercised to bring the EU institutions back within the law, also in the procedural requirements, particularly as regards participation by the European Parliament and the social partners and human rights monitoring to accompany the measures.

149  ILO, Report on the High Level Mission to Greece, above (n 107) para 88; see also ECSR, Decision on the merits, 7 December 2012, Panhellenic Federation of Pensioners of the Public Electricity Corporation (POS-DEI) v Greece, Complaint No 79/2012, para 32. 150  D O’Donovan, ‘The Insulation of Austerity’ (16 May 2013), available at: humanrights.ie/ uncategorized/the-insulation-of-austerity-the-charter-of-fundamental-rights-and-european-unioninstitutions/.

4 Social Policy, Economic Governance and EMU: Alternatives to Austerity SIMON DEAKIN

INTRODUCTION1

A

S THE EUROZONE crisis has unfolded, social policy has moved from the margins of European policymaking to assume a more central role. However, it is a very different role from the one it previously had within the broad framework of EU law and governance. References to a ‘social dimension’ of the integration process have not disappeared from the official discourse of the European institutions, but the idea that social policy should in various ways either compensate for, or more broadly legitimate, the construction of the internal market has given way to a new emphasis on its role in promoting competitiveness and addressing economic imbalances in the single currency area. This is summed up in the notion of the ‘social dimension’ or ‘social pillar’ of Economic and Monetary Union (EMU), which first appeared in late 2012.2 According to this idea, social policy is to be used to promote economic and monetary union through its impact on wage costs and labour market flexibility, as part of the programme of ‘economic governance’ that has emerged since the onset of the sovereign debt crisis in 2009. The aim of this chapter is to scrutinise the new role that social policy is being called on to play; to examine the ideas behind it and the mechanisms being used to implement it; and to assess its significance for the more traditional, protective

  The views and opinions expressed in this chapter are those of the author.   The December 2012 European Council called on the President of the Council, in close cooperation with the President of the European Commission, to set out ‘possible measures and a timebound roadmap on the following issues: coordination of national reforms; the social dimension of the EMU, including social dialogue; the feasibility and modalities of mutually agreed contracts for competitiveness, growth and jobs; and solidarity mechanisms in support of such contractual arrangements’: Towards a Genuine Economic and Monetary Union: State of play of the consultations with Member States and institutional actors, summary note prepared by the Cabinet of the President of the European Council, June 2013, 1, available at: www.consilium.europa.eu/uedocs/ cms_data/docs/pressdata/en/ec/137665.pdf . President Von Rompuy’s report (ibid) is discussed further, below, section II. 1 2

84  Simon Deakin goals of labour and social security law, on the one hand, and for the European project at this critical stage in its development, on the other. The analysis entails moving beyond the normal scope of social policy to consider the legal framework for EU economic and monetary policy, together with the role of actors whose practical significance for labour and social security law is enormous but whose legal and institutional competence to act in the social policy field is, to say the least, ill-defined, the most important of which is the European Central Bank (ECB). The economic discourse that is currently reshaping not just social policy but the wider governance of the EU will, it seems, frame discussion of European policy options for the immediate future and in the medium term. Thus, understanding that discourse, while creating a space for critique, marks a practical response to the crisis and one that can be used to promote progressive alternatives to the current emphasis on austerity. These issues are not cut and dried. The present chapter therefore has the further objective of setting out a road map for a ‘human developmental’ conception of EMU,3 with an egalitarian social policy at its core. There are, undoubtedly, significant political obstacles to this shift. However – and this is a critical point for legal analysis of the crisis – it would not require fundamental institutional changes. It will be argued below that the existing legal framework of the EU Treaties and supplementary legal instruments are adequate to the task, while some recent legal developments that have had negative implications for social policy – including the Pringle judgment4 – may, paradoxically, have created space for new policy initiatives of the kind needed to move beyond the austerity agenda. To develop this argument, section I sets the scene by reviewing the relationship between social policy, on the one hand, and economic and monetary policy, on the other, within the institutional framework for EMU that operated up to the onset of the crisis. As the European Commission itself has now recognised,5 the institutional design of EMU was flawed in ways that materially contributed to the crisis. However, it will be shown in section I that, as far as social policy is concerned, the design flaws were related not so much to supposed inflexibilities associated with labour and social security law systems operating at national level, as to the absence of a common European approach to wage determination within the wider framework of EMU. In section II the focus shifts to the response to the crisis. This part considers the aims and mode of operation of the ‘new economic governance’ which is associated with such measures as the groupings of directives and regulations known as the 3   On the human-developmental model of EU social policy, see S Deakin, ‘The Lisbon Treaty, the Viking and Laval Judgments and the Financial Crisis: In Search of New Foundations for Europe’s “Social Market Economy”’ in N Bruun, K Lörcher and I Schömann (eds), The Lisbon Treaty and Social Europe (Oxford, Hart Publishing, 2012). 4   Case C-370/12 Pringle v Government of Ireland Judgment of 27 November 2012. 5   Commission, ‘A Blueprint for a Deep and Genuine Economic and Monetary Union’ COM (2012) 777 final/2, 2–3.



Alternatives to Austerity  85

‘Six-pack’6 and the ‘Two-pack’,7 the ‘Euro Plus Pact’,8 the European Stability Mechanism Treaty9 and the Treaty on Coordination, Stability and Governance,10 along with the monetary policy being pursued by the ECB to underpin the single currency and the Court’s response to these developments in the Pringle case. It will be argued that the ECB’s recent conduct of monetary policy, rather than being the unprincipled and possibly unconstitutional assumption of powers that some parties have suggested,11 has simply demonstrated the flexibility needed if the ECB is to play its fundamental role of providing liquidity in a crisis, and that if anything the ECB should have acted sooner and gone further in its interventions. Similarly, the Pringle judgment should be welcomed, rather than condemned, for accommodating the changing role of the central bank, and for opening the way to a more balanced approach to EMU. In these respects the recent intervention of the German Federal Constitutional Court, questioning the legality of the ECB’s Outright Market Transactions (OMT) programme,12 is not a constructive development. Even if, as seems likely, the OMT programme survives this challenge, the ECB’s flexible approach to monetary policy will not be enough to resolve the impasse which the process of EMU is rapidly arriving at, and which is closely bound up with austerity policies. With this in mind, section III sets out a programme for a human–developmental conception of EMU, which, while undoubtedly necessitating a policy shift, would be compatible with the 6   Council Regulation (EU) No 1177/2011 of 8 November 2011 amending Regulation (EC) No 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure; Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances; Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies; Regulation (EU) No 1174/2011 of the European Parliament and of the Council of 16 November 2011 on enforcement measures to correct excessive macroeconomic imbalances in the euro area; Regulation (EU) No 1173/2011 of the European Parliament and of the Council of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area; and Council Directive 2011/85/EU of 8 November 2011 on requirements for budgetary frameworks of the Member States. 7   Regulation (EU) No 473/2013 of the European Parliament and of the Council of 21 May 2013 on common provisions for monitoring and assessing draft budgetary plans and ensuring the correction of excessive deficit of the Member States in the euro area; Regulation (EU) No 472/2013 of the European Parliament and of the Council of 21 May 2013 on the strengthening of economic and budgetary surveillance of Member States in the euro area experiencing or threatened with serious difficulties with respect to their financial stability. 8  The Euro Plus Pact, Stronger Economic Policy Coordination for Competitiveness and Convergence, European Council Conclusions, 24–25 March 2011, EUCO 10/1/11 Rev 1, Annex I. 9   Treaty Establishing the European Stability Mechanism, T/ESM 2012/en, Brussels, 2 February 2012. 10  Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, T/SCG/en, Brussels, 2 March 2012. On constitutional aspects of the TSCG and related measures, see also the chapter by Lukas Oberndorfer in this volume. 11   Above all the German Federal Constitutional Court (Bundesverfassungsgericht) in its ruling in the OMT case: 2 BvR 2728/13 (24 Jan 2014), https://www.bundesverfassungsgericht.de/en/ decisions/rs20140114_2bvr272813en.html. 12   2 BvR 2728/13 (24 Jan 2014).

86  Simon Deakin current structure of the Treaties, and would thus not require a fundamental treaty revision of the kind that would seem to be unfeasible under current political circumstances.13 I  THE POST-MAASTRICHT FRAMEWORK FOR EMU AND THE INSTITUTIONAL ROOTS OF THE CRISIS

It is necessary to distinguish between the short-term and long-term causes of the crisis. In the short term, the crisis in the eurozone began as part of the reaction to the wider global financial crisis, which originated not in the coordinated market systems of the single currency zone, but in the liberalised and financially-driven economies of the United States and United Kingdom. The inter­ related nature of the global economy meant that the shock caused by the near complete collapse of the American and British banking systems in 2008, averted only by emergency government action to stabilise the financial sector in those countries, was quickly transmitted to other regions, including mainland Europe. The recession of 2008–09 led to falling tax receipts and increased government expenditure on social security and these quickly translated into public sector deficits in the countries most affected by the economic downturn. These deficits were, in the main, not caused by excessive public spending in the period prior to the crisis.14 With the sole exception of Greece, the future debtor states had run fiscal surpluses, or small deficits within the limits set by the Maastricht convergence criteria, during the 2000s (see Table 1). The crisis was most severe in these countries because of their reliance on private credit and property speculation to drive economic growth.15 In the economies of the German-influenced ‘core’, by contrast, the effects of the crisis were not so pronounced, because these economies had not been so reliant on low-cost credit or on asset-price inflation in the property market to maintain growth. A further factor driving public sector deficits in the ‘periphery’ was the cost of government bail outs for failing or near-failed private sector banks and other financial institutions.16 Sovereign debt 13   It is possible to argue, in contrast to the line taken in this chapter, that European social policy can be revived only if the single currency project is unravelled and a looser system of currency union put in its place. A full discussion of the social policy case for dismantling the euro in its current form is outside the scope of this chapter; the debates are assessed by A Watt, ‘Why left-wing advocates of an end to the single currency are wrong’ (10 June 2013) Social Europe Journal, available at: www. social-europe.eu/2013/07/why-left-wing-advocates-of-an-end-to-the-single-currency-are-wrong/. 14   M Sawyer, ‘Alternative economic policies for the Economic and Monetary Union’ (2013) 32(1) Contributions to Political Economy 11, 18: ‘the financial crisis and the associated recession were not in any way caused by or exacerbated by the scale of budget deficits and the non-fulfilment of the [Stability and Growth Pact] requirements’. 15  T Palley, ‘Europe’s crisis without end: The consequences of neoliberalism’ (2013) 32(1) Contributions to Political Economy 29, 34: ‘the message is that [the debtor states] were not fiscally irresponsible. Instead, it is that the economic model ruptured catastrophically and plunged them into budget deficit’. 16   Palley, ibid, 42: when the economic model broke in 2008–09 ‘it broke asymmetrically, plunging the [debtor] countries into massive deficit while Germany suffered much smaller increases in its



Alternatives to Austerity  87

became a salient issue at this point largely through the assumption of private sector liabilities by the public sector. An additional short-term cause of the crisis was the nature of the immediate policy response by the European institutions. The ECB was slow to react to the crisis in sovereign bond markets which at various points seemed likely to trigger a default by one or more of the eurozone member states.17 The possibility of default initiated a self-reinforcing process of widening ‘spreads’ in bond yields across the eurozone states, signifying an unsustainable increase in borrowing costs for the more indebted states and calling into question the credibility of the currency union. After a lengthy hesitation, the ECB responded to this situation by initiating currency support operations in the form of purchases of government debt on secondary markets in May 2010. However, it was not until July 2012 that the ECB’s public commitment to do ‘whatever it takes’18 to underpin the single currency had the intended effect of reducing bond yields and thereby the risk of one or more governments defaulting; but by this stage the impact of Table 1: Growth, labour costs and public debt in the eurozone in the 2000s Growth in real GDP, 2000–08

Growth in unit labour costs, 2000–08

Budget surplus/deficit as % of GDP, 2007

Austria

19%

9%

–0.5

Germany

10%

3%

0.2

Greece

35%

26%

–5.4

Ireland

40%

33%

0.1

Italy

7%

27%

–1.5

Netherlands

17%

19%

0.2

Portugal

8%

24%

2.7

Spain

28%

30%

1.9

Euro area

15%

16%

–0.6

Source: ETUI, Andreas Botsch budget deficit. In Ireland [and Spain] the huge jump in the deficit was significantly due to the cost of public bailout of the banking system’. 17   As Sawyer explains, the problem lay in the failure of the ECB to assume a role that national central banks perform as an essential part of their functions: ‘the relationship between a government and its central bank is generally one whereby the central bank is the issuer of the currency, and the central bank can, or will, whether directly or indirectly, be a purchaser of government debt. The government debt is thereby monetised. Provided the central bank lends to a national government if required, then the government is always able to finance the deficit’, above (n 13) 17. 18   This was the expression used by ECG President Draghi at an investment conference in London on 26 July 2012: ‘within our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough’. See: www.ecb.europa.eu/press/key/date/2012/html/sp120726. en.html.

88  Simon Deakin increasing borrowing costs and an enhanced risk of default on the economies of the debtor states, in terms of falling output and rising unemployment, were already considerable. A further policy error in this initial stage was the linking of emergency fin­ancial support for the debtor states to cuts in wages and social security expenditure, imposed as conditions for the loans made by the ‘Troika’ of the International Monetary Fund (IMF), European Commission and ECB. We will return to this point in more detail below (section II); at this point it is sufficient to note that these deregulatory polices, by disproportionately affecting lowincome groups who have a higher propensity to consume and by constraining the ability of governments to support domestic demand through discretionary spending, administered a further negative shock to the economies of the debtor states, which was reflected in business failures, increased unemployment and a reduction in levels of economic activity, which led, in turn, to a worsening of public sector deficits.19 Important as these short-term features of the crisis were, they have tended to mask its more fundamental, long-term causes, which include the institutional design of EMU as laid down in the Maastricht Treaty and related legal instruments. It is arguable that periodic crises are endemic to market economies,20 which are far from being as stable as they are presented in economic models. But even allowing for a certain element of endogeneity in the processes through which such crises are generated, the way in which the single currency was designed can be seen to have added to the depth and severity of the crisis currently affecting the eurozone. This is because the framework of economic governance initially established at Maastricht in 199221 and subsequently embedded in the Stability and Growth Pact (SGP) of 199722 was fundamentally asymmetrical.23 Monetary policy was vested exclusively in the ECB which sat at the apex of newly-created networks of national central banks (the ‘European System of Central Banks’ for the EU as a whole and the ‘Eurosystem’ for member states in the eurozone). The ECB set a single interest rate for the economies of the single currency area, which was 19   See Y Varoufakis, ‘From contagion to incoherence towards a model of the unfolding Eurozone crisis’ (2013) 32(1) Contributions to Political Economy 51. 20   See, in particular, the thesis developed by Hyman Minsky to explain the recurring nature of financial crises: H Minsky, Stabilising an Unstable Economy (New Haven, CT, Yale University Press, 1986). 21   The relevant provisions of the Maastricht Treaty are those amending Title 6 (Economic and Monetary Policy) of the EC Treaty (Arts 102–09m, as they then were). See now TFEU, Title 8 (Arts 119–44). 22   For the original legal sources of the SGP see Council Regulation 1466/97, OJ L209/1 (2 August 1997); Council Regulation 1467/97, OJ L209/7 (2 August 1997); and Resolution 97/C 236/01, OJ C236/01 (2 August 1997) and for a contemporaneous discussion of these texts see S Deakin and H Reed, ‘The Contested Meaning of Labour Market Flexibility: Economic Theory and the Discourse of European Integration’ in J Shaw (ed), The Evolution of EC Social Policy (Oxford, Hart Publishing, 2000). 23   P Arestis and M Sawyer, ‘The design faults of the Economic and Monetary Union’ (2011) 19(1) Journal of Contemporary European Studies 19.



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intended to ensure price stability in the form of an inflation target which was set at an annual rate of around 2 per cent. Economic policy, on the other hand, was a matter of shared competence for the Union (as it became)24 and the member states, and was subject to only minimal coordination efforts. There was no common approach to macroeconomic policy. Although certain long-term goals of economic and social policy were the subject of open coordination methods from the late 1990s onwards25 – including employment strategy – individual member states continued to pursue distinct approaches to macroeconomic governance. Social policy became even more decentralised. Notwithstanding agreement at Maastricht on the essentials of an expanded social policy programme,26 to which the United Kingdom belatedly acceded,27 the competencies of the Union in the social policy sphere remained limited, and in some areas in which social policy had immediate implications for economic policy, most notably wage determination, it was practically non-existent, as a result of the exclusion of pay and collective bargaining rights from the new competencies agreed at Maastricht.28 The convergence criteria put in place at Maastricht and confirmed in the SGP (the 60 per cent national debt limit and the 3 per cent annual budget deficit limit), together with the ECB’s single interest rate policy, were designed to lock member states into an economic regime that prioritised price stability.29 By these means, national governments were to be constrained from incurring debts that could impose liabilities on other member states (the ‘moral hazard’ problem). Provisions in the Maastricht Treaty that formally prohibited the ECB from lending to the public authorities of either the Union or an individual member state,30 or from engaging in other forms of financial assistance to member states,31 had the same aim. Powers to fine member states that breached the convergence criteria were not used to any great effect after 2000, in part because it was the larger member states, including France and Germany, that had most prominently 24   On the distinction between the exclusive Union competence over monetary policy and the shared competencies of the Union and the member states in the area of economic policy, see now the Pringle judgment, paras 50–51, referring to TFEU Arts 3(1)(c) (monetary policy) and 119 (economic policy). 25   See generally M Heidenreich and J Zeitlin (eds), Changing European Employment and Welfare Regimes: The Influence of the Open Method of Coordination on National Reforms (London, Routledge, 2009). 26   The Maastricht Treaty made significant extensions to the social policy competencies of the Union (as it became) but these were initially confined to a Protocol and Agreement on Social Policy which established a procedure for adopting social policy measures from which the United Kingdom was exempted. See generally J Kenner, EU Employment Law: From Rome to Amsterdam and Beyond (Oxford, Hart Publishing, 2003). 27   The United Kingdom’s acceptance of the Maastricht Agreement on Social Policy in 1997 made it possible to integrate the new social policy competencies into the EC Treaty. See Kenner, above (n 25). These provisions now form Title 10 (Arts 151–61) TFEU. 28   See now TFEU Art 153(5), excluding ‘pay’ and ‘the right of association’ from the competencies established elsewhere under that Article (see Art 151(1)–151(4)). 29   See Case C-370/12 Pringle v Government of Ireland [2012], para 54. 30   Now Art 123 TFEU. 31   Now Art 125 TFEU, the so-called ‘no-bail-out’ clause.

90  Simon Deakin failed to comply with them.32 The apparent weakness of the enforcement mechanisms associated with the SGP is, however, misleading, since after the establishment of the single currency a large degree of convergence was in fact achieved. Just prior to the onset of the crisis in 2007, all the eurozone states except Greece, which had a public sector deficit of 5.4 per cent of GDP, were in compliance with the Maastricht criteria, and several states which were to go into deficit after the crisis began – including Ireland, Portugal and Spain – had surpluses, as well as having levels of national debt that were not just in line with the Maastricht limits but were at historic lows (see Table 1). This convergence was more formal than real, however. The national economies of the eurozone were on different economic growth paths.33 The future debtor states were mainly pursuing policies of financially-driven growth that were dependent on an expansion of private credit and on increasing asset prices in the markets for commercial and residential property. These policies produced rising household incomes, related to the greater availability of private credit but also due in part to above-productivity wage increases, and led to sustained growth in GDP throughout the 2000s. The future creditor states were, by contrast, mainly following policies of ‘endogenous’ or industry-led growth which depended on targeted investment in capital goods, public support for training and labour force upgrading and wage moderation. These economies experienced static or even falling household incomes, thanks to wage repression, and lower overall growth rates. Their export-orientated industries were reliant to a significant extent on the maintenance of demand in the ‘peripheral’ states of the eurozone itself, a dependency that was further encouraged by capital outflows from the core states, as banks from those countries were lending on an increasing scale to both public and private sector borrowers in the periphery.34 The absence of a common approach to wage determination exacerbated this divergence. Wages were increasing faster than productivity in the ‘periphery’ in part because of the weakness of arrangements for wage coordination.35 These economies were characterised by a mixture of weak inter-associational bargaining (Italy, Portugal, Spain) or ‘time-irregular’ social pacts on wages and incomes which failed to lock in wage moderation over the medium term (Ireland). By 32   In turn, it was largely due to French and German pressure before the March 2005 European Council that the legal basis of the SGP was amended in 2005 to allow for greater flexibility in the operation of the convergence criteria. See European Council, Brussels, 22–23 March 2005, Presidency Conclusions, 7619/1/05 Rev 1, 1. 33   See K Armingeon and L Baccaro, ‘Political Economy of the Sovereign Debt Crisis: The Limits of Internal Devaluation’ (2012) 41(3) Industrial Law Journal 254; R Boyer, ‘Origins and ways out of the euro crisis: supranational institution building in the era of global finance’ (2013) 32(1) Contributions to Political Economy 97, 104 (noting that formal economic convergence after the advent of the single currency masked real divergence); Sawyer, above (n 14) 12 (arguing that the Maastricht convergence criteria focused on nominal rather than real economic variables). 34   See Varoufakis, above (n 19) 54 (noting that imbalances caused by the design of EMU meant that capital flowed from the core to the periphery to create demand for the core’s exports). 35   A Johnston and R Hancké, ‘Wage inflation and labour unions in EMU’ (2009) 16(4) Journal of European Public Policy 601.



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contrast, economies in the ‘core’ had formal and binding mechanisms for limiting wage increases by reference to productivity growth, including ‘timeconsistent’ social pacts (Finland), pattern bargaining over pay at sector level (Austria), formal ‘wage break’ laws (Belgium) and inter-sectoral wage norms that had the effect of tying wage increases across the whole economy, including the public sector, to the lower levels achieved in the competitively-exposed, export-orientated industries (France and Germany) (see Table 2). In principle, the single interest rate set by the ECB should have ironed out some or even all of these divergences. The theory underlying the ECB’s monetary policy mandate, associated with the model of ‘rational expectations’, predicts that workers will voluntarily moderate their wage demands if, among other things, the ECB can credibly commit itself to restraining price inflation.36 However, it seems that, if anything, the constraint of interest rate policy was more effective in the first phase of EMU, between 1992 and 2000, when countries retained their national currencies and their national central banks were responsible for interest rates, while targeting a low inflation rate, allowing for greater convergence in practice. Pay rose broadly in line with productivity across the prospective eurozone states during this period, and began to diverge only once the single currency was in place. One possible interpretation of this divergence is that the ECB’s single interest rate policy was simply too blunt an instrument to deal with different country-specific conditions after 2000.37 It may even have made things worse, as the uniform interest rate, by lowering the cost of private credit, exacerbated the effects of asset price inflation in states following a finance-led growth path. It is not easy to assess how far a greater degree of economic convergence could have been achieved if a common wage determination policy had been in place during the 2000s, but, in its absence, the conduct of monetary policy signally Table 2: Wage determination arrangements in the eurozone, 2000s High wage moderation (below eurozone average of 2%)

Low wage moderation (above eurozone average of 2%)

Austria: pattern bargaining

Ireland: time-irregular social pacts

Belgium: law setting ‘hard’ wage target

Italy: weak inter-associational bargaining

Finland: time-regular social pacts

Netherlands: time-irregular social pacts

France: coordinated bargaining, competitive sectors in the lead

Portugal: weak inter-associational bargaining

Germany: coordinated bargaining, competitive sectors in the lead

Spain: weak inter-associational bargaining

Source: Johnston and Hancké (2009) (see n 35) 36   See R Schettkat, ‘Will only an earthquake shake up economics?’ (2010) 149(2) International Labour Review 185, discussing and critiquing rational expectations theory in this context. 37   Johnston and Hancké, above (n 35).

92  Simon Deakin failed to achieve the degree of harmonisation of underlying economic conditions that had been seen as essential to the successful operation of the single currency zone. The failure to coordinate pay is illustrative of the wider asymmetry in the design of EMU. Granting exclusive power to the ECB to conduct monetary policy but failing to put in place mechanisms for aligning economic and social policy within the single currency area resulted in a situation characterised by growing imbalances between national economies. This was the root cause of the sovereign debt crisis.38 Consideration of EMU’s institutional structure and specifically of the marginal place of social policy within it, also helps to explain why the initial response of the European institutions to the crisis was so ineffective, to the point of being counterproductive: the measures imposed on the debtor states by the Troika were the exact opposite of what should have been done to address the structural imbalances that precipitated the crisis, as the next section will show. II  RESPONSE TO THE CRISIS: INTERNAL DEVALUATION, THE NEW ECONOMIC GOVERNANCE AND THE PRINGLE JUDGMENT

A  Internal Devaluation A national economy that retains control over its own currency can take a number of steps in response to an economic shock of the kind represented by the global financial crisis. In the case of the United Kingdom, the measures taken have included allowing the currency to depreciate as a way of restoring competitiveness. This option was not available to the eurozone states following the onset of the crisis because they were locked into the single currency.39 For this reason, an alternative to currency devaluation – so-called internal devaluation – soon found its way onto the European policy agenda. Internal devaluation essentially entails reducing domestic wages and living standards to the level needed to restore competitiveness in internationally traded goods and services.40 The mechanisms chosen to achieve this were, initially, the ‘Memoranda of Understanding’ (MoUs) agreed between the Troika and the debtor states.41 In return for financial assistance, in the form of loans to keep government services running and enable public debt to be serviced, thereby avoiding a sovereign default, the Troika required the member states concerned to initiate reforms to 38   Sawyer, above (n 14) 12: on the design of EMU, the design of the independent ECB ‘precluded the necessary coordination of fiscal and monetary policy, and has also disabled the central banking system from providing sufficient support to national governments and their budget deficits’. 39   Palley, above (n 15) 43: Spain and Italy do not have ‘a national central bank they can call on to lower [bond] rates . . . Had the USA or UK been subject to the same institutional constraints they too would have experienced public debt crises’; Varoufakis, above (n 19) 53: ‘Greece and Ireland found themselves in 2010 in the situation that Britain would have faced in 1931 if it had [had] no currency of its own to un-peg from the Gold Standard’. 40   See Armingeon and Baccaro, above (n 33). 41   On the legal form and significance of the MoUs, see the chapter by Mélanie Schmitt in this volume.



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labour and social security law that would have the effect of cutting nominal wages. These changes included steps to dismantle national-level and sectoral wage bargaining arrangements and replace them with decentralised, companylevel collective bargaining; the displacement of independent trade unions as bargaining agents by locally-nominated, non-union employee representatives; the abandonment of the ‘favourability principle’ according to which there can be no downwards (in pejus) derogation from the floor of rights set by collective bargaining; more generally, granting increased scope for individual bargaining over pay and conditions, to the detriment of collective bargaining; and, finally, cutting minimum rates of pay and restricting the coverage of minimum wage laws. Related changes to social security law, which include lowering the value of income replacement benefits, tightening up qualifying conditions and restricting the duration of benefits, are intended to have a similar effect of allowing wages to fall at the bottom of the earnings scale and limiting the role of social security as a residual ‘floor’ to wages and terms and conditions of employment, as well as reducing public expenditure on social security benefits.42 Weakening collective bargaining and the floor of rights in social security, as the MoUs have done, may have some short-term effects in terms of reducing nominal wages and making payment systems more responsive to immediate market pressures. In the long run, it is not clear what its impact on real wages and on unit labour costs (wages net of productivity and inflation) will be. As we have seen, under EMU after 2000, it was the absence of coordinated wage bargaining that led to the increasing divergence of wages and productivity growth in the future debtor states. Over the medium to long term, the most feasible route to reducing unit labour costs is for these member states to initiate programmes for coordinating pay rises across the economy, on the one hand, and encouraging investments in human capital and related aspects of workforce upgrading, on the other. The risk in dismantling collective bargaining arrangements in pursuit of a short-term, one-off reduction in unit labour costs, which is not even guaranteed to occur by these means, is that it will be even more difficult than it would otherwise be to put in place mechanisms for coordinated wage determination at a later point, when they would be needed as part of an integrated strategy, along with training and industrial policy, for improving competitiveness. The policies pursued by the Troika are counterproductive in two further respects. The first is their impact on effective demand. Policies aimed at weakening sectoral collective bargaining arrangements will have their greatest impact on groups at the lower end of the earnings scale, which are least equipped to 42   On the changes made to the labour law systems of the debtor states in response to the crisis, see generally the national studies in MC Escandre Varniol, MCS Laulom and E Mazuyer (eds), Quel Droit Social dans une Europe en Crise? (Brussels, Larcier, 2012); on Greece, see also A Koukiadaki and L Kretsos, ‘Opening Pandora’s Box: The sovereign debt crisis and labour market regulation in Greece’ (2012) 41(3) Industrial Law Journal 276; and on Latvia, S Dahan, ‘The EU/IMF financial stabilisation process in Latvia and its implications for labour law and social policy’ (2012) 41(3) Industrial Law Journal 305.

94  Simon Deakin engage in voluntary wage bargaining. Cuts to the minimum wage and to social security benefits directly affect the poor. Because low income groups have a higher propensity to consume than those higher up the income scale, the combined effect of these changes is a drop in domestic demand, a tendency exacerbated by the greater ability of high income groups to move their capital and savings out of the jurisdiction altogether. Lower domestic demand translates into an increased number of bankruptcies, in particular for smaller businesses, and to higher unemployment, a process that reduces tax revenue while further ratcheting up the pressure for wage and benefit cuts. The second, counter­ productive effect of the Troika’s policies is to increase the social costs of adjustment. Cuts to public expenditure disproportionately expose lower-income groups, already affected by higher levels of economic risk associated with joblessness, poverty and ill health, to additional levels of vulnerability. These costs fall back onto government in the form of additional charges on social assistance and health care programmes, precisely when they are least able to deal with these extra expenditures.43 These processes are being played out in each of the member states that has entered into a MoU with the Troika, but are particularly severe in Greece. Labour law reforms implemented since the adoption of the Greek MoU in 2009 include decentralisation of collective bargaining brought about by the undercutting of sectoral agreements by company level agreements; suspension of erga omnes effects of multi-employer agreements and encouragement for non-union employee representation; cuts in minimum wages set by national inter-sectoral agreements; extension of the working week; nominal wage cuts ranging up to 50 per cent in the public sector; a three-year wage freeze and overtime pay cuts in the private sector; and changes to employment protection law, including the loosening of controls over temporary agency employment (new 36-month limit), the loosening of controls over job rotation for fixed-term contracts and the extension of the permitted maximum duration of fixed-term contracts to 36 months. During this period, economic and social developments include an increase in overall unemployment to over 20 per cent; youth unemployment rising to over 50 per cent; tens of thousands of bankruptcies; a lack of growth leading to even further cuts in wages and social security, without reducing overall public debt levels; an impact on public health, including an increase in suicides (17 per cent to 35 per cent); and a rise in the proportion of people seeking medical attention from street clinics (from 3–4 per cent before the crisis to about 30 per cent).44   See Varoufakis, above (n 19).   Koukiadaki and Kretsos, above (n 42). According to a report by the IMF itself in May 2013, the programme of structural adjustment imposed by the Troika as a condition of financial assistance for Greece, while having some successes – including keeping Greece in the eurozone and avoiding negative spillover effects to neighbouring economies – was also characterised by ‘notable failures. Market confidence was not restored, the banking system lost 30 per cent of its deposits and the economy encountered a much deeper-than-expected recession with exceptionally high unemployment. Public debt remained too high and eventually had to be restructured, with collateral damage 43 44



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B  New Economic Governance The new economic governance initiated by the EU institutions is a kind of response to the crisis, but it no more addresses the root causes of the crisis than the MoUs have done. The measures taken essentially have the aim of imposing a stricter regime of macroeconomic surveillance than the one put in place under the SGP after 1997.45 The premise of this policy is that the imbalances that led to the crisis could have been avoided if there had been stricter enforcement prior to the crisis. As we saw above, this premise is highly doubtful. Although enforcement of the debt and deficit criteria was weak, this did not prevent a high level of formal convergence of these criteria being achieved. The problem was growing divergence at the level of the real economy. The recent economic governance reforms do not address this issue. The principal measures taken up to 2013 are as follows: 1. Initiation of the ‘European Semester’, a by-product of the ‘Europe 2020’ process initiated prior to the crisis by way of a review of the Lisbon agenda on competitiveness, which in effect adapts the open method of coordination to economic and fiscal policy. Member states must submit annual reports on a range of macroeconomic policy issues to the European Commission, which then benchmarks them.46 This process affects all member states including those, such as the United Kingdom, which remain outside the eurozone. 2. The ‘Euro Plus Pact’, agreed in March 2011. This is an intergovernmental agreement providing for increased coordination of policies on competitiveness, employment, public finances, financial stability and tax policy on the part of the eurozone member states and the eurozone ‘plus’ group of states intending to join the single currency zone at a future point. The documentation associated with the Pact emphasises flexicurity, reducing unit labour costs and decentralising wage bargaining as goals for policy coordination.47 3. The ‘Six-pack’ (a directive and five regulations) on macroeconomic and fiscal surveillance, brought into force in December 2011, and affecting the eurozone and eurozone plus member states.48 Together these instruments put in for bank balance sheets that were also weakened by the recession. Competitiveness improved somewhat on the back of falling wages, but structural reforms stalled and productivity gains proved elusive’. IMF, Ex Post Evaluation of Exceptional Access under the 2010 Stand-by Arrangement (Washington, DC, IMF, 2013) 1. 45   The TSCG is a stricter version of the SGP ‘in which the intention to balance the budget deficit over the cycle is superseded by a structural budget deficit rule, with the addition of stricter policy’; on the EDP see Sawyer, above (n 14) 20. 46   This aspect of the European Semester has been given a clearer legal basis under one of the ‘Sixpack’ measures, Regulation 1175/2011 (above n 6), and could provide the framework for increased surveillance of national economic policies under the aegis of so-called ‘treaties for competitiveness’. See Lukas Oberndorfer in this volume. 47   European Council Conclusions, above (n 8); see C Barnard, ‘The financial crisis and the Euro Plus Pact: A labour lawyer’s view’ (2012) 41(1) Industrial Law Journal 98. 48   See above (n 6).

96  Simon Deakin place a ‘preventive arm’ in the form of a medium-term objective (MTO) of budgetary stability, setting public debt and deficit targets, and a corrective arm in the form of an excessive deficit procedure (EDP) providing for escalating financial sanctions to be applied to member states in breach of the debt and deficit limits, based on the principle of ‘reverse qualified majority voting’ (that is, a sanction will be applied unless a certain majority of member states vote against it). Under the ‘Two-pack’ of regulations coming into force in May 2013,49 a member state must submit its national budget for review by the European Commission, which may request amendments if the budget reveals significant non-compliance with the requirements of the SGP. 4. The Treaty on Stability, Coordination and Governance (TSCG), the core of which is the ‘Fiscal Treaty’, which was agreed in January 2013. This is an intergovernmental agreement between virtually all the EU member states (the United Kingdom is among the very few not to agree to it) which sets out a balanced budget rule, according to which a member state’s structural (cross-cyclical) budget deficit must not normally exceed 0.5 per cent of GDP or 1 per cent under certain circumstances; a debt-brake rule, according to which a member state must take steps to reduce public debt if it goes above the 60 per cent threshold; and an automatic correction mechanism, whose details are to be specified at member-state level in accordance with EU-level guidelines. The TSCG is intended to supplement the Six-pack while in several respects imposing an even more stringent regime, intended to have ‘binding and eternal validity’.50 C  The ECB’s Changing Role, Financial Conditionality and the Pringle and OMT Judgments As the crisis has unfolded, the ECB has taken a more prominent role in responding to the need for stability in monetary policy and more generally in the eurozone. The prohibition on the bank lending to public authorities in Article 123 of the Treaty on the Functioning of the European Union (TFEU) and the ‘no-bailout’ clause in Article 125 TFEU were inserted in order to discipline eurozone member states into avoiding public sector deficits that would require financing from the ECB. With the legal framework governing the ECB in place, any direct financing of national government debt would, it was thought, involve each member state in underwriting the debts of the others. However, as decisions on levels   See above (n 7).   German Federal Chancellor Angela Merkel reported in Ö1-Morgenjournal (31 January 2012), cited by L Oberndorfer, ‘The fiscal compact bypasses democracy and the rule of law: New treaty next step in neoliberal crisis management’, Democratising Europe, 8 March 2012. Available at: www.tni.org/article/fiscal-compact-bypasses-democracy-and-rule-law. A different view from that of Chancellor Merkel is that the TSCG will prove to be unworkable, because its literal enforcement would remove essential flexibility in macroeconomic planning at member state level: ‘never before in economic history has logical incoherence been given a constitutional expression that reality is bound to wreck’ (Varoufakis, above (n 19) 66). 49 50



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of taxation and on the scale and content of public expenditure remained, in principle, matters for member states, pooling risks in this way without centralising decision making over fiscal policy created a further ‘moral hazard’ problem. The logic of this position was clear enough prior to the crisis, but, as it did not prevent the emergence of significant deficits, it arguably serves little purpose to maintain it now, particularly as it could constitute a barrier to effective action by the ECB to secure the single currency. Were the ECB able to intervene directly in the market for sovereign debt it would have more or less the same power to support the currency as national central banks had prior to the establishment of the single currency, and which central banks in other countries – including EU member states not in the eurozone – still have.51 This power was formally denied to the ECB in the Maastricht Treaty in order to reassure the member states that there was no possibility of underwriting each other’s debts.52 Despite this apparent legal barrier, the ECB came up with a partial solution from May 2010, which was to initiate purchases of government bonds on secondary markets. Its Securities Markets Programme (SMP) enables it to buy sovereign debt not directly from member states but from secondary parties, which in practice means commercial banks. The programme began with a concerted set of purchases of Greek sovereign debt and has since been extended to cover several other member states, not all of which have signed a Memorandum of Understanding. The effect of these bond purchases is akin to quantitative easing (QE) of the kind operated by the Bank of England and the US Federal Reserve during the current crisis, and before that by the Bank of Japan from the mid-1990s onwards; that is, they help to lower bond yields and thereby make it easier for governments to service their national debt.53 At the same time, the consequence of the programme is that the ECB now has large quantities of the sovereign debt of the member states concerned on its own balance sheet.54 This has prompted discussion of the risks to the ECB of taking on such quantities of debt and has fuelled suggestions that the central bank may be exceeding its mandate.55   Sawyer, above (n 14) 17.   It is arguable that this supposed reassurance was in fact illusory because of the way in which the ECB and wider euro system of national central banks processes intra-eurozone balances of payments and related credit transfers. See H-W Sinn and T Wollmershäuser, ‘Target loans, current account balances and capital flows: The ECB’s rescue facility’ (2012) 19(4) International Tax and Public Finance 468. 53   See generally B Fawley and C Neely, ‘Four stories of quantitative easing’ (2013) 95(1) Federal Reserve Bank of St Louis Review 51. Strictly speaking, the ECB’s SMP does not constitute QE of the kind practised by the other central banks because of steps it took to ‘sterilise’ its purchases, that is, to remove the assets concerned from the monetary system, thereby avoiding an increase in the money supply, but its effects on bond markets were similar to QE programmes elsewhere (ibid, 69, 72). 54   As of January 2013, the ECB held assets totalling €320 billion as a result of bond purchases carried out during the crisis. This is only a small fraction of the purchases undertaken, in each case, by the US Federal Reserve, the Bank of England and the Bank of Japan in the same period. See Fawley and Neely, above (n 53) 76–81. 55   This is one of the grounds of the German constitutional law challenge to the ECB’s emergency measures. See M Steen, ‘Bundesbank in court clash with ECB over bond buying plan’ Financial Times (11 June 2013). 51 52

98  Simon Deakin The second step taken by the ECB has been to provide direct liquidity to private banks in member states affected by the crisis. This takes the form of its Emergency Liquidity Assistance and Long-term Refinancing Operations, initiated from December 2011. Finally, through its Outright Market Transactions (OMT) Programme, announced in August 2012, the ECB made a formal undertaking to buy unlimited amounts of sovereign bonds on the secondary market to support the solvency of a member state if it agreed to conditions for the receipt of financial assistance under a MoU with the Troika or via the European Stability Mechanism (ESM). This was the context in which the ECB President Mario Draghi said that ‘within our mandate, the ECB is ready to do whatever it takes [because] sovereign premia hamper the monetary transmission mechanism’.56 Thus, the justification for this action was that the ‘spread’ on sovereign bonds which emerged after the onset of the crisis was causing distortions in the operation of monetary policy.57 Another way of looking at this sequence of events is that the spread arose in the first place only because of concerns that the ECB would not act to prevent a sovereign default, partly because it was not able to do so under the terms of the TFEU.58 The Bank’s broad interpretation of its own mandate appears to have solved this aspect of the crisis, at least temporarily, as bond yields in a number of debtor states were reduced to more sustainable levels following the announcement of the SMP and OMT programmes.59 However, the OMT Programme has yet to be put into action and it remains to be seen how bond markets would respond if it were tested. Concerns about the legality of the ECB’s interventions came to the fore in the Pringle case.60 Ostensibly this case was concerned with the legality of the Treaty amendment made in 2011 which formally empowers the EU to set up a programme of financial assistance to a member state (Article 136(3)) and, relatedly, the validity of the European Stability Mechanism Treaty (ESMT), an intergovernmental agreement establishing the ESM as a permanent body with the power to grant loans to member states in need of such assistance.61 The intention is that the ESM will eventually take over the role played to date by the Troika in providing emergency financial support while also disciplining member states to carry out ‘structural’ economic reforms. The Court ruled that Article 136(3) was adopted validly and the ESMT was also lawful, essentially on the grounds   See above (n 18).   See the record of the press conference on 2 August 2012 at which the ECB announced its OMT programme. (www.ecb.europa.eu/press/pressconf/2012/html/is120802.en.html) and ECB press release of 6 September 2012 on Technical features of Outright Monetary Transactions, available at: www.ecb.int/press/pr/date/2012/html/pr120906_1.en.html. 58   Sawyer, above (n 14) 22. 59   Fawley and Neely, above (n 53) 72. As Varoufakis puts it: ‘the OMT constituted a simple threat, by the ECB, that (if need be) the central bank would purchase as much short-term Italian and Spanish debt from the Italian and Spanish banks as [was] necessary to inflict losses on the short sellers of Italian and Spanish bonds’ (above (n 19) 68). 60   Case C-370/12 Pringle v Government of Ireland [2012] Judgment of 27 November 2012. 61   Treaty Establishing the European Stability Mechanism, T/ESM 2012/en, above (n 9). 56 57



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that the ESMT did not interfere with the Union’s exclusive competence in the area of monetary policy. Monetary policy, according to the Court, was concerned with ‘price stability’, whereas the ESM was concerned with ensuring ‘the stability of the euro area as a whole’ by providing financial assistance to member states. While member states had to comply with EU law when establishing and operating the ESM, this was ensured by the provisions of the ESM requiring ‘strict conditionality’ in the granting of loans: While it is true that, under Article 3, Article 12(1) and the first subparagraph of Article 13(3) of the ESM Treaty, the financial assistance provided to a Member State that is an ESM Member is subject to strict conditionality, appropriate to the financial assistance instrument chosen, which can take the form of a macroeconomic adjustment programme, the conditionality prescribed nonetheless does not constitute an instrument for the coordination of the economic policies of the Member States, but is intended to ensure that the activities of the ESM are compatible with, inter alia, Article 125 TFEU and the coordinating measures adopted by the Union.62

The Court went on to hold that the ESMT did not contravene Article 123 TFEU (preventing the ECB or national central banks from lending directly to public authorities of the Union or of member states) or Article 125 TFEU (the no-bailout clause) because the principle of strict conditionality under the ESMT ensured compatibility with Article 125 TFEU, and because the ESMT and Article 125 shared the common goal of ensuring budgetary discipline: ‘the prohibition laid down in Article 125 TFEU ensures that the Member States remain subject to the logic of the market when they enter into debt, since that ought to prompt them to maintain budgetary discipline’.63 The Court considered that the ESM could grant financial assistance only where it was ‘indispensable for the safeguarding of the financial stability of the euro area as a whole and subject to strict conditions’.64 The Court then considered the role of the European institutions when exercising powers under the ESMT, as the Treaty requires them to do in a number of respects. According to the Court in Pringle, the tasks allotted to the European Commission and the ECB under the ESM were not incompatible with their roles under the Treaty on European Union (TEU) and TFEU, because the European Commission and the ECB would have to act in accordance with EU law when exercising powers under the ESM Treaty.65 This implies a further reinforcement of the role of the Commission and ECB in policing member states’ macroeconomic policies. The Court finally examined the relationship between the ESMT and the Charter of Fundamental Rights of the European Union (CFREU). It ruled that the conclusion of the ESMT did not infringe the principle of effective judicial protection under Article 47 CFREU because   Case C-370/12 Pringle v Government of Ireland Judgment, para 111.   ibid, para 135. 64   ibid, para 136. 65   ibid, paras 155–69. 62 63

100  Simon Deakin the Member States are not implementing Union law, within the meaning of Article 51(1) of the Charter, when they establish a stability mechanism such as the ESM where the [TEU and TFEU] do not confer any specific competence on the Union to do so.66

This interpretation once again preserves the legality of the ESMT, but it does not necessarily mean that the CFREU will be of no relevance in the context of the operation of the ESM, since the Charter should in principle govern the conduct of the European Commission and ECB when they act under the provisions of the ESMT. In explicitly validating the ESM, the Court also implicitly, and in practice much more significantly, endorsed the actions of the ECB in intervening in the secondary market for government debt in order to forestall the possibility of a sovereign default by one or more eurozone member states. The Court’s ruling can be seen as turning on some fairly formal and questionable distinctions between direct lending to member states, on the one hand, and on purchases on the secondary market, on the other. But however formal this distinction may be, the practical effect is to be welcomed as it gives the ECB the flexibility it needs to conduct monetary policy in a way that would serve the goal of underpinning the single currency by regulating the market for national debt. The Pringle judgment can be seen, then, as endorsing a broad view of the ECB’s regulatory capacity within the domain of monetary policy, which aligns its powers more closely with those traditionally enjoyed by national central banks. This is an acknowledgement of the critical role that any central bank inevitably has in regulating the market in the interest of protecting its currency.67 The wider distinction drawn in Pringle between monetary policy, which is an exclusive competence of the Union but is narrowly drawn to refer to the goal of price stability, and the shared competence of economic policy, which is concerned with the stability of the eurozone as a whole, may also be questioned for its extreme formalism, but equally has real consequences that go beyond validating Article 136(3) and the ESMT. The effect is to expand the scope for intergovernmental action to coordinate macroeconomic policy measures. While this can be seen as validating an extra-constitutional element in European governance, it also involves recognition of the need for flexibility in adapting the existing framework to an economic context which was not foreseen – or at least not accurately – at the time of the Maastricht Treaty and SGP. Nor should it be assumed, for the reasons set out above, that the social rights and other human rights provisions of the Charter and of EU law more generally will not be relevant in the context of the operation of the ESMT or, for that matter, the TSCG. These instruments may not be part of EU law stricto sensu, but it follows from Pringle that the European institutions will not be able to act under them without regard to the CFREU and general principles of EU law.68   ibid, para 179.   On which, see Sawyer, above (n 14) 22. 68  This is not spelled out by the Court in Pringle, and indeed, was almost certainly not an intended result of its judgment, which was directed at ensuring that the European Commission and 66 67



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The flexibility shown by the Luxembourg Court in Pringle is in marked contrast to the approach taken by the German Federal Constitutional Court in the OMT case.69 The Court ruled that the ECB’s decision to establish the OMT was, on the face of it, an ‘independent act of economic policy’ which lay beyond the powers of the ECB in the area of monetary policy. The OMT programme also appeared, according to the German Court, to contravene the ban on the financing of Member State budgets under Article 125. However, the Court made a reference to the ECJ on the basis that the OMT programme might be upheld ‘if it could be interpreted or limited in its validity in such a way that it would not undermine the conditionality of the assistance programme of the EFSF and the ESM, and would indeed only be of a supportive nature with regard to the economic policies of the Union’. How the ECJ will respond remains to be seen. If it follows its own judgment in Pringle, it will not have much difficulty in finding that the OMT is lawful, for the reasons set out above. From a social policy perspective, however, the import­ ance of the OMT ruling is the stress on strict conditionality as the basis for the legality of the Bank’s actions. The ECB can, it seems, act flexibly in a crisis, as long as the effect is not to undermine the disciplinary dimension of monetary policy. III AFTER PRINGLE: THE LEGAL BASIS FOR AN ALTERNATIVE EMU

The European Commission’s communication ‘A Blueprint for a Deep and Genuine Economic and Monetary Union’,70 published in November 2012, sets out a process for the deepening of EMU that includes measures to realise increased economic and fiscal surveillance, unified banking supervision and the issuing of euro-denominated bonds. At a further stage, full fiscal and economic union is mooted, a process that would require treaty changes. While it represents a potentially significant step forward in the policy debate, there are several problematic aspects to the ‘Blueprint’. Although it is ambitious and compre­ hensive in its treatment of economic and monetary policy, it has virtually nothing to say about social policy, apart from fleeting references to greater policy coordination ‘in the field of taxation and employment’71 and ‘coordination and the ECB exercised disciplinary powers over the member states that were consistent with the general thrust of economic and monetary policy. However, if the argument presented in the text is correct, parties may argue in future litigation that it is not open to the Court to insist on the Community institutions performing their functions in a way that is consistent with economic and monetary policy, without also having regard to social policy and to the CFREU. How this argument would fare remains to be seen. 69   2 BvR 2728/13 (24 Jan 2014). For a valuable legal-economic discussion of this judgment, see C Gerner-Beurle, E Kücük and E Schuster ‘Law meets economics in the German Federal Constitutional Court: Outright Monetary Transactions on Trial’ (2014) 15(2) German Law Journal 281. 70   COM (2012) 777 final/2, above (n 5). 71   ibid, 11.

102  Simon Deakin surveillance of employment and social policies’.72 By omitting to discuss social policy, the ‘Blueprint’ presents a highly misleading picture of the nature of conditionality and policy coordination, which, under the MoUs, has had a far greater impact on labour and social security law at national level than on virtually any other area of law.73 Notwithstanding the lack of substance on labour law issues in the ‘Blueprint’, social policy began to assume a higher profile in the course of 2013. In May 2013, European Commission Vice-President Rehn referred, in a speech to the European Parliament, to the European Commission’s ‘working on preparing proposals to strengthen the social dimension of EMU’ and on ‘finding ways to better integrate the social dimension in the current structures for economic governance. For example, there is room for strengthening the surveillance of employment and social developments within the European semester framework’. This speech referred to the need for improved social dialogue but also to structural reform being pursued ‘ever more intensively’.74 Social policy received further attention in the summary note on consultations with the member states and institutional actors concerning a ‘deep and genuine EMU’ which was prepared by the Council Presidency for the June 2013 European Council.75 Under a section headed ‘the social dimension of the EMU’, this document noted that ‘while social policy remains an exclusive prerogative of Member States’, lack of coordination of social policy ‘can disrupt the functioning and the stability of the EMU’. It therefore proposed ‘improving the framework for the coordination of employment and social policies in the context of the European semester’, while acknowledging the ‘need for enhanced social dialogue at both the EMU and the national levels’.76 With this in mind, three complementary measures emerging from consultations ‘with the Member States and social partners’ were set out. The first was the identification of common benchmarks ‘in the spirit of the social benchmarks already considered by the Europe 2020 strategy’, which, it was suggested, would entail broadening the macroeconomic imbalances procedure (MIP) set out as part of the Six-pack with ‘complementary social indicators so as to better assess the interplay between social and economic policies and contribute to the sharing of best practices’.77 The second measure was concerned with amendments to existing indicators of employment and social protection performance under the European Semester process and the third proposed a set of policy instruments

  ibid, 27.   See above, section II. 74   European Commission (2013) Social pillar of the EMU – European Commission statement in the European Parliament, SPEECH/13/443, 22/05/13, available at: europa.eu/rapid/press-release_ SPEECH-13-443_en.htm. 75   Towards a Genuine Economic and Monetary Union: State of play of the consultations with Member States and institutional actors, summary note, above (n 2). 76   ibid, 2. 77   ibid, 3. 72 73



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to address investment in education and training by the member states.78 In line with these recommendations, the European Council conclusions contained this reference to social policy: [T]he social dimension of the EMU should be strengthened. As a first step, it is import­ant to better monitor and take into account the social and labour market situation within EMU, notably by using appropriate social and employment indicators within the European semester. It is also important to ensure better coordination of employment and social policies, while fully respecting national competences. The role of the social partners and social dialogue, including at national level, is also key.79

These are potentially significant developments that could open up a debate about the value of social indicators within the wider process of economic governance associated with the European Semester. However, the problem with the ‘Blueprint’ and with the later communications from the European Commission and Council referred to above is that they proceed from the false assumption that the causes of the crisis lay in inadequate implementation of the SGP, and that with stricter enforcement a future crisis can be avoided. Because it does not effectively address the root causes of the crisis,80 the ‘Blueprint’ is a missed opportunity. The lull in the crisis caused by the success of the ECB’s announcement of its OMT policy is likely to be a temporary respite at best. The asymmetry between monetary policy on the one hand, and economic and fiscal policy, on the other, is not addressed by the ‘Blueprint’.81 In the meantime, the highly negative effects of the MoUs on the economies and social infrastructure of the debtor member states continue. Greece is simply the most extreme case to date of high unemployment, mass business failures, the undermining of social cohesion and a recession verging on depression-like conditions. A plan for a truly ‘deep and genuine EMU’ would have to address the need for social cohesion and solidarity, in the sense of risk sharing, across and within member states. It has been argued in this chapter that the lack of effective coordination of wage policy was a major factor in the emergence of economic imbalances during the 2000s.82 The dismantling of sector-level collective bargaining under the MoUs has led to increasing inequality in the debtor member states, with knock-on effects for social cohesion.83 Thus, the policy pursued by

 ibid.   European Council, Brussels, 27–28 June, 104/2/13 Rev 2, Conclusions, 11. 80   On which, see section I above. 81   Varoufakis, above (n 19) 69 (discussing the likelihood of the crisis intensifying again); Boyer, above (n 33) 111 (arguing that debt ratios have worsened as a result of the Troika’s policies and that only Ireland of the current debtor states is in any position to resume economic growth as a consequence of austerity measures); IMF, Ex Post Evaluation report, above (n 44) 1 (accepting that Troika policies leading to a reduction in nominal wage costs do not reflect sustainable productivity improvements, with the implication that they will not lead to a long-term convergence of unit wage costs across the eurozone). 82   See above, section I. 83   See the discussion of the effects of internal devaluation in section II, above. 78 79

104  Simon Deakin the Troika is the precise opposite of what was required. There is an urgent need to reverse this policy and to put in place a framework for effective wage coordination at both national and transnational level. More generally, an egalitarian social policy which puts solidaristic collective bargaining and coordinated wage determination at its core could provide the basis for an alternative conception of EMU. This would see harmonisation of basic labour standards as part of the process of fiscal and economic union set out in the ‘Blueprint’. This would also be consistent with what has elsewhere been called a ‘human-developmental’ conception of labour law. This is one that stresses the multiple functions played by labour law rules, in terms of addressing market failures and assisting economic coordination, on the one hand, while enhancing social cohesion and labour market capabilities, on the other.84 Translated into the framework of the new economic governance, this would see a role for social policy coordination as part of the wider process of policy learning associated with the European Semester. A first step would be the inclusion of social benchmarks in the macroeconomic indicators used in the MIP, but this step, while welcome, would be insufficient by itself to address the design problems in EMU that helped to trigger the crisis and continue to obstruct its resolution. The asymmetries between monetary and economic policy, on the one hand, and social policy, on the other, are still in place. Monetary policy must in future be buttressed by greater coordination of both economic and social policy. The following interlocking elements could form part of an alternative programme for a sustainable EMU: 1. The ECB should formally assume the role of lender and market maker of last resort in respect of sovereign debt in order to counter distortions arising from the short-term speculation in international bond markets. It is arguable that the ECB has already arrived at this point by default.85 The Pringle judgment has removed legal obstacles to the ECB’s emergency measures arising from potentially restrictive interpretations of the TFEU, but a further move that would strengthen the bank’s position would be to grant a banking licence to the ESM, enabling the ECB to lend to it directly.86 2. Monetary policy (the aim of which is maintaining price stability) should be balanced by a growth-orientated economic policy, coordinated through the European Semester process. Growth targets should be included in the benchmarks for the European Semester alongside those relating to fiscal and budgetary stability. There is no legal obstacle to this step in light of the clear distinction drawn between monetary policy (a competence unique to the   Deakin, above (n 2).   See above, section II. 86   The German Federal Constitutional Court’s ruling in the OMT case, 2 BvR 2728/13 (24 Jan 2014) (see above, section II), is of course a potential obstacle to this interpretation of the ECB’s powers. 84 85



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Union) and economic policy (a shared competence of the Union and the member states) set out in Pringle.87 3. Counter-cyclical fiscal policy should be given a greater role. As things stand, the TSCG is an obstacle to the concerted and targeted use of fiscal policy to counter-recessionary conditions. Some economic commentators predict the de facto demise of the TSCG if current recessionary conditions continue.88 How this scenario might develop remains to be seen, since the TSCG formally commits its signatory member states to embed its provisions in constitutional texts. However, a paradoxical and again presumably unintended effect of Pringle was to limit the potential legal significance of the TSCG, by ruling that the ESMT was not ‘part of EU law’. This may allow the member states and the European institutions some much needed flexibility in future deliberations over macroeconomic policy. 4. Coordination of transnational wage determination should be actively promoted. This can be pursued not just through the European semester process, but also through the social dialogue provisions of Article 152 TFEU. There is scope here for proposals which would avoid the limitations placed on Union competencies in the areas of pay and freedom of association as set out in Article 151(5) TFEU. Policy learning in this area should be framed with a view to finding a common framework for linking wages to productivity increases, which, in the spirit of the open method of coordination, would be sensitive to differences in wage determination systems at national level. In this regard, ensuring that wages at least keep pace with productivity in the creditor states is just as important as aligning wage increases with productivity growth in the debtor states.89 5. At a further stage in this process, consideration should be given to the harmonisation of labour laws at Union level, in ways which would complement the coordination of economic and social policies through the European Semester. Although, as we have just noted, there are limits on Union competencies in the social policy field, there is scope for new initiatives using existing powers under the TFEU.90 These would permit, for example, new directives to be adopted in the field of termination of employment – an area where there is currently a danger of a ‘race to the bottom’ induced, in large part, by the policies of the Troika. CONCLUSION

This chapter has considered the role of social policy within the institutional framework of EMU, both prior to and during the crisis. It was argued that the   See the discussion in section II above.   See Varoufakis, above (n 18). 89   On this point, see Armingeon and Baccaro, above (n 32). 90   See the chapter by Klaus Lörcher in this volume. 87 88

106  Simon Deakin asymmetrical relationship between social policy, on the one hand, and economic and monetary policy, on the other, under the post-Maastricht arrangements for currency union, was a contributing factor in the imbalances which triggered the eurozone crisis after 2009. Since the onset of the crisis and the emergence of a new legal and institutional framework for economic governance, social policy has assumed a new role in the official discourse of the European institutions, as a basis for addressing imbalances and asymmetries in the operation of the eurozone economies. The precise contribution that social policy will play is not yet clear, but is likely to take the form, to begin with, of a recalibration of benchmarks and indicators used in the European Semester process. This is a potentially significant step forward, but even if relevant social policy indicators are developed, it will not go far enough in addressing the need for institutional reform. If the design faults of EMU are not effectively addressed, there can be no prospect of an early end to the crisis and the recessionary economic conditions that it has generated. Five elements of an alternative road map for EMU – one that would avoid the austerity trap in which European economies find themselves – were identified. They were: (1) clearer institutional acknowledgement of the ECB’s role as lender and market maker of last resort, capable of taking the steps necessary to underpin the single currency; (2) use of the European Semester process to initiate a growth-orientated economic policy, to complement the price-stabilisation objectives of monetary policy; (3) recognition of the role played by countercyclical fiscal policy in macroeconomic management; (4) development of mechanisms for the transnational coordination of wage determination, centred around solidaristic and egalitarian forms of collective bargaining; and (5) the resumption of debate over the role that the harmonisation of labour laws could play in complementing policy learning in the area of economic governance. This alternative road map is not proposed in the belief that anything resembling it will soon become official EU policy. The neoliberal consensus that has shaped the policy of austerity will not easily be shifted. There is, however, one overwhelming reason for believing that neoliberal policies will, at some point, be reassessed, namely that these policies, and the institutional framework they informed, are the root cause of the crisis that Europe is currently enduring. We may reach this point sooner rather than later, and when it arrives, the ensuing debate will determine not just the future of social policy in Europe, but the fate of the wider project of European integration.

5 Austerity Measures, Democracy and Social Policy in the EU BRUNO VENEZIANI

INTRODUCTION1

I

N THIS CHAPTER we shall examine how the austerity measures have consistently given rise to negative effects in terms of individual and collective labour law and welfare systems as envisaged by the European legal system after the Lisbon reform. The aim is to discover how and to what extent these measures have involved the principles of new European governance inspired by the values of democracy, solidarity and pluralism. These values are deeply rooted in the European constitutional traditions that prevailed from the end of the Second World War and the advent of the EU single market. The idea is that the new rules introduced into Article 136 of the Treaty on the Functioning of the European Union (TFEU) and in the intergovernmental treaties and regulations risk profoundly modifying the already unbalanced equilibrium between EU institutions and national legal-constitutional orders and between state political powers and collective private autonomy. In other words, we shall try to evaluate the democratic legitimacy of the EU as expressed by the model of participatory democracy to make decision-making processes more effective and accountable.2 We assume that the new wave of legal interventions aimed at managing the financial crisis cannot elude from the more general context of the acquis communautaire. Article 152 TFEU and Articles 27 and 28 of the Charter of Fundamental Rights enhance the collective autonomy of social partners at EU level. Their rights of information and consultation are strongly embedded as a fundamental social right in the EU culture, as clearly affirmed also in the European Social Charter (Articles 21 and 22). According to the Luxembourg judges the task of the social dialogue (and the parties that are co-regulators at   The views and opinions expressed in this chapter are those of the author.   V Schmidt, ‘Democracy and Legitimacy in the European Union Revisited. Output, Input and Throughput’ (The Transformative Power of Europe, Freie Universität Berlin) Working Paper KFG, November 2010, No 21, 7. 1 2

110  Bruno Veneziani European level) is ‘to democratize Union life’.3 In a social governance regime, solidarity constitutes the essential value closely linked to the emergence of the trade union movement and its structures and functions – collective bargaining, association, collective action and participation – and in labour law it is the equivalent of democracy in politics. The idea of social governance is a paradigm to strengthen the EU’s commitment to positive integration, also in the current crisis in which, although the Fiscal Treaty and the Treaty on Stability Coordination and Governance (TSCG) have the nature of intergovernmental treaties, none of the EU institutions – European Central Bank (ECB), European Commission and Council – are entirely absent from managing the rules provided for by the contracting parties. I  THE NEED FOR DEMOCRACY AND THE MORTGAGE OF THE PAST

The debate about the EU’s democratic deficit has engaged both politicians and scholars since the establishment of the Common Market. The intentions of the ‘founding fathers’ were clearly inspired by a strategy of liberal laissez-faire, which is reflected in the almost total absence of social policy and labour law provisions. The main goals of European government were a single market and free competition. The word ‘democracy’ was absent from the Preamble and first part of the EC Treaty. Liberty and peace (Preamble, Recital 8) were the only values emphasised – both logically and historically – in memory of the recent war and to the challenges and threats to which the founding states were subject in the 1950s. Although from the beginning the Community contained supranational elements and provided for some pooling of sovereignty, the European Parliament was not endowed with legislative powers. The reason was clear: as an international organisation founded on a treaty between sovereign states, single member states tried to circumscribe the surrender of national sovereignty within clear borders. Thus, the only effective power granted to the Parliament was a purely negative power of review; that is to say, the power to reject regulations and directives but not to initiate or amend legislation. Thus, the birth of the Community was a substantial anomaly; its member states, emerging from the ruins of war, had to fight to restore parliamentary democracy in their own political context.4 Since 1957, however, the situation has changed considerably, even though the process towards democratic legitimacy has been difficult and slow. A short historical sketch can clarify the steps taken. The ‘Original Sin’ stemmed from the fact that the Council was empowered to take all important decisions on the basis of proposals from the European Commission, sometimes consulting a   Case T-135/96 Ueapme v Council and Commission [1998] ECR II-2335, § 89.  GF Mancini, Democracy and Constitutionalism in the European Union (Oxford, Hart Publishing, 2000) 32–33. 3 4



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parliamentary assembly composed of members delegated by national parliaments. The first reform to promote democracy took place in October 1976, when it was decided that the members of the Assembly would be elected by direct universal suffrage. The goal was to build a more democratic basis for the decision-making of EC institutions. In any case, national parliaments were no longer directly involved. The role of the European judiciary has been predominant with a view to establishing institutional equilibrium among the supranational bodies and powers. The Court of Justice5 was invited to determine the right of Parliament to be consulted before legislation is adopted under the provisions of the EC Treaty. The Court declared that the consultation provided for in the Treaty is the mean which allows the parliament to play a part in the legislative process of the Community. Such power represents an essential factor in the institutional balance intended by the Treaty. Although limited it reflects at community level the fundamental democratic principle that the peoples should take part in the exercise of power through the intermediary of a representative assembly. Due consultation of the parliament therefore constitutes an essential [procedural requirement] disregard of which means that the measure concerned is void.6

The decision is interesting for two reasons in particular. First, the Court affirmed the idea that democracy consists of maintaining the institutional balance established by the law. Second, it invoked the ‘fundamental democratic principle of popular participation in the exercise of a legislative power not supported openly in the text of the Treaty but . . . strongly embedded in the constitutional systems of the member states’.7 In the Preamble to the Single European Act 1986 the member states expressed their determination to work together to promote democracy on the basis of fundamental rights. Finally Article F(2) of the Maastricht Treaty 1991 committed the European Union to respecting fundamental rights as guaranteed by the European Human Rights Convention and the constitutional tradition common to the member states. The Amsterdam Treaty 1997 (Article 6 (ex F)) underlined not only that the Union is based on the principles of liberty, democracy and respect for human rights and fundamental freedoms, but also that it respects fundamental rights as envisaged in the Treaty of Rome 1950. Article 6 tried to accelerate a progress towards a more complete constitutional system. Of course, that system is founded on checks and balances and on the principle of limited government under rule of law, but it lacks an essential component of a democratic regime. In fact, from a theoretical point of view democracy is not a matter of ensuring that people’s elected representatives play a full role in the process of law-making; democracy is also about protecting the rights of individuals.  Case 138/79 Roquette Frères v Council [1980] ECR 3333, para 33.   Mancini, above (n 4) 35.  ibid.

5 6 7

112  Bruno Veneziani This explains why Article O of the Treaty on European Union, as amended in Amsterdam, specifies that ‘[a]ny European State which respects the principles set out in Article F(1) – liberty, democracy, respect for human rights and fundamental freedoms and the rule of law – may apply to become a Member of the Union’. Natural and legal persons are involved in the application of the EU Treaty by the Union institutions and the member states. II  THE SLOW PROCESS OF DEMOCRACY

Progress on the path of conceptually corroborating the idea of democracy within the legal culture of the EU has been made only step by step. The first step was made when the Court of Justice recognised, in Van Gend en Loos, that democratic legitimacy has two aspects. It involves, on the one hand, people’s right to participate in law-making through representative bodies and, on the other hand, the ability of individuals to use their rights in judicial proceedings, invoking legal provisions ‘which become part of their legal heritage’.8 The link between these two aspects was consequently one of the reasons given for upholding the doctrine of direct effect, according to which ‘the nationals of the states brought together in the Community are called upon to cooperate in the functioning of this community through the intermediary of the European Parliament and the Economic Social Committee’.9 The second step occurred when the Court revealed its sources of inspiration by stating that fundamental human rights ‘were enshrined in the general principles of common law . . . protected by the Court’10 and, furthermore,11 ‘in the international treaties for the protection of human rights on which the member states have collaborated or of which they are signatories’. Both sources therefore can provide for ‘guidelines which should be allowed within the framework of Community law’. Both statements represent a strong contribution to enhancing the idea of the European Community as a legal order pervaded with democratic aspirations. But that was not sufficient to give a complete picture of what democracy means at European level. In 2000, one commentator wrote that ‘today’s Europe presupposes democracy as a heritage of values and institutions shared by the member states in all of which the representatives of the people control the action of the executive branch’. Nevertheless, he concluded, Europe ‘is not itself democratic’.12 Europe still ignored at that time what happened in the periphery of member states where the major feature of post-parliamentary democracy – the representation of private organised interests – was widespread. There seemed to be no   Case C-26/62 Van Gend en Loos [1963] ECR 1, 12.  ibid. 10  Case Stauder v City of Ulm [1969] ECR 419. 11   Case 4/73 Nold, Kholen-und-baustoffgrosshandlung v Commission [1974] ECR 491. 12   Mancini, above (n 4) 65. 8 9



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doubt that its European version was far less balanced than the forms it took in the national context. For that reason, some commentators argued that the EU was a fairly extreme case of weakness in the self-organisation of large-scale or more diffuse interests, such as wage earners, women, consumers and the unemployed workers.13 However, the Treaty on the European Coal and Steel Community (ECSC) (1951) did not ignore participatory democracy, which already existed in some legislative and constitutional models at national level. German law on Mitbestimmung and the Italian Constitution 1948 (Article 46) envisaged a substantive model of the involvement of workers’ representatives in decision making at company level. The ECSC Treaty provided for a model of participation of ‘private interests’ in the Consultative Committee, and the Council had the power to choose the more representative workers’ organisations (Article 18). The High Authority was entitled to consult all private interests, including workers and their organisations (Article 46(1)). The High Authority was later dissolved into the EC Commission, however, and the Council and the Consultative Committee into the Economic and Social Committee. The lack of a catalogue of fundamental rights – including individual rights, collective labour rights and welfare rights – at Community level had led to a reaction by national constitutional courts. In 1967, the German Constitutional Court indicated, albeit in hypothetical fashion, that the Community legal order, lacking any provision for human rights, had no lawful democratic basis.14 The absence of fundamental rights in the European Community context is astonishing compared with the creative jurisprudence of the Court of Justice, strongly engaged in an effort to establish a relationship between Community law and national legal orders similar to that of a constitutional federal state. In the Court’s foundational period from 1960 to 1970, the Luxembourg judges reacted to the anomie of the system and promoted a process of ‘constitutionalisation’ of the Community legal architecture through the doctrines of direct effect, supremacy of treaty law and the doctrine of implied powers (included the corollaries of exclusivity and pre-emption).15 It constituted a rebuke with regard to the ‘economic’ rationale of the overall Community system, in which human and labour rights were not involved. The reaction of the Court of Justice of the European Union (CJEU) stimulated a slow process of positive integration through a group of important decisions disregarding rights of a purely economic nature as a consequence of the continued expansion of the scope of EU policy and law. The Luxembourg judges focused progressively on a number of issues such as procedural due process, respect for private life, legal professional privilege, non-retroactivity of 13   W Streeck and PC Schmitter, ‘From national corporation to transnational Pluralism: Organized interests in the Single European market (1991) 10 Politics and Society 133. 14  Bundesverfassungsgericht, Judgment 18 October 1967, in BVerfGE, 22, 293, reproduced in (1968) Common Market Law Review 483. 15   JHH Weiler, The Constitution of Europe, 5th edn (Cambridge, Cambridge University Press, 2005) 19–26.

114  Bruno Veneziani criminal provisions, the principle of administrative measures by courts and the inviolability of domicile.16 In the social sphere, however, Article 119 of the Treaty of the European Community (TEC) provided a particularly good example of the subordinate status of the original EC Treaty’s social provisions, although the principle of equal pay for equal work and the idea of equality in labour relations was – and still is – one of the features of democracy. In some countries underpaid female workers had already claimed their full rights before the courts on the basis of the equal treatment provisions enshrined in their constitutions. This trend towards equality was to be consolidated by means of directives on equal pay, equal treatment and social security and the extensive case law of the CJEU, which ruled that Article 119 gave underpaid female workers rights enforceable before national courts.17 The Court’s role as interpreter of rules and guarantees in the labour and social areas is relatively recent and has increased since the enactment of the Charter of Rights and with the ever-expanding scope of EU powers and competences, not to mention the contributions of other inter­ national human rights bodies and courts. III  FEATURES, INGREDIENTS AND OBJECTIVES OF DEMOCRACY

As we have already seen, the shortcomings of the model of democracy inherited from the past include the limited power of the European Parliament, the distance between citizens and institutions, the lack of a role for political parties, the limited weight of group interests and the absence of a Bill of Rights. The institutional structure set out by the Lisbon Treaty empowers the EU’s fragile democracy to make decision making more effective and accountable. The planned reform recalls the culture of the project of a Constitution for Europe 2004 whose Title VI was named ‘The democratic life of the Union’, inspired by the principle of democratic equality and the two models of representative (Article I-46) and participatory (Article I-47) democracy. The Lisbon Treaty extends the power of the European Parliament in many areas, such as agriculture, judicial and police cooperation, delegated acts, criminal law and the ratification of international agreements to which the Union is a party. The Treaty distributes competences and powers between the Union and member states more clearly and introduces special arrangements to involve national parliaments in legislative processes (Articles 10 and 11 of the Treaty on European Union (TEU)). In light of this new culture of ‘participation’ it has created the European citizens’ ‘initiative of invitation’ to the European Commission ‘to submit appropriate proposals’ to the Union (Article 11 TEU) and in that domain the European   Mancini, above (n 4) 173, fn 13 ff.   Case 43/75 Defrenne II [1976] ECR 455, paras 8–12.

16 17



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Parliament promotes more consistent channels of communication between citizens and the EU institutional system. It is important to stress that the architecture of the Treaty – revised in Lisbon – is inspired by principles and values provided for by Article 2 TEU and Articles 7(1), 13 and 49 TEU as parameters of legitimate actions and interpretations on the part of all institutions.18 The chapter on democracy is included in Title II (‘Provisions on democratic principles’) which tries to react to all issues and problems that have emerged since the European institutions came into being. It is a ‘golden rule’ stemming from socio-political doctrine that an institutional system or polity in most, but not in all cases ‘must enjoy formal legitimacy to enjoy social legitimacy’.19 The model proposed by the Treaty has a structural/functional nature: in other words, it is representative democracy (Article 10(1) TEU) according to which citizens are directly represented in the European Parliament and member states are represented in the European Council by their heads of state or government and in the Council by their governments, which are democratically accountable either to their national parliaments or to their citizens (Article 10(2) TEU). All citizens have the right to participate in the democratic life of the Union, and political parties at European level contribute to forming European awareness and to expressing the will of citizens (Article 10(3) and (4) TEU). The main reason for choosing this model lies in the strategy of involving national parliaments in the EU decision-making process to ‘contribute actively to the good functioning of the Union’ (Article 12 TEU). The clause on the subsidiarity check is considered a key tool for ensuring this. Article 12 in fact determines a specific engagement of national parliaments in the areas of freedom and secur­ ity and justice, such as the ‘political monitoring of Europol and the evaluation of Eurojust’s activities’.20 Article 12 also reasserts inter-parliamentary cooperation between national parliaments and the European Parliament. An important feature of the entire structure is the legislative function acquired by the European Parliament as actor in a system of co-decision-making, which has now become an ‘ordinary legislative procedure’, consisting of ‘the joint option by the European Parliament and the Council of a regulation, directive or decision on a proposal from the European Commission’ (Article 289 TFEU). But the scope of co-decision-making has been extended to more than 30 cases of variable importance and provided for in 14 new legal bases. The most signific­ ant sectors of extension are freedom, security and justice, coordination of social 18   B Veneziani, ‘The Role of the Social Partners in the Lisbon Treaty’ in N Bruun, K Lörcher and I Schömann (eds), The Lisbon Treaty and Social Europe (Oxford, Hart Publishing, 2012) 125. 19   Weiler, above (n 15) 81. 20   R Matarazzo, ‘National Parliaments after the Lisbon Treaty. A New Power Player or Mr No in EU Decision-making?’ in R Matarazzo (ed), Democracy in the EU after the Lisbon Treaty, IAI Research Paper (Rome, Nuova Cultura, 2011) 47.

116  Bruno Veneziani security for migrant workers, culture, measures necessary for the use of the euro and the structural and cohesion funds.21 Article 2 TEU provides for the substance of democracy which is – no longer a principle, as in the previous treaty – a value in itself and comprises a web of other values to be diffused by the Union in all societies, such as pluralism, nondiscrimination, tolerance, justice, solidarity and equality between men and women (Article 2 TEU). The two features – functions and substance – of democracy envisaged in the Lisbon reform suggest the idea that all the architecture of the EU is based on the general principle of the ‘rule of law’. The rule of law is not a merely an expression of the idea that state power cannot be exercised arbitrarily, but also that the subordination of power to rules is functional. It allows individual or collective liberty as a fundamental organising principle of modern society and the social state. Legality is imbued with the rule of law and with other elements of modern social states: democracy, separation of powers and respect for human rights.22 In the modern state the principle of legality protects people against arbitrary use of power or, more precisely, it demands a legal basis to legitimise state action. The assumption of power by the EU, mainly with regard to the classic prerogatives of executives – such as foreign and security policy – must be balanced by giving more powers to European citizens. The Charter of Fundamental Rights is an instrument against centralisation of powers in the hands of supranational entities. This is the history of all parliamentary constitutional democracies that emerged from the ruins of the last world war. The European Charter 2000 (revised 2007) was in fact inserted into the text of the Constitutional Treaty 2004 and, because of its failure, was given ‘the same legal value as the Treaty’ in the Lisbon reform (Article 6(1) TEU). In the structure of the European system – still shadowed by the ambiguity of a European state and its semi-federal nature – the proclamation of fundamental guarantees of citizens has considerable impact because the division of competences with regard to the growing importance of the principle of subsidiarity is both vertical (EU member states) and horizontal (EU and social partners’ actions).23 Subsidiarity was laid down officially as a principle of law for the first time in the Maastricht Treaty (Article 3b(2) TEC) and has not been changed. Now it is more clearly affirmed by Article 5(3)(1) TEU. This helps to clarify the substance of functional democracy internal to the dialogue between EU institutions and member states, as indicated by the German Federal Constitutional 21   J-C Piris, The Lisbon Treaty. A Legal and Political Analysis. Studies in European Law and Policies (Cambridge, Cambridge University Press, 2010) 119; P Syrpis, ‘The Treaty of Lisbon: Much ado . . . But about what?’ (2008) 37(3) Industrial Law Journal 219, 224. 22   L Besselink, F Pennings and S Prechal, ‘Introduction: Legality in Multiple Legal Orders’ in L Besselink, F Pennings and S Prechall (eds), The Eclipse of the Legality Principle in the European Union (Alphen aan den Rijn, Wolters Kluwer, 2011) 25. 23   T Blanke, ‘The Principle of Subsidiarity in the Lisbon Treaty’ in N Bruun, K Lörcher and I Schömann (eds), The Lisbon Treaty and Social Europe (Oxford, Hart Publishing, 2012) 236.



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Court, according to which ‘the Treaty of Lisbon pursues the objective of achieving more transparency concerning division of competence between Union and member states and it extends the European Union’s competences’.24 Nevertheless, national member states may run the risk of modifying their own models of sovereignty and democracy. In this respect the reaction of the member states were clear in asserting – in the words of the UK House of Lords – that the Lisbon Treaty ‘would make no alteration to the current relationships between the principles of primacy of European EU law and parliamentary sovereignty’.25 The constitutional identity of the state – according to the Constitutional Tribunal of Poland – is a political achievement and a concept that determines the scope of excluding (from the ‘competence to confer competences’) ‘the matters which constitute the basis of a political system of the state, the fundamental principles of constitution and the principles of social justice’.26 The reaction of the German Constitutional Court to the Lisbon Treaty must be read in light of a strong defence of the mechanism of the social state,27 of its obligation ‘to ensure just social order’ and to ‘create the minimum conditions for a life for its citizens that is in line with human dignity’.28 A solemn declaration on workers’ rights and social policy was one element of the package offered to the Irish government at the European Council (18 and 19 June 2009) with a view to obtaining the assent of the Irish people.29 ‘Social order’, ‘social policy’, ‘social justice’, ‘social state’ and ‘workers’ rights’ compose a maximum common denominator of Western European constitutions since the Second World War. In their Bill of Rights these words are closely linked to the values of dem­ ocracy and pluralism. Democracy and pluralism and solidarity, contained in Article 2 TEU, represent the genetic code of labour law. In the context of a constitutional state, inspired by the principle of liberty, any rule protecting collective autonomy gives maximum latitude to self-governing activities, such as negotiation, selforganisation, self-defence and participation.30 One French commentator doubts   ibid, 246.   House of Lords Constitutional Committee, European Union (Amendment Bill) and the Lisbon Treaty: implications for the UK Constitution, HL Paper 84 (London, House of Lord, 2008) paras 95 and 142. 26   Constitutional Tribunal of the Republic of Poland, 24 November 2010, Ref No K32/09, para 2.1. 27   BVerfG, 2 BVE/08 from 30 June 2009, para 168, available at: www.bverfg.de/entscheidungen/ es20090630_2bve000208.html. See D Halberstam and C Möllers, ‘The German Constitutional Court says “Ja zu Deutschland!”’ (2009) 10 German Law Journal 1241. 28   BVerfG, 2 BVE/08 from 30 June 2009, para 257 and, ‘to respect social principles’ and ‘social responsibility’, para 258. 29   Statement of the Concerns of the Irish people on the Lisbon Treaty as set out by the Taoiseach, 11–12 December 2008; and European Council 18–19 June 2009, Presidency Conclusions, point 4(b) and Annex 2, in Piris, above (n 21) 55, 57. 30   A Jacobs, ‘Collective Self-regulation’ in B Hepple (ed), The Making of Labour Law 2nd edn (London, Mansell, 2010) 193 ff, and A Jacobs, ‘Collective Labour Relations’ in B Hepple and B Veneziani (eds), The Transformation of Labour Law in Europe (Oxford, Hart Publishing, 2009) 201 ff; A Blogg, The Democratic Aspects of Trade Union Recognition (Oxford, Hart Publishing, 2009) 3 ff. 24 25

118  Bruno Veneziani that the principle of subsidiarity in the Lisbon reform is in conformity with the principle of democracy, because it gives exclusive legitimacy to create a compulsory legal order to the nation state, which has primacy in regulating public and social order. At present ‘The same order is not given to decentralized, subordin­ ate and intermediate institutions of society such as families or associations’.31 Analysis of democracy as a value requires supplementary research on the actors, subjects, mechanism and tools to make it effective in the EU as a complex legal and political system of ‘multilevel governance through democracy’. We need to find in the context of the Lisbon Treaty other elements that could support the idea that state subsidiarity could eventually be supplemented by the principle of social administration through the social partners as evidence of a democratic context. IV  DEMOCRACY AND THE NEW EUROPEAN SOCIAL MODEL

Analysis of EU democracy is based on the idea that the new institutional framework requires a systematic method of interpretation. Each chapter indicating the goals and duties of the EU as a legal system must be read in light of the values enshrined in the provisions of the EU Charter of Fundamental Rights. The EU is now obliged ‘to recognise’ and no longer merely to ‘respect’ the rights, freedom and principles set out in the Charter and its Preamble, which qualifies human dignity, freedom and solidarity as ‘indivisible and universal values on which the EU is founded’. Article 3(1) TEU indicates a hierarchy between values as primary and objectives as secondary and many objectives must be related to the values of Article 2 TEU. Values are intertwined with the issues of citizenship, whereas the objectives are related to the EU.32 In a rational and correct reading and systematic interpretation, all rights and freedoms protecting human beings as citizens, workers or consumers cannot be sacrificed to the commercial aims of public or private organisations. Rights containing fundamental values and freedoms are qualified tools for achieving the democratic functioning of a political/legal order, rooted in the constitutional principles of the Treaty, including ‘the principle that all Community acts must respect fundamental rights, that respect constituting a condition of their lawfulness which is for the Court to review in the framework of the complete system of legal remedies established by the Treaty’.33 In this perspective the values of democracy and solidarity enshrined in the same rule (Article 2 TEU) are co-related and together refer closely to the social   A Lyon-Caen, ‘Subsidiarité et droit social europeén’ (1997) 4 Droit social 382 ff.   F Dorssemont, ‘Values and Objectives’ in N Bruun, K Lörcher and I Schömann (eds), The Lisbon Treaty and Social Europe (Oxford, Hart Publishing, 2012) 50. 33   CJEU joined cases C-402/05 P and case C-415/05 P Kadi and Al Barakaat v Council ECR II-649, para 285. The EC Treaty ‘constitutes the Constitutional Charter of a Community based on the rule of the law’, CJEU Opinion 1/91 European Community Area [1991] I-6079, para 21 and CJEU Case C-15/00 Commission v European Investment Bank [2003] ECR I-7281, para 75. 31 32



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goals enumerated in Article 3 TEU: a social market economy (Article 3(3); social exclusion (Article 3(3)(2)); social cohesion (Article 3(3)(3)); social justice and protection (Article 3(3)(2)); sustainable development, solidarity among people, fair trade, eradication of poverty and protection of human rights (Article 3(5)). It is the only interpretation that explains the structure and functioning of the EU as a democratic and social state. Democracy and solidarity are meaningful components of the unitary concept of the new European social and political citizenship. This defines the condition of European citizens in the polity, the labour market and the welfare context. The idea of the European social ideal type as traced back to when the European Commission described itself based on the conviction that economic and social progress are inseparable.34 But the Lisbon Treaty has a more comprehensive concept of European citizenship entailing civil rights (freedom, equality), political rights (participation in democratic life) and social rights (welfare, individual and collective labour relations).35 Solidarity is an essential component of EU democracy and identifies the Union as a social state within a larger context of democracy. Social European citizenship has multiple meanings linked to the status of workers as members of collective institutions, such as the polity (public sphere) and trade unions (private sphere). The social citizen is entitled to a set of rules and principles to be implemented in order to qualify and protect his or her identity in a more general EU framework. Most of these values are closely interwoven with labour law, social policy, welfare and industrial relations. Dignity and equality compose the genetic code of individual employment relationships and welfare systems (Article 2 TEU). Both values in fact are contained in specific rights of the Charter of Fundamental Rights related to the status of workers as citizens of a state and of enterprises. A subset of provisions deals with dignity: human dignity (Article 1); protection against forced labour (Article 5); rights to: respect for private and family life (Article 7) and personal data (Article 8); freedom of thought, conscience and religion (Article 10); expression and information (Article 11); freedom of assembly and association (Article 12); choose an occupation and engage in work (Article 15); protection in the event of unjustified dismissal (Article 30); and fair working conditions (Article 31). Democracy means building a welfare state inspired by the values of equality, non-discrimination (Articles 20, 21 and 23) and social inclusion (Articles 25, 26, 34 and 35).

34   European Commission, White Paper ‘European Social Policy – A Way Forward for the Union’ (1994) COM (94) para 3. 35   Veneziani, ‘The Role of the Social Partners’, above (n 18) 123.

120  Bruno Veneziani

V  SOCIAL POLICY: DEMOCRACY AS GOOD GOVERNANCE

Principles and values provided for by the Lisbon Treaty and Articles 7(1), 13 and 49 TEU are the parameters of the legitimacy of actions and interpretation on the part of all EU institutions. Title X TFEU describes for the Union and member states the area of social policy – employment and living and working conditions – and the corresponding functions (promotion and improvement) to make possible their harmonisation (Article 151 TFEU). But inside Article 153 TFEU the responsibility of the Union is clearly expressed only in terms of supporting and complementing the activities of member states in a large number of matters related closely to individual and collective labour law. Article 153 covers a wide range of legislative competences for directives, but the power of intervention is limited because the competences can be exercised in the form of regulations but in this case ‘excluding any harmonization’ (Article 153(2)(a) TFEU)). The renewed Treaty devotes much attention to the legal delimitation and definition of categories of competence: areas of exclusive and shared competences and supporting and coordinating or supplementing action. The web of competences is strictly articulated in conformity to a system of decisions and Acts: directives taken following ordinary legislative procedures for areas provided for in Article 153(2); legislation in all forms, including measures for all social policy fields (Article 153(1)) covered by a special legislative procedure with unanimity voting. The same principle is also applied to combating social exclusion and to the modernisation of social protection systems. The principle of subsidiarity is also applied in the social policy area in the form of a supporting role for supranational bodies. The Union has the function of carrying out actions to ‘support, coordinate and supplement’ the actions of member states (Article 2 5) TEU). The clear distribution of competences satisfies the criterion of transparency, a key ingredient of democracy, based on different principles, such as the principle of conferral (Articles 1(1), 5(1) and 5(2) TEU), the division of powers between Union and member states (Article 4(1)) and the clarification of competences to the extent that the Union does not supersede national competences in these areas. It may not entail harmonisation of member states’ legislation.36 From the institutional perspective democratic legitimacy stems from the plurality of EU institutions and, of course, of the private actors acting in that context. 36  ‘[E]ven though overall transparency is not fully achieved’, according to K Lenaerts and N Cambien, ‘The Democratic Legitimacy of the EU after the Treaty of Lisbon’ in J Wouters, L Verhey and P Kiiver (eds), European Constitutionalism Beyond Lisbon (Antwerp, Intersentia, 2009) 191; problems of coordination and interpretation of the rule in the field of social policy are raised by K Lörcher, ‘Social Competences’ in N Bruun, K Lörcher and I Schömann (eds), The Lisbon Treaty and Social Europe (Oxford, Hart Publishing, 2012) 173; Syrpis, above (n 21) 226 ff.



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The Lisbon Treaty involves the European Parliament as co-legislator. On the other hand, the passerelle clause (Article 153 (2) sub-paragraph 4 TFEU) offers the possibility of unanimous decision-making by the Council to apply the ordin­ary legislative procedure (that is, with qualified majority voting) for all areas indicated in Article 153(1), except for more sensitive issues, such as social security and social protection. However, democratic legitimacy also consists of increasing the involvement of citizens or their representative institutions in the Union’s decision-making processes. It must be noted that Article 48(7) TEU offers a so-called ‘simplified revision procedure’, with the involvement of national parliaments.37 VI  COLLECTIVE LABOUR LAW: DEMOCRACY AS DISTRIBUTION OF SOCIAL POWERS

A  The Legal Foundations of Good Governance The idea of the proximity of the EU to its citizens corroborates the democracy inside the European legal framework through a process ‘of creating an ever closer union among the people of Europe in which decisions are taken as openly as possible and as closely as possible to the citizen’ (Article 1 TEU). The legal tools for achieving this goal are rights for citizens and representative associations and obligations for the EU: • ‘The right to participate in the democratic life of the Union’ through ‘decisions . . . openly and as closely as possible to the citizens’ (Article 10 TEU). • The obligation (for EU institutions to give ‘by appropriate means . . . citizens and representative associations’ the opportunity ‘to make known and publicly exchange their views in all areas of Union actions’ (Article 11(1) TEU). • The obligation ‘to maintain an open, transparent and regular dialogue with representative associations and civil society’ (Article 11(2) TEU). • The obligation of the European Commission ‘to carry out broad consultations with parties concerned in order to ensure that the Unions’ actions are coherent and transparent’ (Article 11(3) TEU). • The obligation of EU bodies, offices and agencies ‘to conduct their work as openly as possible’ (Article 15 TFEU). This framework tries to make up for a lack of faith on the part of European citizens in EU governance and decision making.38   Lörcher, ‘Social Competences’, above (n 36) 186 ff.   COM (2005) 494 final; COM (2006) 35 final. The reaction of the Commission (COM (2007) 568 final. The idea of transparency goes back to the Preamble of Regulation 1049/2001, 2: ‘None the less, democracy can be measured by the closeness, responsiveness and accountability of the government to governed’. Although this formula (representative democracy) is vague, ‘it is sufficient for the present purpose’, Weiler, above (n 15) 81. 37 38

122  Bruno Veneziani Both pluralism and solidarity (Article 2 TEU) describe the essential core of collective labour law and industrial relations at supranational and national levels. The clearest expression of the new approach to the problem of democracy in this field is the ‘constitutionalisation’ at EU level of the pillars of trade union law by the Charter of Fundamental Rights: freedom of association (Article 12(1)), rights to collective bargaining and collective action (Article 28) and the right to information and consultation at enterprise level (Article 27). The new trend at the level of primary law is the idea that fundamental rights must embed and promote collective autonomy. This set of rules directly corroborates the architecture of the European edifice and promotes the social partners. Furthermore, the goal of embedding fundamental rights in EU culture is achieved, as stated by Article 6(2) TEU, through the accession of the EU to the collective social guarantees of the European Convention on Human Rights and Fundamental Freedoms and also as they arise from the constitutional traditions of the member states. The rights contained in both sources ‘shall constitute general principles of EU law’ (Article 6(3) TEU). We can add a more cautious but no less meaningful reference in the Preamble of the TEU (‘confirm . . . the attachment’, 5th Recital), as well as Article 151(1) TFEU ‘having in mind’ to the fundamental rights of the European Social Charter (1961 revised in 1996) and the Strasbourg Community Charter (1989). Collective bargaining and action, the rights to strike and collective action, the right to free association and participation compose the legal mosaic of the icons of so-called ‘social’ democracy. The EU, like all Western states, has to deal with the idea that democracy is a system of balancing different and countervailing powers. That is true also in the social and labour sphere where power is collective power and labour law is concerned with this elementary phenomenon of social power.39 In this case the rule of law has a principal purpose to regulate, support and restrain social powers. The new Article 152 TFEU provides evidence that the EU has adopted the model of auxiliary legislation to recognise and support the activities of the social partners. This rule needs to be analysed in light of the new philosophy of the Lisbon Treaty. It is placed in part III Title X of the TFEU on social policy and represents the values of representative democracy in the social fields (social democracy) and participation (social dialogue). In other words, it expresses the idea that the ‘collective autonomy’ of the social partners is a protagonist of a reshaped legal order as a whole, in which all the ingredients of collective labour law have acquired full legal status. Article 152 TFEU recognises and promotes explicitly the functions of collective autonomy at EU level. Recognition and promotion are legal obligations extended from the European Commission – as indicated in Article 154 TFEU –   O Kahn Freund, Labour and the Law, 1st edn (London, Stevens & Sons, 1972) 5.

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to all Union bodies and institutions now engaged in roles that are not only passive (‘respecting’ a right) but also proactive (‘facilitating’) dialogue in general, so ‘that dialogue may lead to contractual relations, including agreements’ (Article 155(1) TFEU) at supranational level. Collective autonomy and social dialogue represent a parameter of ‘democratic equality’, in other words the right of citizens as workers to receive equal attention from EU institutions, bodies, offices and agencies (Article 9 TEU). Thus, primary law offers a range of qualities of participatory democracy, for example, when Article 11 TEU requires that ‘the European Commission shall carry out broad consultation with the parties concerned in order to ensure that the EU’s actions are coherent and transparent’ (Article 11(3) TEU). All institutional frameworks ‘shall promote its values, advance its objectives, serve its interests, those of its citizens and those of member states and ensure the consistency, effectiveness and continuity of its policy and actions’ (Article 13(1) TEU). B  The Actors and Model of Participatory Democracy Social dialogue and collective negotiation represent for social partners legal devices to manage power relations in a political context.39 History shows the slow emergence of the social partners’ role during the life of the European legal order.40 Article 152 TFEU ‘recognises’ the pre-existing acquis communautaire and the importance of functions performed by collective autonomy (Articles 153, 154 and 155 TFEU), so that the first obligation (to recognise) has as its specific aim to not reduce the intensity and breadth of the actions of the social partners. The body of secondary EU law on the involvement of the social partners has had a crescendo sequence in the evolution of secondary law since the so-called social directives of the 1970s41 and then amended and consolidated with the directives on collective redundancies (1998), transfer of undertakings (2001), information and consultation in the EU community (2002), involvement of employees in the statute for European cooperatives society and European Company (2003) and recasting the Council Directive on European Works Councils (2009). The right to information and consultation is strongly embedded in this legal framework as a fundamental social right in the EU, as clearly affirmed in the Charter (Article 27) and in the European Social Charter (Articles 21 and 22).42 40   B Bercusson, European Labour Law, 2nd edn (Cambridge, Cambridge University Press, 2009) 262. 41  F Dorssemont, ‘Workers Involvement in Secondary Law Prior to the Recast Directive’ in F Dorssemont and T Blanke (eds), The Recast of the EUWC Directive (Antwerp, Intersentia, 2010) 31; there is an historical sketch in U Mückenberger, ‘Workers’ Representation at the Plant and Enterprise Level’ in B Hepple and B Veneziani (eds), The Transformation of Labour Law in Europe (Oxford, Hart Publishing, 2009) 233. 42   42 C Kollonay-Lehoczky, ‘The Fundamental Right of Workers to Information and Consultation under the European Social Charter’ in Dorssemont and Blanke above (n 41) 3.

124  Bruno Veneziani The political role of the social partners is underlined in the legislative process at EU level, with regard to both submission of a proposal and the decision on its content (Article 154 TFEU). The CJEU has emphasised this aspect of the functions of collective autonomy in evaluating the social dialogue as a ‘substitute of the European Parliament in the decision-making process’. In other words the social dialogue (and the parties that are co-regulators at European level) has as its task to ‘democratize Union life’.43 In the view of the Court the fundamental principle of democracy (Article 2 TEU) requires that the participation of the people in law-making processes should be otherwise assured44 or guaranteed in alternative ways, for example, by the social partners’ stipulating the agreement for which the Council – on the European Commission’s proposal – is to provide a legal basis. The autonomy of the social partners has been compromised by the additional supervision requirement of the European Commission, the Council and the Court concerning the precise identity and quality of the actors (representativeness).45 Representativeness in fact is an integral part of democratic legitimacy in the political and social field. Both criteria – identity and quality – are correlates because functional representation, when exercised through fair representation and balanced with the mechanism ensuring public control of the process, can reinforce democratic legitimacy without endangering or jeopardising the rights of the individual. The Court of First Instance stipulated that in order for a European collective agreement to be democratically legitimate, it had to be assured ‘whether, having regard to the content of the agreement in question, the signatories, taken together, are sufficiently representative’. The same court further claimed that the representativeness of those parties had to be judged also ‘with respect to the substantive scope of the framework agreement’.46 The decision taken by the Luxembourg judges seems to confer on the social partners the role of ‘functional substitute’ for the traditional institutions and bodies involved in European governance in social policy, where competences and responsibilities ‘are not clearly distributed’.47 This problem remains unresolved, but could be resolved successfully if Article 152 TFEU were interpreted in light of the EU Charter in terms of a reinforced role for the social partners in building a truly democratic system of industrial relations, as called for by the European Trade Union Confederation (ETUC). The precondition is guaranteeing, first of all, respect for transnational trade union rights – that is, the rights of association and strike action at European level – amending Article 153(5)   Case T-135/96 Ueapme v Council and Commission [1998] ECR II-2335.   ibid, para 89. 45  A Veldman, ‘The Quasi-legislative Powers of the European Social Dialogue: Imperfect Delegation of Powers or Ambivalent Recognition of Contractual Autonomy?’ in L Besselink, F Pennings and S Prechal (eds), The Eclipse of the Legality Principle in the European Union (Alphen aan den Rijn, Wolters Kluwer, 2011) 196. 46   Case T-135/96 Ueapme v Council and Commission [1998] ECR II-2335, §§ 90, 91, 110. 47   Veldman, above (n 45) 195. 43 44



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TFEU. This reform was also proposed by some members of Working Group XI on Social Europe as a logical consequence of the recognition of the autonomy of action of management and labour.48 Secondly, Article 152 must be interpreted as a device for anchoring the role of the European social partners as co-regulators and their involvement in EU-related decision-making procedures, in general as regards consultation on all issues concerning their direct responsibilities and enlarging their competences. A third role might be to reinforce the structural identity of the social dialogue, providing for the establishment of a permanent social partner infrastructure to develop institutionalised consultation and negotiation with them.49 One path of possible reform is indicated by the new horizontal mainstreaming social clause, Article 9 TFEU, which ensures convergence of all EU powers in support of the aims of Article 3 TEU. It establishes a reference standard for the institutions in respect not only of their special legislation on social policy competences (Article 151 TFEU), employment (Article 145 ff TFEU) and the European social fund (Article 162 ff TFEU), but also of their other com­petences, taken as a whole. The range of matters to be taken into account by the EU represents, in Article 9 TFEU, a series of topics involving the role of the social partners. Each of the issues can stimulate their active participation in terms of proposals and control of measures planned by the EU, such as how high is the level of employment, education and training and social protection; how adequate is social protection; how keenly is the fight against social exclusion being waged; and finally which legal tool the EU should employ to pursue these aims. The correct method of interpretation is to read Article 9 TFEU in light of the open method of coordination (OMC) so that the choice of wording – ‘high’, ‘keenly’, ‘adequate’, ‘which’ – will be understood as an unequivocal reference to a determination to redress the balance in favour of socially directed purposes.50 The Lisbon Treaty enlarged the scope of intervention of the OMC to social policy in general terms (Article 5(3) TEU) and more specifically in Articles 153(2)(a) and 156 TFEU. Only the second of these rules provides measures including all sorts of acts to encourage cooperation between member states through initiatives aimed at improving knowledge, developing exchanges of information and best practices, promoting innovative approaches and evaluating experience, excluding any harmonisation of the laws and regulations of the member states. 48   See ‘Recommendation by Transnational Trade Union Rights Expert Group to the European Trade Union Confederation (ETUC) on effective application of Art 152 of the TFEU’ in N Bruun, K Lörcher and I Schömann (eds), The Lisbon Treaty and Social Europe (Oxford, Hart Publishing, 2012) Appendix, 307. 49   Veneziani, ‘The Role of the Social Partners’, above (n 18) 131. 50   P Vielle, ‘How the Horizontal Social Clause can be Made to Work: The Lessons of Gender Mainstreaming’ in N Bruun, K Lörcher and I Schömann (eds), The Lisbon Treaty and Social Europe (Oxford, Hart Publishing, 2012) 115.

126  Bruno Veneziani In general the OMC must be considered essentially as a procedural device aimed at improving mutual learning among the states both in employment and social policy. It is an expression of soft law following the period of integration through law of the first decades, characterised by normative supranationalism. Soft law now indicates a postmodern model of normative intervention focused mainly on procedures rather than on imposing compulsory rules. Nothing excludes, anyway, that recourse to legislation in these cases can be justified by the most democratic principle of the ordinary legislative procedure (ex Article 294 TFEU) with the co-decision of the European Parliament, as well as the principle of legal certainty. The openness of procedure should entail the participation of local and regional authorities, social partners and civil society and other institutions. Nevertheless, the social partners are absent from the procedure envisaged in Article 150 TFEU and the European Parliament is simply informed. The European Union has Article 152 TFEU to fill this gap, also because all social inclusion policies presuppose active ‘coordination’ which ‘involves all levels of government and relevant actors’.51 VII  FINANCIAL CRISIS, CONDITIONALITY, DEMOCRACY AND LABOUR LAW: A RETURN TO TECHNOCRACY?

In general terms, the practices imposed in the context of the reaction to the EU stability strategy are affecting the so-called ‘deficit countries’ asymmetrically because the latter are suffering a loss of national sovereignty as a result of the strong intervention of European governance, leading to a democratic deficit. The modern era of divergence both across and within countries should form the centrepiece of all efforts to redress the current situation and redirect the EU onto the road of original social convergence. The neoclassical model of the relationship between the law and the economy sees the market as essentially self-equilibrating52 and views labour law rules and collective bargaining totally differently from what we see in the past history of Western European democracies. In its opposition to the Euro Plus Pact (11 March 2011) the ETUC has underlined that the Pact, ‘with its strict unit labour cost comparison, will force member states to enter into a competitive downward spiral of undercutting wages and working conditions’.53 A new rule amending the Lisbon Treaty envisages the legal framework according to which the Council shall adopt measures specific to the member 51   As suggested by the Social Protection Committee to the Permanent Representatives Committee (part I)/Council (EPSCO), ‘The future of social open method of coordination’ (OMC), 23 May 2011, SOC 418, Ecofin 276, SAN 105,1045/11 para (f). 52  S Deakin, ‘The Lisbon Treaty, the Viking and Laval Judgments and the Financial Crisis: In Search of New Foundations for Europe’s “Social Market Economy”’ in N Bruun, K Lörcher and I Schömann (eds), The Lisbon Treaty and Social Europe (Oxford, Hart Publishing, 2012) 29. 53   ETUC, ‘ETUC wants a fair, “cooperative” Europe, not a “race to the bottom” Competitiveness Pact’ press release (Brussels, 11 March 2011).



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states of the eurozone: (a) to strengthen the coordination and surveillance of their budgetary discipline; and (b) to set out policy guidelines for them, while ensuring that they are compatible with those adopted for the whole of the Union and are kept under surveillance (Article 136 TFEU). The difference between more general discipline for all member states and a special legal framework for the eurozone is striking in terms of legal prerogatives: in the first case the EU has the power of ‘simple coordination’ of economic policy through broad guidelines (Article 5(1) TFEU). In the second case ‘enhanced coordination’ and ‘surveillance’ imply a more stringent power of intervention (Article 136 TFEU). The European Council decided in March 2011 to add a more serious obligation to Article 136 TFEU: [M]ember states of the euro zone may establish a mechanism to be activated that is indispensable to safeguarding the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality.

All the architecture of the European Stability Mechanism (ESM), which assumes the role of the European Financial Stabilisation Mechanism (EFSM) and the European Financial Stability Facility (EFSF), will provide for the task of safeguarding the financial stability of the euro area as a whole and financial assistance. Conditionality is a principle of the new economic governance, activated by mutual agreements, and it seems to have considerably increased the technocratic character of EU governance. It controls macroeconomic adjustment programmes through a rigorous analysis of public debt sustainability.54 The EU intervention was provoked by the crisis surrounding sovereign debt; the weakness of the financial sector, together with persistent low growth and macro­economic imbalances, are slowing down recovery and creating risks for the stability of Economic and Monetary Union (EMU). In the words of the European Council Conclusions of 29 June 2012,55 inspired also by the report, Towards a Genuine Economic and Monetary Union of the President of the European Council, the EU must set out ‘four essential building blocks’ for the future of EMU: an integrated financial framework, an integrated budgetary framework, an integrated policy framework and strengthened democratic legitimacy and accountability.56 The two pacts ‘for growth and jobs’ were stipulated among the states or governments to stimulate smart, sustainable, inclusive resource-efficient and job-creating growth in the context of the Europe 2020 Strategy.

  Doc 24–25 March 2011, EUCO 10/1/11 Rev 1, 21.   EUCO 76/2, 1. 56   EU Council, Towards a Genuine Economic and Monetary Union, report of the President of the EC, press release 296 (Brussels, 26 June 2012); Conclusion 28–29 June 2012, part II, point 4. 54 55

128  Bruno Veneziani A close analysis reveals that, in the text of Council Conclusions, fundamental social rights are not mentioned at all. The essential reason is that the new governance must be supplemented by improved monitoring of employment and social policies, ‘particularly those which can have an impact on macroeconomic stability and economic growth’.57 In this perspective, employment policy, and labour law as such, is still subordinate to economic strategies and, strangely enough, no documents issued during the economic and financial crisis mention the intervention of social partners at EU level in elaborating plans within the framework of the new economic European governance. This is also the clear philosophy of the President of the European Commission as set out in his speech to the EU Parliament in 2011 which focused essentially on increasing financial stability and competitiveness without any reference to fundamental social rights and social partner involvement.58 Instead, member states’ contracting parties, ‘conscious of their obligation to regard economic policies as a matter of common concern’ (Fiscal Compact, Preamble, point 1) are obliged to respect, in the implementation of the fiscal compact, ‘the specific role of the social partners’, as it is recognised in the national law of the same parties (point 19). The absence of collective autonomy in elaborating the EU mechanism of intervention is astonishing because the financial strategy has a strong impact on the role – as envisaged by the Lisbon Treaty – of labour law and welfare systems. In fact, Article 9 TFEU belongs to a ‘provision having general application’ and indicates the obligation of the EU to define and implement policies and activities finalised to promote an important series of aims, such as high employment, the guarantee of adequate social protection, the fight against social exclusion, a high level of education and training and protection of human rights. The strategic function of the EU implies the promotion of the measures that have direct implications for essential elements of individual employment contracts at national level (wage cutting) or targets for long-term and youth employment (labour market), health care and social security benefits (welfare), levels and content of collective bargaining systems and collective action (trade EU law). Many of these areas ‘fall under national competences’ or are excluded from EU intervention (Article 153(5) TFEU). The mechanism discernible throughout the strategy seems to be a version of OMC, under the influence of a duty to promote the social partners’ role. In fact, Article 152 TFEU is the backbone of Title X (Social policy) but tends to be ignored, although the Euro Plus Pact envisages monitoring unit labour costs at national level with the aim of ensuring that they evolve ‘in line with productivity’59 and the agreement reached by the signatory parties of the Pact is   Conclusions of the European Council, 9 December 2011, EUCO 139/11, point 4.2.   Président de la Commission Européenne, ‘Avis de la Commission Européenne sur le projet de modification de L’art 136 du Traité’, Session plénière du Parliament Européen, Strasbourg 15 February 2011. 59   EUCO 10/1/11, 16. 57 58



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based on the idea that ‘competitiveness is essential to help the EU grow faster on the condition that it ‘preserves our social models’;60 the European Parliament will play its full role in line with its competence and ‘social partners will be fully involved at EU level through tripartite social summits’.61 The main commitment of all the parties involved is still subordinate to the old ‘mortgage’ because the Pact ‘will fully respect the integrity of the single market’,62 thus extending economic and monetary policy at the EU level into the area of social policy, previously understood to be largely the domain of member states.63 In general the Fiscal Treaty (Treaty on Stability, Coordination and Governance (TSCG)) poses the question of respect for the rule of law as one of the pillars of a democratic regime. The approach proposed by the austerity programme has been debated at all levels, national and supranational, by experts and organisations, including the Parliamentary Assembly of the Council of Europe, which is worried about the impact of the new rules ‘on democratic process and social rights standards’.64 The therapy proposed seems to be expressed in terms of an ‘escape from technocratic diktat’, enhancing political – ‘form of participation and consultation citizens’65 – and social (‘social partnership’)66 democracy. From a general political point of view, it is true that the fiscal measures entail a different distribution of political powers from the bottom to the top of the European institutional architecture, in the absence of a pure or classic federalist structure which could propose the European Commission as a sort of government controlled by the EU Parliament.67 The absence of political legitimacy entails also, inevitably, the attribution of competences in the social sphere between EU and national legal institutions (parliament, executives, legislation and constitution), given the close link between the economy and labour rights protection. The social objectives of the EU’s Strategy 2020 – full employment, quality of jobs, reduction of social inequalities and poverty68 – if taken seriously and pursued in the right way could risk being delayed and ‘locked in the new economic governance architecture’ composed of hard fiscal indicators for member states 60   Preamble of the Euro Plus Pact, Stronger Economic Policy Coordination for Competitiveness and Convergence, EUCO 10/1/11, Annex I, 13. 61   EUCO, point (a), Annex I. 62   EUCO, point (d), Annex I. 63   Deakin, above (n 52) 34. 64   Council of Europe, Parliamentary Assembly, ‘Austerity measures – A danger for democracy and social rights’ Debate 26 June 2012, Resolution 1884 (2012), Final version, para 1.2. 65   Council of Europe, Resolution 1884, para 10.5. 66   ibid, para 4. 67   C Degryse and P Pochet, Monetary union, economic coordination and democratic legitimacy, ETUI Policy Brief, 5/2011, 4; W Van Gerven, ‘Wanted: More Democratic Legitimacy for the European Union’ in J Wouters, L Verhey and P Kiiver (eds), European Constitutionalism beyond Lisbon (Antwerp, Intersentia, 2009) 153. 68   European Commission, ‘Europe 2020: A European Strategy for Smart, Sustainable and Inclusive Growth’ COM (2010) 2020, Brussels, 16–18.

130  Bruno Veneziani without the proper involvement of the social partners.69 The reaction of the European Commission in 2013 reveals worries about exclusion of ‘social concerns in the overall policy landscape’ because the participation of social partners in decision making is ‘critical for the social dimension of EMU’.70 First, the rules adopted in building a decision-making procedure – and therefore using the simplified revision procedure – seem to circumvent the Lisbon Treaty provisions on the revision of European treaties,71 entail an alteration of EU competences and are inconsistent with the general ‘constitutional’ prin­ ciples of EU law (doctrine of supremacy, effective judicial protection and fundamental labour rights). Second, it is normatively incoherent to use intergovernmental treaties to sidestep restrictions and obligations contained in EU primary law. It is, also, conceptually incoherent to regulate matters of fundamental and intrinsic concern to the EU Treaties – including the social aims the EU must promote – outside the EU legal order. All institutions established beyond the borders of the ‘constitutional’ framework of the EU and beyond the reach of its citizens-­ workers, as individuals, and collective freedom and social rights guaranteed under the Charter, are inconsistent with the principle of democratic governance.72 Furthermore, in this framework the ESM enjoys ‘immunity from every form of judicial process’ except to the extent that the ESM expressly waives immunity (Article 32(3)). The Court of Justice in the Pringle case rejected all these objections in the name of two strong arguments: (i) maintaining the financial stability of the monetary union is a higher objective (§ 135); and (ii) the ESM is compatible with TFEU because it is indispensable for safeguarding the financial stability of the eurozone (§ 136).73 Both arguments pertain to a political opportunity rationale. In fact the adoption of measures inconsistent with or circumventing prohibitions or obligations of the EU Treaties – which have a ‘constitutional’ nature – has the corollary that also fundamental legal rules and principles of labour law and welfare systems, negotiated and adopted democratically by mandated representatives of the 69   ETUC position on Europe 2020 Strategy – An Assessment, meeting 5–6 March 2013, para I. Also, European Parliament Resolution on the European semester for economic policy coordination: implementation of 2012 priorities (26 October 2012). 70   European Commission, Social Pillar of the EMU – Commission statement in the European Parliament, Speech of Olli Rehn 13/443 of 22 May 2013, press release database, available at: europa. eu/rapid/press-release_SPEECH-13-443_en.htm; see also European Commission, The Social Dimension of the Europe 2020 Strategy – A Report of the Social Protection Committee (EU Publication Office, Luxembourg, 2011) 8. 71   P Craig, Oral evidence before the European Scrutiny Committee of the House of Commons, 7 February 2012 HC Deb (2012) 1817-I (UK), available at: www.publications.parliament.uk/pa/ cm201012/cmselect/cmeuleg/uc1817-i/uc181701.htm. 72   J Tomkin, ‘Contradiction, Circumvention and Conceptual Gymnastics: The Impact of the Adoption of the ESM Treaty on the State of European Democracy’ (2013) 14(1) German Law Journal 180. 73   Case C-370/12 Pringle v Ireland, Judgment of 27 November 2012.



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member states, are still subordinated to the old logic of preservation of stability and ‘integrity of the Single Market’.74 Third, the European Parliament has warned that establishing a permanent stability mechanism outside the EU institutional framework poses a risk to the integrity of the treaty-based system.75 With the reform of the Treaty the EU has been granted and exercises a substantial degree of economic coordinating competence in relation to measures that concern the single currency and the establishment of the ESM by a different legal mechanism from an intergovernmental treaty. This mechanism, operating outside the framework of the EU Treaties, has the consequence that the activ­ ities of the ESM are no longer subject to the legislative and democratic guarantees on which the institutional architecture of the European social model has been based.76 This framework includes tools, goals and values envisaged for enhancing social policy (Articles 2, 3, 9 and 11 TEU) and promoting functions of collective autonomy (Title X TFEU and the Charter of Fundamental Rights). The austerity strategy has based its main argument on the supposed lax budgetary stance adopted by European governments and the apparent inability of democracies to cope with problems of excessive public debt, frequently accumulated over many years by irresponsible political parties and banking crises. Competitiveness, viability of public finances and financial stability are closely related to labour market dynamics and welfare institutional protections, to the extent that economic–financial reform implies consequences for labour incomes, wage determination policy, pensions, health and care benefits and early retirement schemes. The reaction of national democracies to the adoption of the Euro Plus Pact focused essentially on the worry that member states were obliged to enter ‘into a competitive downward spiral of undercutting each other’s wages and working conditions’,77 weakening their internal social cohesion. The postmodern paradigm of the neoclassical model of regulation is clearly expressed in the idea that all reforms that systematically deregulate the levels of acquired rights and principles belonging to the constitutional tradition of EU countries are deemed to be ‘employment-friendly’. Decreasing notice periods and levels of severance pay, abolishing the limitations on atypical contracts and reducing constraints on minimum working time are measures justified in the name of ‘increasing employment’.   EUCO 10/1/11, point (d) Annex I.   European Parliament Resolution, 23 March 2011 on the Draft European Council Decision Amending Art 136 of the TFEU with regard to a stability mechanism for member states whose currency is the euro, available at: Eur.ParL.Doc:P7_TA (2011)0103, para 7. See the strong reactions of the states against the fiscal Compact envisaged in the Pringle case judgment, Tomkin, above (n 72) 187–88. 76   S Sciarra, ‘Patterns of European labour law in the crisis’ (2011) 2, available at: www.europeanrights.eu. 77   ETUC press release, above (n 53); C Degryse, ‘The New European Governance’ ETUI Working Paper, Brussels 2012, 14. 74 75

132  Bruno Veneziani A relevant counter-critique emerges from recent researches that have shown how the improved internal flexibility, coupled with nominal wage concessions in return for supposed employment stability in some industries (temporary closures in the car industry is the classical example), have prevented – though perhaps they have only delayed – more significant labour shedding so far.78 The suggested strategy proposes social policy as a new parameter of protection as far as it can ‘play a major role in cushioning economic shocks, in preventing families falling into poverty and improving social cohesion’.79 The corollary of the neoliberal paradigm is the reduction of the coverage of collective bargaining and it implies also a substantial weakening of trade union power,80 insofar as all the terms and conditions of individual employment contracts are negotiated and included in collective agreements. A  Collective Bargaining as a Structure of the Democracy in the Social and Political Systems The austerity policies pursued by national governments in order to satisfy the obligations imposed by the EU have inevitably affected one of the pillars of social democracy. The collective bargaining landscape in Europe has been altered because austerity has targeted bargaining outcomes and modified the structure and level of collective negotiations. The first effect is that following the direct link between unit wage costs and competitiveness as the key objectives, the internal devaluation approach has been to increase flexibility of wages existing in collective bargaining arrangements. The result is the consequent shifting of economic decision-making from the national to the European level, followed by decreasing national discretion over social policy choices, reviewing the degree of centralisation of wage setting arrangements and indexation mechanisms, as well as ensuring that public sector wage settlements do not undermine competitiveness in the private sector. The second effect is to shift the main focus of collective bargaining from multiemployer to company level arrangements. In Romania cross-sectoral bargaining was essentially abolished by the government’s unilateral introduction of the social dialogue Act in 2011; in Hungary the only tripartite forum for discussion of 78   EU Commission, ‘Economic Crisis in Europe: Causes, Consequences and Responses’ (2009) 7 European Economy 36 ff; Joint ILO–IMF Conference in Cooperation with the office of the Prime Minister of Norway, ‘The Challenges of Growth, Employment and Social Cohesion’, Oslo, August 2010, available at: www.osloconference2010.org/discussionpaper.pdf. 79   ILO/IMF, ‘The Challenges of Growth’, above (n 78) 86: ‘the positive correlations between the level of social security expenditure per capita and reduction of poverty rates are established developed countries’ and it has been shown that’ effects can be ever higher in developing countries’. 80  See the recent DG ECFIN report, Labour Market Developments in Europe 2012 (EU Commission) Staff Working Document, Education and Training Monitor 2012 accompanying the Document – Communication from the Commission – Rethinking education: investing in skills for better socio-economic outcomes, SWD (2012) 373 final, 20 November 2012.



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recommendations on wage increases has been abolished81 and in Ireland one effect of austerity was a government withdrawal from negotiations on a reform of the public sector in light of deteriorating public finance. Then, after 22 years of sectoral wage determination, it brought the return of company level bargaining. The third effect implies pressures towards decentralisation resulting from the tightening of rules on the extension and application of sectoral agreements and an increase in the threshold for trade union representativeness as a precondition for negotiating collective agreements. Furthermore, the perception that the financial system has been in immediate danger has weakened tripartite social pacts and reinforced the government role in preparing emergency therapy, although without the involvement of social partners.82 That is why the social dialogue is strongly underlined by the International Monetary Fund (IMF)/International Labour Organization (ILO) as an institutional device to ‘avoid an explosion of social unrest’.83 B  The Upsetting of the Hierarchy Principle in the Relationship between Law and Collective Bargaining A recent law in Italy (2011) allows company or regional or local agreements to derogate also in pejus from national laws and collective agreement stipulations at national level. The rationale of this profound modification is the attempt to increase employment, to improve the quality of labour contracts, to put a stop to illegal labour, to manage industrial and employment crises and to encourage new investments and start-up of new activities. The reform overturns the consolidated collective bargaining structure and paradigms of collective labour law. The first deals with the legal principle of inderogability of collective national agreement; that is, collective agreements at a lower level cannot change in pejus what has been negotiated at national or territorial levels. The second substantial change stems from the legal provision according to which special derogating agreements are to be valid for all workers if they were signed by a majority of the relevant union organisations. The rule contrasts with the constitutional provision included in Article 39 of the Italian Constitution which states that erga omnes effect of collective agreement can be pursued only throughout a constitutional procedure. A third feature of the reform is that these agreements may affect all aspects of labour organisations and production, including recruitment modalities and 81  ETUI, Benchmarking Working Europe (ETUI, Brussels, 2013) 461; T Schulten and T Muller, ‘A New European Interventionism? The Impact of the New Economic Governance on Wages and Collective Bargaining’ in D Natali and B Vanhercke (eds), Social Developments in the European Union (Brussels, ETUI, 2013) 181 ff. 82   J Freyssinet, ‘Tripartite responses to the economic crisis in the principal Western European Countries’ in Negotiating out of the Crisis, 25–27 November 2009 (Geneva, ILO, 2009) 32. 83   IMF/ILO, ‘The Challenges of Growth’, above (n 78) 65.

134  Bruno Veneziani regulations of working relationships, as well as the consequences of the termin­ ation of employment, except for layoffs due to discrimination. The golden rules and principles characterising the history of the features and functions of labour law in Western democracies have been profoundly changed: the idea of law as promoting industrial relations and democracy, the hierarchy between the legal sources of rules (statutes and collective agreements), the hierarchy among the different levels of collective bargaining based on the principle of inderogability in pejus, the role of social partners in the decision-making process to take anti-crisis measures at government level, the absolute freedom of trade unions to determine through a collective agreement the content of existing employment contracts and to predetermine future contracts.84 VIII  THE NEED TO RESTORE A ‘FULL’ DEMOCRATIC PATH FOR EU POLICY

The lack of democracy starts from the top of the European edifice and extends down to the national arena where national executives have had to implement the ‘Memoranda of Uunderstanding’ (MoUs) imposed by the Troika to get access to financial aid without consultation with social partners or the European Parliament. All changes laid down in a Memorandum of Understanding require implementation by the national states, which are under the strict control of the EU authorities. The modification of the role of the social partners represents an alteration and reduction of their autonomy in contrast with a ‘culture’ of social dialogue intended to be a dominant feature of European and national industrial relations. This goes back to the relatively recent past when social dialogue was an ideal type of governance ‘with social consensus’. In other words, the European Commission once said, social dialogue ‘is a component of democratic government and also of economic and social modernization’85 and any sustainable reform requires ‘investment in political capital and efforts to develop intelligent and effective institutions’; the social partners were indispensable to ‘a genuine partnership for change’.86 The European Commission’s strategy today is still anchored to that philosophy of promoting collective autonomy at the level of supranational governance 84   For an historical perspective, see B Hepple and B Veneziani, ‘Introduction’ in B Hepple and B Veneziani (eds), The Transformation of Labour Law in Europe (Oxford, Hart Publishing, 2009) 1; for a comparative analysis, see B Veneziani, ‘Formation, Modification and Termination of Employment Contracts’ in B Hepple (ed), International Encyclopedia of Comparative Law: Labour Law vol XVJCB (Dordrecht, Mohr Siebeck, 2010). 85   Communication of 26 June 2002, ‘The European Social Dialogue – A force for modernisation and change’ COM (2002) 341 final; Bercusson, above (n 40) 278. 86   Communication of 12 August 2004, ‘Partnership for change in an enlarged Europe – Enhancing the contribution of European social dialogue’ COM (2004) 557, § 2.4.



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because Business Europe and CES – says the European Commission – ‘have an acknowledged role in giving voice to aspirations of different sectors of the economy in dialogue that could lead to Europe-wide agreement’.87 The asymmetry inside the European integration is growing and the contrast is more evident if we compare a new wave of economic and financial governance with the European social model based on solidarity rules; that is, with the ‘icons’ of the collective labour relations provided for in the Nice Charter. In fact, freedom of assembly and of association (Article 12), workers’ right to information and consultation within the undertaking (Article 27) and rights of collective bargaining and collective action (Article 28) have a strategic position in the overall architecture of the EU Treaty, together with Article 152 TFEU. The legal framework represents an institutional ideal type of auxiliary legislation and its rationale mirrors a general principle of the EU to support collective autonomy and freedom of contract bestowed on the social partners. It is testimony to the independence of private interests in an institutional architecture in which democracy and pluralism compose the inner essence of a democratic state. Collective autonomy reflects fundamental social values that are to be protected as against potentially conflicting objectives and other economic freedoms existing in EU law, such as competition law and the free market. The developments in the EU’s institutional architecture, of which the ECB is one prominent example, have legitimised a way of thinking about the relationship between the legal system and economic integration which over time conditioned the CJEU, finding expression in the four judgments Viking, Laval, Rüffert and Luxembourg. All these cases demonstrate how the founding principles of the European market have clashed with traditional member state legislation and constitutions. It must be clear that the Laval case has changed Swedish labour law and today it poses a delicate question about its content and how it fits into both inter­national labour law standards and Sweden’s autonomous collective bargaining system.88 A  Austerity Strategy and the Charter The status of the counteracting objectives in the Treaty does not indicate which have priority. In deciding the hierarchy of values and aims, the CJEU must bear in mind, in its decision, that the right to collective bargaining has more weight in the absence of recognition of contrasting values – for example, competition – in the Charter of Fundamental Rights.

87   Communication of 27 October 2010, ‘Towards a Single Market Act’ COM (2010) 608 final, § 1.6. 88   N Bruun and J Malmberg, ‘Lex, Laval: Collective Actions and Posted Workers in Sweden’ in R Blanpain and F Hendrickx (eds), Labour Law between Change and Tradition: Liber Amicorum Antoine Jacobs, Bulletin of Comparative Labour Relations Series (Alphen aan den Rijn, Kluwer, 2011).

136  Bruno Veneziani The states under the MoUs apply EU law and they are bound by the fundamental rights enshrined in the Charter. EU member states also know that if the Memorandum imposes restrictions on their actions and their legal order ‘the limitations on rights and freedoms must respect the essence of those rights and freedoms’ (Article 52 Charter). The social policy and welfare models of the modern democracies of the eurozone are seriously impaired by the logic of the new economic–financial governance, in which a generalised austerity only serves to impinge on a range of labour law rules characterising a welfare state as a feature of democratic society. In the name of ‘stability of the financial system’ intervention in labour law has been stepped up.89 Examples include the following: increasing working time without additional compensation and suspending annual minimum wage increases (Spain); extending wage cuts and freezes and consolidating bonuses (Latvia); abolishing compulsory paid leave (Romania); reducing overall severance payments, raising the minimum threshold for activation of rules on collective dismissal to facilitate greater use of temporary contracts and part-time work and extending probation periods for new jobs to one year (Greece); reducing legal guarantees in individual dismissal procedures (Italy); and moving from full to partial indexation with a reduction of the rate of indexation and the suspension of wage indexation in the wider public sector (Cyprus).90 These issues related to the content of individual employment contracts and welfare are covered by the fundamental provisions of the Charter: the right to protection in the event of unjustified dismissal (Article 30); fair and just working conditions (Article 31); and social security and social assistance (Article 34). The austerity strategy seems ‘contrary to equity and social cohesion but also to laying foundations for sustained growth made possible by an expansion of potential output matched by adequate effective demand’.91 For that reason the European Commission is aware of the risks of weakening the ‘rule of law’, as the backbone of democracy, and limiting the process of positive integration via law. The objective of the European Commission is to make fundamental individual and collective rights ‘as effective as possible’ because the new Bill of Rights ‘is not setting out abstract values’ and it must serve ‘as a compass’ for Union policies and their implementation by the Member States’.92 The European Commission routinely checks the compatibility of its proposal, non-legislative measures, acts and decisions with the Charter and it is 89   Memorandum of understanding on cooperation between the financial supervisory authorities, Central Banks and Financial Ministries of the EU on cross-border financial stability, 1 June 2008, ECFIN/CEFCPE (2008) REP/53106 Rev, point 2.1(1). 90  ETUI, Benchmarking Working Europe, above (n 81) 50 ff. See also Memorandum of Understanding on Specific Economic Conditionality-Cyprus, and the obligation to put the pension system on a sustainable path, reducing the pensions of public employees, limiting the fiscal subsidy to the General Social Insurance Scheme, Ch 3, para 3.1; a move from full to partial indexation of wage, Ch 4, para 4.1; C. Degryse, The new European Economic Governance (n 77) 40. 91   IMF/ILO, ‘The Challenges of Growth’, above (n 78) 7, 67–73. 92   Commission, ‘Strategy for the effective implementation of the Charter of Fundamental Rights by the EU’ (Communication) COM (2010) 573 final. Introduction.



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obliged to set up a special department to monitor compliance with it system­ atically and rigorously. Furthermore, the European Commission has two tasks: (i) to prepare assessment guidelines to identify possible infringements or interference with the right in question; and (ii) to ensure that the member states respect the Charter when implementing EU law.93 In any case, it seems that the exclusion of EU actors and institutions from the new economic strategy and from the guarantees envisaged in the EU legal system is not yet complete. i  The Actors The Memorandum of Understanding on cooperation between the financial supervisory authorities, central banks and finance ministries of the EU94 2008 does not exclude the ECB, which is involved (‘in accordance with its responsibility’, Article 4.4) as a signatory body. As regards the link between policy substance and general social aims, according to the Fiscal Treaty (TSCG), all its rules must be applied and interpreted by the contracting parties • ‘ in conformity with the Treaties on which EU is founded, in particular Article 4(3)TEU and with EU law, including procedural law whenever the adoption of secondary legislation is required’ ([emphasis added]) (Article 2(1) TSCG) and • ‘as far as . . . compatible with the Treaties on which EU is founded’ (Article 2(2) TSCG) [emphasis added]; • and, on the other side, according to Article 10 TSCG, the contracting parties should be ready to make active use of the measure envisaged in Articles 136 (TFEU) and 20 (TEU) and Articles 326–34 (TFEU). Furthermore, the effect of the rules of the Fiscal Treaty will involve strong interference in national systems to the extent that includes provisions of binding force and ‘permanent character, preferably constitutional, or otherwise guaranteed to be fully respected and adhered to throughout national budgetary process’ (Article 3(2) TSCG). In this perspective strict conditionality – according to the Court of Justice – has the goal of guaranteeing that the stability mechanism envisaged by the Council ‘respects EU law . . . implied the measures of Union aiming at the national economic policies of the member states’.95

  ibid, § 1 and 1.1.   On Cross-border Financial Stability of 1 June 2008, based on Council Conclusions of 9 October 2007 and the EFC report 5 September 2007, doc ECFINCEFCPE/REP/53990. 95   Case C-370/12 Pringle v Ireland, § 69; Council Decision of 25 March 2011 amending Article 136 of the TFEU with regard to a stability mechanism for Member States whose currency is the Euro, OJ EU L91/1 (6 April 2011). 93 94

138  Bruno Veneziani The architecture of the TSCG does not exclude direct involvement of EU institutions and bodies: • The time-frame of convergence of the annual structural balance of the states is suggested by the European Commission (Article 3b), which proposes also ‘common principles’ of the correction mechanism (Article 3(2)) and checks compliance with the excessive deficit procedure by the national parties (Article 7), presenting to them a report on the provisions adopted by each state in compliance with Article 3(2). • The content and format of national budgetary and economic partnership programmes must be submitted to the Council and to the European Commission for endorsement (Article 5). • The European Commission and ECB and possibly the European Parliament (Article 12(5)) participate in Euro Summits to meet contracting parties (Article 12(1)). Participatory democracy through collective autonomy is expressly required by the fiscal compact; in fact, the contracting parties are warned to ‘bear in mind’ the need to respect ‘in the implementation of this Treaty the specific role of the social partners as it is recognized in the laws or national systems’ (Recital 15 TSCG). Interpretation of austerity’s legal sources (treaties, regulations) must include an examination of their internal coherence with the Lisbon Treaty. A truly cohesive interpretation requires respect for the symmetry of the legal obligations of all actors operating in a context that involves a coercive macroeconomic policy without democratic (social) control. Thus, although the TSCG has the nature of an international treaty the full involvement of the European Commission (and other EU bodies) in this context does not exempt it from the obligation to act in conformity with the general principle of the Lisbon Treaty to promote and facilitate the role of social partners at EU level (Article 152 TFEU), involving them in the procedure. According to the Treaty Establishing the European Stability Mechanism (ESM) each Memorandum, agreed by national states and the European Commission, ‘shall be fully consistent with the measures of economic policy coordination provided for in TFEU, in particular with any act of European Union law, including any opinion, warning, recommendation and decisions addressed to the ESM member concerned’ (Article 13(3) ESM). As a consequence, the web of rules of the ESM (Recital 16) does not exclude the CJEU’s competence according to Article 273 TFEU (Article 37 ESM) in checking the compatibility of all acts of the EU with the fundamental social rights of the Charter and the social goals contained in Article 9 TEU. Furthermore, the EU’s central institutions are not totally absent from the management of the international treaties, because, • the European Commission has a general obligation (shall) to ‘promote the general interest of the Union’ and ‘ensures the application of the Treaty’ (Article 17(1) TEU); and



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• a more specific obligation to control, evaluate and negotiate a Memorandum of Understanding on the Concession of Financial Aid (Articles 13, § 1 and Article 13, § 3);96 • the ECB plays an evaluating role with regard to requests ‘to safeguard stabil­ ity’97 (Article 5(3)(6)). ii  The Relationship between Public Law Intervention and Private Collective Autonomy The unbalanced presence of interested actors in the mosaic of the new economic governance illustrates the democratic deficit of the EU’s political approach. The austerity strategy seems oblivious to the fact that improved economic governance is based on several interlinked and coherent policies, not only for growth but also for jobs. The European Parliament and the Council are aware that in setting up a robust framework for preventing and correcting macro­ economic imbalances, reform must take into account that ‘stakeholders – in particular social partners – should be particularly involved in the European Semester on the main issues of the strategy according to the rules provided by the EU Treaty and by national legal and political systems’.98 This opinion is also sustained by the European Economic and Social Committee (EESC), according to which more intensive use will progressively be made of the Macroeconomic Dialogue (MED), which will thereby become ‘an instrument for governments and social partners to jointly assess the economic situation at EU level and to agree on the steps to be taken in close coordination with national social dialogue and consultation processes’.99 The relationship between economic crisis and public interference in collective autonomy has provoked strong reactions among trade unions at national level. The trade unions in Greece complained to the ILO about the policy being implemented by the government and the response of the ILO Committee of Experts on trade union freedom is important because it is clearly expressed in terms of democracy. The Committee emphasised the importance of respect for ILO Convention 98, which can be violated by suspension of collective agreements containing wage settlements. The Committee stressed the importance of the ‘involvement of social partners in the framework of the agreement concluded with the European Commission, IMF and ECB on the issue of future modifications dealing with fundamental human rights, right of association   Case C-370/12 Pringle v Ireland, § 156.   ibid, § 157. 98  Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies, OJ L306/12, § 16. 99   Opinion of the EESC on the Proposal of the European Parliament and the Council on enforcement measures to correct excessive macroeconomic imbalances in the euro area, in ECO/286 5 May 2011, § 1.16–§ 1.20; EESC 12 July 2012 SOC/462 § 4, § 6.1. 96 97

140  Bruno Veneziani and collective bargaining processes that constitute the essence of democracy and social peace’.100 In May 2011 the EESC welcomed the fact that the European Commission, as part of a move to strengthen European economic governance, has taken on board the need to devote greater attention to macroeconomic imbalances, in the same way as public budget deficits, as key economic, financial and social factors in the economies of the EU member states. The EESC acknowledges that the current economic crisis has challenged the economic, social and even political resilience of the EMU in particular. The proposed new philosophy should be good governance focused equally on the need for stability and for growth that produces new jobs and – as emphasised by the European Commission since 2002 – ‘the ability of the economy to provide its population with high and rising standards of living and high rates of employment on a sustainable basis’.101 The European Parliament and the Council have tried to respond to demands for change.102 The rationale of Regulation 1176/2011 is still to improve economic governance, which should include several interlinked and coherent policies, including on jobs. However, the focus of the EU strategy shall be ‘on developing and strengthening the internal market’ (Recital 4). But a consciousness of the risks of integration guided solely by ordoliberal economic policy is mirrored in the rule that imposes an obligation (shall) for EU bodies implementing the Regulation to ‘fully observe Article 152 TFEU’. The same provision envisages a further obligation that ‘recommendations issued under this Regulation shall respect national practices and institutions for wage formation’.103 The two obligations are included in the austerity mainstreaming trend, which is clearly expressed by the idea that in assessing ‘macroeconomic imbalances, account should be taken of their severity and their potential negative economic and financial spill-over effects which aggravate the vulnerability of the EU economy and are a threat to the smooth functioning of the economic and monetary union’ (Recital 17). The absence of negative social effects from Recital 17 is astonishing because it seems to weaken the effort to back up the new European social model through positive integration. Macroeconomic imbalances, in fact, affect all the components of a social market economy, such as social exclusion and social and territorial cohesion (Article 3 TEU) and impinge on such values as equality, dignity and democracy (Article 2 TEU), which are part of the EU’s legal foundations. This is why it is essential to foster the democratic accountability and legitimacy of all protagonists involved in the European Semester ‘with active participation 100   365th Report of the Expert Committee on Trade Union Freedom, ILO Governing Body 316th session (Geneva, 1–16 November 2012) § 1002. 101   EU Commission COM (2002) 714 final; Opinion of the EESC, ECO/286 5 May 2011, § 1.6. 102  Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on prevention and corrections of macroeconomic imbalances, OJ L306/12. 103   ibid, Art 1(3).



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of the social partners and to call on the EU Council to pay attention . . . to workers’ access to a core set of labour rights as enshrined in the Treaties’.104 The Regulation is the first source of European law that refers to Article 152 TFEU as a general principle for promoting collective autonomy, expressly and literally written in Article 1(3) and Article 6(3). A correct interpretation of the two rules should underline the multiple functions that Article 152 could perform to concretise an ideal type of participatory democracy inside the Regulation’s framework. In fact, it must bear in mind that, in the context of Regulation 1176, the European Parliament is granted only limited consultation rights and that, also, corrections in the field of wage policy and deregulation of labour, product and service markets are to be made to restore ‘competitiveness’.105 The social partners should thus be involved, • in the alert mechanism and in helping the European Commission to prepare the annual report, containing a qualitative economic and financial assessment (Article 3), based on a scoreboard with a set of indicators dealing with social issues, such as employment and unemployment; • in in-depth reviews undertaken by the European Commission to analyse substantial developments related to the EU strategy for growth and jobs (Article 5(1)(2)); • with the Council when it prepares and directs to member states recommendations on preventive action (Article 6(1)) and in corrective action plan procedures (Article 8(2) and (3)); • with the competent Committee of the European Parliament when it takes the initiative to enhance the dialogue between all the EU institutions in the context of an economic dialogue (Article 14), to discuss information on broad guidelines, general guidance to the member states, orientations for economic policy, results of multilateral surveillance and Council orientations. The same Article 1(3) states that Regulation 1176/2011 ‘takes into account Article 28 of the Charter of Fundamental Rights of the EU and accordingly does not affect the right to negotiate, conclude and enforce collective agreements or to take collective action in accordance with national law and practices’ (Article 1(3)). Both Article 152 (TFEU) and Article 28 of the Charter have also been included ‘in the procedure of in-depth review and preventive action by the European Commission and Council which are legally obliged in addressing recommendations to a member state to respect national practices and institutions in wage 104   European Parliament Resolution of 7 February 2013 on the European Semester for Economic Policy Coordination: Employment and Social Aspects in the Annual Growth Survey 2013 (2012/2257(INI) §§ 35, 36, 37, 73; EU Commission, Communication to the EP, Council and ECSC and the Committee of the Regions, Commission work programme, COM (2012) 629 final, 7; Committee on Employment and Social Affairs, Draft Report on the Social Investment Pact – A Response to the Crisis (2012/2003(INI)) § 4. 105   Regulation 1176/2011, Recital 20.

142  Bruno Veneziani formation’ (Article 1(3) and ‘to acknowledge national specificities regarding industrial relations and social dialogue’ (Article 5(1)). The use of these cautious formulas derives from awareness that growing economic imbalances between countries in Europe are a result of diverging development in national competitiveness, mainly caused by different industrial relations systems and divergent trends in wages and unit labour costs. Social dialogue is widespread in Europe but the patterns of its intervention and success have varied markedly due to exogenous factors (economic structure, timeframe, severity of the crisis) and endogenous factors, such as ‘cultural heritage’, traditional institutional patterns, structure of legal systems, constitutional rules and quality of representativeness of the social partners and their role in defining public policy. The conclusion is that in many European states there is ‘insufficient support for a process in which the social partners are deemed by the government to have a legitimate role in reacting to the crisis and concluding agreements’, and many countries and sectors have experienced a considerable decline in the rate of collectively agreed pay.106 Articles 152 and 28 of the Charter propose a model of participatory democracy to ensure greater transparency and accountability – the two main ingredients of democratic procedure – in the activity and measures of EU institutions affecting individual and collective rights, labour markets and industrial relations systems. In other words, a correct interpretation of the role of the two norms must take into account that austerity measures deal with processes of social dynamics between public powers at the national and supranational levels. The best approach is to balance such powers through a state of ‘constitutional’ law which reacts to the centralising tendencies of political systems that endanger individual and collective autonomy.107 The references to the two provisions in the same source (Article 1, Regulation 1176) mean that the interpreter has to establish a close link between the rules to make the envisaged rights more effective. A logical approach to the rationale of Article 152 TFEU could provide an adequate response to the question of the effectiveness (justiciability) of rights. By systematic interpretation and the principle of ‘effet utile’ it is possible to connect this Article to the legal recognition of collective autonomy laid down in the Charter (Articles 28 and 12). 106   R Guyet, D Tarren and CE Triomphe, ‘Social dialogue in times of the global economic crisis’ (Dublin, European Foundation for the Improvement of Living and Working Conditions, 2012) 61–64; Eurofound, ‘The social impact of the crisis’, background paper (Dublin, European foundation for the Improvement of Living and Working Conditions, 2011) 9; for a comparative analysis see J Clasen, D Clegg and J Kvist, ‘European labour market policies in (the) crisis’ Working Paper, Brussels, WP ETUI, 2012/12, 21. With regard to countries that have cut labour market budgets and have implemented a range of programmes and entitlements for the unemployed, see S Clauwaert and I Schömann, ‘The crisis and national labour law reforms: A mapping exercise’ ETUI Working Paper 2012/4, 8 ff. 107   The risks posed by the erosion of substantial democracy and the shift to an ‘authoritative constitutionalism’ are analysed by Lukas Oberndorfer in this volume.



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With this perspective the social partners will have the power to check the content of recommendations not only on wage formation, but on all terms and working conditions closely connected with wages (hours of work, overtime, workers’ classification, compensation for retirement, sabbatical leave), laid down by laws or collective bargaining at European and national levels. The Charter does not seek to modify the division of competences between the EU and national states, but Articles 28 and 12 are strongly intertwined. In the multilevel governance of the crisis it is likely that Article 1(3) of Regulation 1176 has far-reaching effects on the content of the Regulation insofar as Article 28 states that rights to collective bargaining and collective action must be respected by all measures taken by EU institutions and by national states. IX   CONCLUSIONS: HOW TO ENHANCE DEMOCRACY

At a time when neoclassical ordoliberal ideas are dominant, legitimacy requires that the legal system improve the effectiveness of rights that come to be challenged not only by economic freedoms – as also in the past – but by stringent and overarching austerity measures. Democracy in labour law essentially implies, first, the effectiveness of social rights through the evaluation of all rules present in the European legal panoply.108 It is possible to achieve this along various paths. A  The ‘Path’ of Interpretation The interpretation we are suggesting is an attempt to reverse the culture of the Viking, Laval, Rüffert and Luxembourg judgments and to use the Charter to make it impossible to establish any prevalence of austerity mechanisms over social rights. The road map has been designed by Community legislators looking for a fair balance in the ‘constitutional asymmetry’ between economic freedoms and the protection of workers’ rights.109 A comprehensive approach to the research on a ‘uniformity regulative ideal’ through a Bill of Rights must follow the previous jurisprudence of the CJEU in its effort to make fundamental rights effective in the national context. The EU Court has given an extensive interpretation of the concept of ‘implementing 108   The right to an effective remedy is the most quoted right in the decisions of the CJEU; see the overview in the Report by the Commission to the EP, the Council, the ECSC and the Committee of Regions, Commission staff working document on the Application of the EU Charter of fundamental Rights in 2011, COM (2012) 169. 109  European Parliament, Resolution on Challenges to Collective Agreements in the EU, 22 October 2008/2085 (INI); EESC Opinion on ‘The Social Dimension of the Internal Market (own initiative opinion), 2011/C 44/15, OJ CO44, 11/02/2011 90–98, paras 3 and 4; R Hyman, ‘Trade unions, Lisbon and Europe 2020: From dream to nightmare’ LSE ‘Europe in Question’ discussion paper series, No 45 (London, 2011) 18.

144  Bruno Veneziani community law’110 and by referring to respect for fundamental rights ‘within the field of application of community law’ has stated that, where national legislation falls within the field of application of the Community law the Court must provide the national court with all elements of interpretation which are necessary in order to enable it to assess the compatibility of that legislation with fundamental social rights.111

The problem of interpretation is a crucial point in the legal culture of the CJEU, which is backed up by the doctrine of the supremacy of the EU legal order as an essential condition rooted in EU law. Today, the legal nature of the EU Charter, acquired in the Lisbon reform, should oblige the CJEU to scrutinise cases according to the quality of employment rights and their internal nature as human rights. In other words, the Luxembourg judges will decide in light not only of the specific rule dealing with collective bargaining and action rights and of the more overarching principle of fair and just conditions (Article 31), but also of functional norms indicating the values (Article 2 TEU) and the aims that EU bodies and institutions should achieve (Article 9 TEU). This perspective includes the influence of the European Convention on Human Rights and of the jurisprudence of the Strasbourg Court. Recently the CJEU affirmed that ‘the rights of association of employers is a fundamental right also as a right not to associate’, as stated in Article 11 ECHR and ‘guaranteed also by the community’s legal order’.112 The link between the CJEU and the Strasbourg judges can be fruitful and could divert the attitude of the Luxembourg judiciary towards new cultural horizons within the framework of the Lisbon Treaty, which contains an obligation (shall) for the EU ‘to accede to the ECHR’ (Article 6(2) TEU). Accession to the ECHR can be read as a further step on the road to democratic legitimacy as individuals will be able to contest alleged violations of fundamental rights by act or measures before the ECHR113 and it will increase the uniformity of protection through full integration of the two European legal orders and a common style of interpretation. The legal personality of the EU, recognised by the Lisbon Treaty (Article 47 TEU) and the full recognition of the ECHR as ‘general principles of EU law’ (Article 6, § 3 TEU) can open up a stimulating perspective. The ‘Strasbourg method’ is based on the idea that in order to determine the meanings of the terms and phrases used in international sources the Court itself must be guided by the following paradigms:

  Case 5/88 Wachauf [1989] ECR I-2609.   Case 159/90 The Society for the Protection of Unborn Children Ireland Ltd v Stephen Grogan and others [1991] ECR I-4685, para 31. 112   Case 499/2004 Werhof v Freeway Traffic Systems GMBH & Co KG [2006] ECR I-2397. 113   Lenaerts and Cambien, above (n 36) 206. 110 111



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• ‘to ascertain the ordinary meaning to be given to words in their context and in the light of the object and purpose of the provision for which they have drawn’;114 • to refer ‘to the living nature of the international sources to be interpreted in the light of present-day conditions and that it has taken account of the evolving norms of national and international law’;115 • to interpret and apply the ECHR (i) ‘in a manner which renders its practical and effective, not theoretically and illusory’; (ii) it must also be read ‘as a whole and interpreted in such a way as to promote internal consistency and harmony between its various provisions’;116 (iii) ‘the limitations on rights must be constructed in a manner which gives practical and effective protection’;117 and • ‘it is a common ground that collective action, like collective negotiation and agreements may, in the particular circumstances of a case, be one of the main ways in which trade unions protect the interests of their members’.118 In fact, a general horizontal provision of the EU Charter also supports this approach because it states that limitations on the exercise of fundamental social rights and freedoms must ‘be provided by the law’ and respect their ‘essence’ (Article 52(1)). Here the challenge for interpreters is to give appropriate weight to opposed elements, such as economic freedoms and individual and collective social rights. It is not utopian to think that economic measures could be put off for social reasons if the latter are protected by a Bill of Rights. The protection of fundamental rights ‘is a legitimate interest which, in principle, justifies a restriction of the obligation imposed by Community law even under fundamental freedoms guaranteed by the Treaty, such as the free movement of goods’.119 Following this methodology the Strasbourg Court has taken from a fairly sober legal rule (Article 11 ECHR) the logical elements that compose the essential content of the right of association. The Court has defined the notion of association; has affirmed the right to organise and the right to join – or not to join – an organisation; has qualified the notion of anti-union discrimination as a violation of freedom of association; and has singled out the right of collective action as just one of many ways to protect professional interests. The Court has also stated that the collective dimension of the right to organise can be interpreted as the autonomy of trade unions with regard to their internal administration and their function to protect workers’ rights.120 114   Grand Chamber, Demir and Baykara v Turkey, App no 34503/97, Judgment, 12 November 2008, § 65; Enerji Yapi-Yol Sen v Turkey, App no 68959/01 (21 April 2009) § 20 ff. 115   Demir and Baykara v Turkey, § 68. 116   Stec and others v UK (dec), App nos 65731/01 and 65900/01, §§ 47–48, ECHR, 2005-X. 117   Demir and Baykara v Turkey, § 146. 118  ECHR, Syndicat national de la police belge v Belgium (1975) Series A no 19, § 86 and Wilson, National Union Journalists and Others v United Kingdom July 2002, 2002-V, § 44. 119   CJEU Case C-112/00 Schmidberger, International Transport und Planzuge v Austria [2003] ECR I-1569, §§ 73–74; Case C-299/95 Kremzow [1997] ECR I-2629, § 14. 120   F Dorssemont, ‘The right to form and to join trade unions for the protection of his interests under art 11, ECHR’ (2010) 1(2) European Law Journal 210.

146  Bruno Veneziani The reference made by the Strasbourg Court to an international source of law and to the living nature of legal standards opens up a useful analytical approach that is ‘more systematic and less fragmented’ for assessing the evolution of EU acts and initiatives.121 The ‘judicial path’ as a mechanism for backing up the democratic legitimacy of the EU legal order would be appropriate if the structural adjustment programmes could be legally challenged before the CJEU by the ‘interested’ parties, in particular by the social partners. The CJEU has the competence to rule on the validity of legal acts that have binding effects adopted by the EU institutions and governments of member states (Article 263(1) and (2) TFEU). The key question concerns the possibility that the European trade unions could as such be considered semi-privileged applicants (Article 263(3) TFEU) and could claim the violation of their own rights deriving from the Charter and the Lisbon Treaty (Article 152). B  The ‘Path’ of the Inclusion of EU Rules and Institutions in Austerity Strategies Many observers – including labour lawyers – have measured the new legal framework governing the ESM in terms of democracy and legitimacy and of constitutional law or EU law. According to the most radical argument the whole mechanism for economic and monetary activities must be established within the EU legal order, otherwise it threatens the integrity of the EU Treaty, underpinned by the principles of rule of law, democracy and effective judicial protection.122 The international pressure imposed by the short-term fiscal and economic policy has also fostered the development of state interventionism and unbalanced reactions on the part of the national constitutional judiciary. The agreement signed by the Portuguese government with the IMF, the European Commission and the ECB (the Troika) in order to receive financial aid has been judged by the Portugal Constitutional Court to suspend traditional rights – concerning vacations and Christmas benefits in the public sector – and two consolidated legal paradigms, namely the principle of equality and the principle of ‘trust’, which protects citizens’ ‘legitimate expectations’. Although they are deemed to be fundamental pillars of the constitutional system, the judges assumed that both principles can be sacrificed for overriding reasons of public 121  See the deep and documented analysis by K Lörcher, ‘The New Social Dimension in the Jurisprudence of the European Court of Human Rights: The Demir and Baykara Judgment, its Methodology and Follow-up’ in F Dorssemont, K Lörcher and I Schömann (eds), The European Convention on Human Rights and the Employment Relation (Oxford, Hart Publishing, 2013) 46. 122   Tomkin, above (n 72) 186–87; S Sciarra, ‘Patterns of European labour law in the crisis’ (2100) 1, available at: www. europeanrights eu; C Pinelli, ‘Le misure di contrasto alla crisi dell’Eurozona ed il loro impatto sul modello sociale europeo’ (2003) 2 Rivista giuridica del lavoro e della previdenza sociale 243; M Rüffert, ‘The European debt crisis and European Union law’ (2011) Common Market Law Review 1777, 1789.



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interest. But the final ruling was pragmatic: to suspend the effect of their own decision, allowing the provision considered illegal to continue in force.123 The circumvention of the legal parameters of the Lisbon Treaty is based on the assumption of the artificial distinction between stability of prices – the essential core of the EU – and the stability of economic policy, which is the main goal of the ESM. The immediate corollary of this dogma is the exclusion of austerity discipline from the rule on social policy (TFEU) and the Charter of Fundamental Rights,124 above all by Article 47 of the Charter which guarantees the right of effective judicial protection. The ambiguity of the relationship between austerity norms and EU law is emphasised in the Pringle case, in which the CJEU supposed that the reform of Article 136 TFEU is meaningful to the extent that it ‘ensures that that mechanism will operate in a way that will comply with European EU law’.125 It is questionable whether an individual’s right to effective judicial protection can be safeguarded if the ESM falls outside the scope of the Charter.126 The final impression is that the ESM system also needs to respect the principle of due process of law, which is a key feature of democracy. In the two Treaties – the Fiscal Treaty and the ESM – the CJEU has the delicate task of dealing with disputes arising from the interpretation or application of the rules of the same Treaties. In particular, • if a member contests the decision of the Board of Governors (Article 37(3) ESM) – in a dispute arising between an ESM member and the ESM or between ESM members – in connection with the interpretation and application of this Treaty; and • according to the TSGC Article 8(1)(2) if a contracting party has failed to comply with Article 3(2). The jurisdiction of the court is not limited to the previous two cases because the ESM and the TSGC seem to be consistent and related to the general law of the Union insofar they contain: • a general principle according to which it ‘shall apply insofar as . . . compatible’ with the TFEU and TEU and with EU law (Article 2(2) TSCG), and consequently • the contracting parties are obliged to interpret and apply their own rules ‘in conformity with the Treaties on which the Union is founded’, in particular on the principle of Article 4(3) TEU and ‘on EU law, including procedural law whenever the adoption of secondary legislation is required’. 123   Tribunal Constitutional (port Const 353/2012) 5 July 2012, § 4 and 6, available at: www.tribunalconstitutional.pt/tc/acordaos2012353.html; Tribunal Constitutional 5 April 2013, n187/2013, available at: tribunalconstitutional.pt/tc/acordaos/20130187.html; Tribunal Constitutional (port Const Ct), 396/2011(port), available at: www.tribunalconstitutional.Pt/tc/acordaos/2011396.html. 124   Case C-370/12, Pringle v Ireland, §§ 178–82. 125   ibid, § 69 and §§ 72, 111, 143. 126   ibid, § 180.

148  Bruno Veneziani The channel that establishes a link with the principles, values and aims of the EU is the ‘principle of sincere cooperation’, whereby ‘the member states shall take any appropriate measure, general or particular, to ensure fulfilment of the obligation arising out of the Treaties or resulting from the acts of institutions of the Union’ (Article 4(3) TEU).127 Correct interpretation of austerity measures in terms of labour law must be inspired by the idea that crisis measures do not operate in a normative vacuum. All provisions enacted by the member states and EU bodies are linked in a closely functional relationship. Thus, the CJEU is supposed to be involved in decision making about the interpretation of the compatibility and conformity of international agreements signed by contracting parties with the general principles of EU law and the Lisbon Treaty. The legal measures available to correct excessive macroeconomic imbalances in the euro area reveal greater awareness of the fact that coordination of the economic policies of the member states within the EU should be developed ‘in the context of the broad economic policy guidelines and the employment guidelines as provided for by the TFEU’.128 Furthermore, in this context of rules covering the submission, examination and monitoring of stability and convergence programmes, the EU institutions have to promote and support ‘the achievement of the Union’s objectives for growth and employment’ (Article 1 and 2(b)(d) of Regulation 1175/2011). From this perspective the philosophy of the European Semester for economic policy coordination (ES) envisages the rule that ‘multilateral surveillance’ by the Council, as an integral part of European Semester economic policy coordination, shall be ‘in accordance with the objectives and requirements set out in the TFEU’ (Article 2(1)). This ‘interlink and coherence’ rationale for sustainable growth and jobs, the European Semester and the Stability and Growth Pact (SGP)129 includes some corrections to improve democracy with timely involvement of European and national parliaments and, as we have seen, participatory democracy through Article 152 TFEU and Article 28 of the Charter.130 What the CJEU sets forth in the Pringle case is not convincing. It is based on the assumption that the establishment of the ESM is outside the European legal order and that the mechanism in itself is ‘removed from the scope of the Charter’.131 But the Court could be asked to take a decision on the interpretation and application of the ESM and the consistency of a Memorandum with the ‘general interests’ of European Union law.132 And that could happen because 127   On this point see P-A van Malleghem, ‘A Paradigm Shift in the European Union’s Monetary Constitution’ (2013) 14(1) German Law Journal 141, 157. 128   Regulation (EU) No 1174/2011 of the European Parliament and of the Council of 16 November 2011 on enforcement measures to correct excessive macroeconomic imbalances in the euro area, Recital 3. 129   Regulation No 1176/2011, Recital 4. 130   ibid, Art 1. 131   Case C-370/12 Pringle v Ireland, § 178. 132   As it is sustained also by the Court, Pringle v Ireland, §§ 164, 174.



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– as the Court says itself – ‘a dispute linked to the interpretation or application of the ESM treaty is likely also to concern the interpretation or application of provisions of EU law’.133 However, the Court concludes that member states agreeing a Memorandum of Understanding are not implementing EU law and thus they are not ‘within the scope of the Charter’. Anyway, that reasoning does not exclude that the ‘full consistency’ of a given Memorandum with European law could be made good in light of observance of the fundamental social rights of the Charter, which also binds the European Commission by virtue of Article 13(3) of the ESM Treaty. Accordingly, the relevance of the Charter in the context of the ESM has been clearly expressed by the Opinion of the Advocate General in the Pringle case, when she says: ‘The Commission remains, even when it acts within the framework of the ESM, an institution of the Union and as such is bound by the full extent of European EU law, including the Charter of Fundamental Rights’ (emphasis added).134 This conclusion is based on the assumption that, with the European Central Bank,135 the European Commission is also ‘in principle entitled to carry out tasks which are prescribed to it in the ESM treaty’.136 C  The ‘Path’ of Promoting Social Partner Participation If it is accepted that the EU institutions ‘as such’ must respect EU law ‘to the full extent’, there is no reason to exclude a proactive and promotional approach to the collective autonomy of social partners and fully to implement Article 152 TFEU. The involvement of the social partners is envisaged in the Lisbon Treaty, where Article 152 TFEU seems to be an appropriate and useful tool for promoting a model of democracy in social policy. Article 152 is the expression of the ‘democratic principles’ included in Part I, Title II of the TEU and must be coordinated with the architecture of the Lisbon Treaty, in particular the general idea of representative democracy (Articles 10, 11 and 13) and the social aims to be achieved (Article 3 TEU and Article 9 TFEU).137 In this methodological perspective it seems clear that over the years and by way of a normative crescendo in the transformation of primary law, the social partners have achieved an institutional status within the dialogue between EU bodies.   Case C-370/12 Pringle v Ireland, § 174.   View of Advocate General Kokott delivered on 26 October 2012 (1), Case C-370/12 Pringle v Government of Ireland and Attorney General § 176. 135   Council Cover note of 24 June 2011, Document – No 2114/11 and Recital 10 in the Preamble of the ESM Treaty. 136   ibid, § 172. 137   D Schiek, ‘The EU Constitution of Social Governance in an Economic Crisis in Defence of a Transnational Dimension of Social Europe’ (2013) 2(20) Maastricht Journal of European and Comparative Law 201 proposes a ‘teleological, coherent and purposive’ interpretation. 133 134

150  Bruno Veneziani Their position is clearly subject to rights and obligations that have to be recognised by the Union and promoted by its bodies, which have a duty to facilitate dialogue between the social partners and to respect their autonomy. Thus, the new democratic principles prescribe a broad concept of democracy, political and civil representation, institutional participation and regular institutional dialogue. The more the austerity measures risk driving Europe into economic stagnation and recession, the more a system must be developed that ‘will truly deliver a solid partnership among European institutions, national governments and social partners and civil organizations’. The suggested therapy is to build up ‘a strategic and comprehensive multi-layered partnership process’.138 Thus, the first level of intervention with regard to collective autonomy is ‘political’ participation in shaping ‘upcoming European debates on employment and social affairs’.139 Accordingly, the next steps along the relevant ‘path’ involve treaty changes in line with three pillars: social dialogue and collective bargaining; economic governance for sustainable growth and employment; and economic, fiscal and social justice, which compose the project of a Social Compact for Europe. This project consists of active solidarity, social progress and accountability, which are essential features of democracy.140 The rationale of this perspective stems from the conviction that social security is an ‘investment in people that empowers them to adjust to changes in the economy and in the labour market, and that social security systems act as automatic social and economic stabilizers, help stimulate aggregate demand in times of crisis and beyond and help to support a transition to a more sustainable economy’, while also reducing ‘inequalities within and among regions’.141 D  The ‘Path’ of Social Partner Involvement in Law-Making Procedures Despite the consistent accumulation of real experiences and the acquis, the proclaimed role of the social partners is at risk of serious challenge from the inter­ national agreement on better law making between the European Parliament, the Council and the Commission.142 In fact, the social partners are ignored as possible 138   EESC, Opinion on Strengthening the participatory process and involvement of local authorities, NGOs and social partners in the implementation of Europe 2020, SOC/462, 12 July 2012, § 6.1. 139  Business Europe, Ueapme, CES, CEE, Work programme of the European social partners 2012–2014, available at: www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100::O::NO::P12100 _instrument_ ID:3065524. 140  ETUC, ETUC day of action and solidarity for Social Compact for Europe, Declaration adopted by the ETUC Committee at the meeting on 17 October 2012, § 8, available at: www.etuc. org/Home/OurActivities/Economic and Employment policies-Europe 2020/Focus Economic and social crisis/resolutions. 141   ILO, Social Protection Floors Recommendation, 2012 (No 202), Geneva, 191st ILO session, 14 June 2012, Recitals 5 and 6. 142   Concluded by the Council, Commission and EU Parliament on 16 December 2003 [2003] OJ C321/1.



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actors to be consulted both in ‘pre-legislative consultation’ procedures (§ 26) and with regard to the ‘choice of legislative instruments and legal basis’ (§§ 12 and 14). This is the case unless one takes the view that consultation with social partners is envisaged in the provision in which the European Commission is obliged, in referring its legislative decisions to the European Parliament and Council, ‘to take into account the results of any consultation’ (§ 12). The envisaged mechanism of the Inter-institutional agreement represents a rigid and centralised model governed only by the EU institutions.143 Some evidence of an acquired consciousness of the existing rigidity moves the European Commission to explore a new road map when it proposes a new initiative or revision of existing EU legislation. In fact, the strategy of ‘smart regulation’ is an adequate tool to help to put into practice the provisions of the Lisbon Treaty on participatory democracy (Article 11 TEU and Article 152 TFEU) and to take into account all relevant social impacts of the whole policy cycle.144 The road map contains information on initial problem definition, objectives and preliminary assessments of the impacts and envisaged timetable to be submitted for preventive consultation to a range of stakeholders, including the social partners. There seems to be a new trend based on the idea that ‘excluding them would mean that the regulation would not be able to achieve its goals, such as to protect workers and consumers’.145 Accordingly, the strategy can be completed also with the involvement of the stakeholders in regular and systematic evaluations of proposals.146 The EU and the social partners need to respond together, and within the framework of their respective roles, to the challenges that the austerity ‘philosophy’ represents for labour law and social policy (Article 9 TEU).147 Both remain essential features of European integration and of democracy.148

  Veneziani, ‘The Role of the Social Partners’, above (n 18) 157–58.   EU Commission, Communication from the Commission to the EU Parliament, the Council, the EESC and the Committee of Regions, Smart regulation in the European Union, COM (2010) 543 final, §§ 1, 2.2 (iii)(iv). 145   EU Commission, Communication from the Commission to the EU Parliament, the Council and the EESC and the Committee of the Regions, Smart regulation – responding to the needs of small and medium sized enterprises, COM (2013) 122 final, § 2. 146   EU Commission, Communication from the Commission to the EU Parliament, the Council, the EESC and Committee of the Regions, Strengthening the foundation of smart regulation – improving evaluation, COM (2013) 686 final, § 12.1. 147   EU Commission, White Paper ‘An Agenda for Adequate, Safe and Sustainable pensions’ COM (2012) 55 final. 148   N Countouris and M Freedland (eds), Resocialising Europe in a Time of Crisis (Cambridge, Cambridge University Press, 2013) 1 ff; S Giubboni, ‘Social Europe after the Lisbon Treaty. Some Skeptical Remarks’ (2011) 4 European Journal of Social Law 245 ff. 143 144

6 Collective Action Against Austerity Measures FILIP DORSSEMONT

INTRODUCTION1

I

N THIS CHAPTER, I will examine the extent to which trade unions and/ or workers can have recourse to collective action in order to combat austerity policy at the level of the European Union, the euro zone or the member states that are being forced to implement it. The ‘legitimacy’ perspective that is being adopted is construed primarily from a legal point of view. The legitimacy of collective actions will be examined under international, European and comparative labour law (that is, member state law). Recourse to collective action needs to be contextualised. From an International Labour Organization (ILO) perspective, collective action could be related to the right to form and join trade unions in order to further and defend the interests of workers within the meaning of Article 10 of ILO Convention 87. Unfortunately, both Article 6 of the (Revised) European Social Charter and Article 28 of the Nice Charter adopt a somewhat different approach. They refer to a context of collective bargaining, while recognising a right to have recourse to collective action. The issue of trade union involvement in the design and implementation of austerity measures,2 as well as the impact of austerity policies on collective bargaining, is analysed3 at length in other chapters of this book. In this chapter, this context will be analysed primarily insofar as it is relevant for the recognition of a right to collective action. In sum, the question arises of whether there are ‘teleological’ objections against the recognition of a right to collective action against austerity measures under international, European and domestic law. To answer this question, I will build on the elements defining the ‘role’ of trade   The views and opinions expressed in this chapter are those of the author.   See the chapters by Isabelle Schömann, Mélanie Schmitt and Bruno Veneziani. See also the note drafted by the TTUR, ‘Possibility for direct action to the EU Court by the ETUC against certain austerity measures based on the violation of the right to consultation’. 3   See the chapters by Antoine Jacobs, Mélanie Schmitt and Bruno Veneziani. 1 2

154  Filip Dorssemont unions in other chapters (section I) of this book and assess whether, given that role, a case for collective action under a ‘right to take collective action’ can be built under international, European and domestic law (section II). This issue is, according to long-standing tradition, intertwined with the very contentious issue of the legitimacy of so-called ‘political’ strikes. The issue is not whether political strikes are legitimate, but whether a strike against austerity should be qualified per se as a ‘political’ strike. It might even be better to avoid the notion of ‘political strike’ and to refer to a notion with fewer connotations, such as ‘protest strikes’. Insofar as a right to have recourse to collective action against austerity measures falls outside the ambit of the right to take collective action, other grounds of justification might come into play under international, European or domestic law (section III). Prior to putting forward conclusions, I will assess to what extent a strike or collective action against economic austerity measures constitutes a so-called ‘purely political strike’ or whether it could be qualified as a legitimate ‘protest strike’ (section IV). Last but not least, I will dwell on some private international law (PIL) issues related to pan-European collective action against austerity measures (section V). Given the divergences between the domestic law of the member states related to collective action and the lack of an EU competence to harmonise strike law, it is essential to determine how conflict-of-law issues will have to be dealt with. This will help us to understand how these divergences are a substantial obstacle to pan-European collective action.

I  EXPLICIT OR PROACTIVE INVOLVEMENT FOR TRADE UNIONS IN THE PROCESS OF ECONOMIC GOVERNANCE?

The Treaty on the Functioning of the European Union (TFEU) provisions that empower the European Union and the member states to adopt measures in the area of economic governance do not provide for any specific role for trade unions. There are no formal and explicit treaty obligations to involve trade unions at the level of the European Union or at the level of the member states either. Thus, there is no formal involvement of social partners in the design of the economic and monetary policy related to the members of the eurozone (cf Article 136 TFEU), in contrast to the Employment and the Social Policy, Titles X and XI. This general disregard of the so-called ‘social partners’ is at odds with the formal lip service paid in the Social Policy Title to the idea that ‘the Union recognises and promotes the role of the social partners at its level, taking into account the diversity of national systems’ (Article 152 TFEU). The argument that this obligation is restricted to the Social Policy Title is not entirely convincing. Article 152 TFEU seems to have a more transversal or horizontal scope.



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Judged otherwise, the provision seems to provide no sufficient added value in regard to Article 154, despite the fact that Article 154 TFEU is addressed solely to the Commission. As indicated in the Transnational Trade Union Rights Experts Network (TTUR) note for the European Trade Union Confederation (ETUC) on the ‘Possibility for direct action to the EU Court by the ETUC against certain austerity measures based on the violation of the right to consultation’. The reference in Article 152 to the Summit for Growth and Employment indicates that the ambit of Article 152 transcends the Social Policy Title. Another argument raised in the note relates to the fact that Article 152 precedes and therefore transcends the provisions attributing legislative competences in the Social Policy Title. Furthermore, in my view, Article 152 TFEU cannot be read in isolation from Article 9 TFEU.4 The horizontal character of Article 9 is undisputed. Because the Union needs to ‘take into account requirements linked to the promotion of a high level of employment, the guarantee of adequate social protection, the fight against social exclusion, and a high level of education, training and protection of human health’ – that is, objectives reflected in Article 3 of the Treaty on European Union (TEU) – it is hard to imagine how this constitutional obligation can be fully respected without proper involvement of the social partners. Disregarding the social partners in pursuing economic and monetary policies that inevitably impact on the social objectives enumerated in Article 9 TFEU, cannot but violate the obligations under that Article. Thus, the Employment Title of the TFEU provides a powerful illustration of imperative good practices. The European Council in drawing up Guidelines is obliged to consult the Economic and Social Committee (Article 148 TFEU), whereas the Employment Committee needs to consult management and labour in fulfilling its mandate (Article 150 TFEU). The mere fact that the renewed approach to economic governance seems to absorb and reduce employment policy (in)to an economic policy does not constitute a sufficient reason to disregard involvement of the social partners in shaping such a policy. Such a disregard would be at odds with the general constitutional principle enshrined in Article 7 TFEU. This provision, which has general application, obliges the ‘Union to ensure consistency between its policies and activities, taking all of its objectives into account’. Such substantive consistency cannot be at odds with a minimum of procedural consistency. Despite the shallow character of the role of social partners in the area of economic governance, some ‘austerity’ instruments suggest that a role for the social partners is in fact implied. Thus, the Euro Plus Pact explicitly urges the member states, in implementing the EU governance agenda with regard to fostering competitiveness, to ‘respect national traditions of social dialogue and industrial relations’. Building on the 4   In the same vein, see also the observation of Mélanie Schmitt in her chapter, as well as the observations of Bruno Veneziani.

156  Filip Dorssemont Euro Plus Pact, one of the instruments of the ‘Six-pack’5 contains a safeguard clause referring to Article 152 TFEU.6 In contrast to the Euro Plus Pact, this reference suggests that there is a role to be played by the European social partners as well. Indeed, Article 152 does not relate to the role of social partners at national level and seems to be of direct concern to European social partners. Another instrument of the Six-pack, Regulation 1175/20117 introducing the so-called European Semester, is full of references to the role of social partners.8 The references concerned are ambiguous. There is no clear-cut reference to Article 152 TFEU. Involvement is required ‘where appropriate’ and ‘in accordance with TFEU provisions’. The formula thus mixes considerations based upon appropriateness (opportunité) and legality (légalité) in a rather discomforting way. Recital 26 does refer to the role of the Employment Committee, ‘where appropriate’. It is still unclear whether that Committee will consult management and labour in line with the constitutional traditions enshrined in Article 150 TFEU. In sum, Regulation 1175/2011 refers indiscriminately to a role for both European and national social partners. The subsequent European Stability Mechanism Treaty (ESM) Treaty does not provide for explicit involvement of the social partners in the stability mechan­ ism. The Fiscal Treaty constitutes some progress, insofar as it does refer to a role for social partners in the exercise of fiscal discipline. 5   Regulation (EU) No 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances. 6   See the following provisions of Regulation No 1176/2011: – ‘The application of this Regulation shall fully observe Article 152 TFEU, and the recommendations issued under this Regulation shall respect national practices and institutions for wage formation. This Regulation takes into account Article 28 of the Charter of Fundamental Rights of the European Union, and accordingly does not affect the right to negotiate, conclude or enforce collective agreements or to take collective action in accordance with national law and practices’ (Article 1(3)). – ‘In applying this Regulation, the Council and the Commission should fully respect the role of national parliaments and social partners, as well as differences in national systems, such as the systems for wage formation’ (Article 6 (3)). 7   Regulation (EU) No 1175/2011 of the European Parliament and of the Council of 16 November 2011 amending Council Regulation (EC) No 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies. 8   See Recital 16: ‘(16) In line with the legal and political arrangements of each Member State, national parliaments should be duly involved in the European Semester and in the preparation of stability programmes, convergence programmes and national reform programmes in order to increase the transparency and ownership of, and accountability for the decisions taken. Where appropriate, the Economic and Financial Committee, the Economic Policy Committee, the Employment Committee and the Social Protection Committee should be consulted within the framework of the European Semester. Relevant stakeholders, in particular the social partners, should be involved, within the framework of the European Semester, on the main policy issues where appropriate, in accordance with the provisions of the TFEU and national legal and political arrangements’. See also Article 2 A, which is being introduced into the body of Regulation No 1466/97: ‘Relevant stakeholders, in particular the social partners, shall be involved within the framework of the European Semester, on the main policy issues where appropriate, in accordance with the provisions of the TFEU and national legal and political arrangements’.



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The ESM Treaty does not contain any reference to either Article 152 or the Charter of Fundamental Rights of the European Union. In her analysis of the Pringle judgment related to the ESM Treaty, in her contribution to this volume, Schmitt succeeds in arguing that the general obligation for the European Commission to negotiate a ‘Memorandum of Understanding’ in a way that is consistent with EU law, as highlighted by the Court of Justice of the European Union (CJEU) on the basis of Article 13(3) of the ESM Treaty, might generate an obligation to consult the social partners. On the other hand, the author argues that the formal or explicit rejection of the applicability of the Charter in establishing a stability mechanism will urge the social partners to seek salvation for the preservation of fundamental workers outside the EU legal order. Title II of the Fiscal Treaty dedicates particular attention to the issue of the consistency and relationship of the compact with EU law. The very existence of such a relationship demonstrates that the Fiscal Treaty is not as such part of EU law and that the relevance of the Charter might be disputed by analogy with the Pringle judgment. Contrary to the ESM Treaty explicit reference is made to ‘social partners’ in the Preamble, though this Recital refers only to social partners at national level.9 II  THE SPECTRE OF THE ‘PURELY’ POLITICAL STRIKE

In the absence of such a secure and proactive avenue to influence the design of economic governance in a way that is consistent with the idea of a European social model or a social market economy, the question arises of the extent to which trade unions and/or workers can have recourse to a reactive avenue to influence these policies in order to contest austerity measures. Unfortunately, this question can be treated only under the shadow of a seminal debate regarding the legitimacy of the ‘political strike’. The very notion of a ‘political strike’ suggests that ordinary strikes are a-political, that is, oriented towards purely professional, or at best, socio-economic objectives. The political arena is thus considered to be restricted to the action of political parties functioning within the framework of a so-called parliamentary democracy. General strikes are considered an anarchist intrusion in this well ordered polity. This mythical presentation neglects basic historic facts. First, genuine parliamentary democracies have seldom been introduced spontaneously. They have often been preceded by purely political strikes organised by trade unions in order to introduce universal suffrage (at least for men).10 Furthermore, some ‘political revolutions’ have been 9   Bearing in mind the need to respect, in the implementation of this Treaty, the specific role of the social partners, as it is recognised in the laws or national systems of each of the Contracting Parties. 10   A fine example is the history of the introduction of universal suffrage into the kingdom of Belgium. For a history of the clashes between workers and the so-called ‘garde civique’ during those purely political collective actions, see P Heyman, R Hoeckx, P Veldman and B Willems, Leve het algemeen stemrecht. Vive la garde civique (Leuven, Peeters, 2002).

158  Filip Dorssemont preceded by a nationwide proliferation of purely economic strikes.11 In real life, the boundaries between the economic, the socio-economic and political sphere are much more artificial and fluid than in a more legalistic and dogmatic approach.12 It is clear that these artificial dogmatic concepts have been introduced or at least have been (ab)used to restrict collective action by trade unions in the defence of workers’ interests. However, in this chapter, I will examine the legitimacy of collective action against austerity measures in light of such deeply rooted legal dogmatism. The spectre still haunts legal minds. Indeed, there is a large consensus in the domestic law of the member states of the European Union and in European and international standards that a ‘purely’ political strike falls beyond the scope of the recognition of the right to strike, casu quo the right to take collective action. However, this consensus evaporates as soon as a precise definition needs to be given of what constitutes a (purely) political strike. Hence, it is not by trying to overturn this deeply rooted dogma that progress can be made, but by insisting on a clear-cut definition of the notion of a political strike. In her seminal book International and European Protection of the Right to Strike, Novitz rightly pointed out the legal insecurity surrounding the status of the political strike.13 The European Committee of Social Rights (ECSR), since the second cycle of control, has allowed governments to prohibit ‘political strikes’ because ‘they are obviously quite outside the purview of collective bargaining’. The Digest of the case law of the ECSR provides more guidance on the rationale of this a priori rejection of the political strike. The Digest reaffirms that political strikes fall outside the ambit of Article 6, § 4 of the European Social Charter (ESC).14 The question arises of whether this rejection is based on an analysis of the identity of the parties in the conflict or by reference to the nature of the interests and issues at stake.

11   See in this respect, the analysis of Rosa Luxembourg of the Russian revolution of 1905 in Massenstreik, Partei und Gewerkschaften (Berlin, Verlag Kommunistischer Kampf, 1997). 12   See also T Novitz, International and European Protection of the Right to Strike (Oxford, Oxford University Press, 2003) 56–64. 13  See also Novitz, ibid, 294. The author refers to a seminal position of the ECSR in its Conclusions during the second cycle. 14  The Digest recalls that Art 6, § 4 relates to conflicts of interest. That notion is the object of a further clarification in a previous comment related to Art 6, § 3 ESC. In this respect, the Digest states that ‘Article 6 § 3 applies to conflicts of interest, ie generally conflicts which concern the conclusion of a collective agreement or the modification, through collective bargaining, of conditions of work contained in an existing collective agreement. It does not concern conflicts of rights, i.e. conflicts related to the application and implementation of a collective agreement, or to political disputes’. See Digest (2008) 54, available at: www.coe.int/t/dghl/monitoring/socialcharter/Digest/ DigestSept2008_en.pdf. See for a recent doctrinal analysis of the ‘jurisprudence’ of the Committee on the ‘political strike’ by a former member, A Swiatkowski, ‘Resocialising Europe through a European right to strike modeled on the Social Charter’ in N Countouris and M Freedland (eds), Resocialising Europe in a Time of Crisis (Cambridge, Cambridge University Press, 2013).



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Because the right to take collective action has been recognised ‘with a view to ensuring the right to bargain collectively’, the ECSR according to the Digest advances a context of ‘any negotiation between employers and employees in order to settle an industrial dispute’.15 Because negotiations do not necessarily have to be aimed at concluding a formal collective agreement, the object and the formal outcome of collective bargaining are interpreted broadly. However, according to the ECSR’s Digest, less latitude exists as regards the identity of the parties involved in such a dispute. The dispute needs to be between ‘employers and employees’. In sum, the role of trade unions in the design and implementation of austerity measures might be phrased in terms of a ‘negotiation’ sensu lato, for example, a ‘dialogue’, but it is essentially a dialogue between public authorities and social partners, not between employers and employees. Novitz has observed that the case law of the ILO Freedom of Association Committee (FAC) provides more as well as different guidance regarding the concept of a political strike.16 Although the FAC indicates that ‘purely political strikes do not fall within the scope of the principles of freedom of association’, it states that trade unions should be able to have recourse to protest strikes, in particular where aimed at criticising a government’s economic and social policies. Hence, protest strikes against government economic and social policies should not be considered ‘political strikes’. Implicitly, the ILO seems to favour a definition of political strike which is not based on the identification of the parties but on an analysis of the issues at stake. If the issues of a strike against the government are social or economic, the strike does not constitute a ‘political strike’. It needs to be qualified as a protest strike. Such an approach is consistent with the broad definition of a worker organisation in Article 10 of ILO Convention 87 as ‘any organisation of workers . . . for furthering and defending the interests of workers or of employers’. This definition does not reduce the interests at stake to the defence of working conditions affecting the employment relationship with an employer. A proper understanding of the relationship between the right to strike and the freedom of association can be beneficial to a more liberal approach of the teleological restrictions on the right to strike. The legal construction of the right to take collective action as a corollary of the freedom of association has the major advantage of broadening the scope of the interests that can be furthered, as well as the scope of the ‘antagonists’ against whom collective action can be deployed. Interest and antagonist are intertwined.17  See Digest (2008), above n (14) 56.  Novitz, above (n 12) 290–94. See the following quote in the Digest (2006, 5th edn) of the Freedom of Association Committee: ‘The right to strike should not be limited solely to industrial disputes that are likely to be resolved through the signing of a collective agreement; workers and their organizations should be able to express in a broader context, if necessary, their dissatisfaction as regards economic and social matters affecting their members’ interests’ No 531, available at: www.coe.int/t/dghl/ monitoring/socialcharter/Digest/DigestSept2008_en.pdf. 17   In the same vein, see the chapter by Keith Ewing and John Hendy in this book. 15 16

160  Filip Dorssemont It goes without saying that public authorities need to be qualified as potential antagonists in the furtherance and defence of these rights. For this very reason, Article 3, § 2 of ILO Convention 87 prohibits interference by public authorities. This liberal approach on the part of the ILO towards teleological restrictions of collective actions is mirrored by the practices of some member states. In a recent survey on the right to strike in 27 member states, Warneck stated that the political strike is illegal in almost all member states.18 However, a political strike is defined as a strike directed against the government that has no bearing on employment issues. In sum, it appears that this situation refers only to ‘purely’ political strikes. In his comparative research, Jacobs does not deny that ‘purely’ political strikes as a general rule fall outside the recognition of the right to strike, but he rightly points out the conceptual difficulty in distinguishing between a ‘political’ and an ‘economic’ strike.19 Rebhahn has stressed that in some member states ‘some’ political strikes are allowed.20 Unfortunately, the author does not provide a clear-cut definition of what constitutes a political strike. In sum, the deeply rooted conviction that ‘political’ strikes fall outside the ambit of the right to take collective action needs to be mitigated by analysing the nature of the demands put forward instead of identifying the person against whom that demand is directed. In other words, a strike is not ‘political’ because it seeks to influence the behaviour of a public authority instead of a private employer. It can be called ‘political’ insofar as it is not related to the improvement or defence of the (social and economic) interests of workers as workers. In this respect, many member states have explicitly allowed (general) strikes directed at public authorities and dealing with social, economic or monetary policies which affect the interests of workers as workers. Examples are legion: Belgium,21 France,22 Italy23 and the Netherlands.24 However, some member states have a much narrower approach to the telos of collective action. In the United Kingdom,25 18   W Warneck, Strike rules in the EU27 and beyond. A comparative overview (Brussels, ETUI, 2007) 8. Similar general statements regarding the illicit character of the political strike can be found in other comparative surveys (eg, C La Macchia, The Right to Strike in the European Union (Rome, Ediesse, 2011) 65–66). 19   A Jacobs, ‘The Law of Strikes and Lock-outs’ in R Blanpain, Comparative Labour Law and Industrial Relations in Industrialized Market Economies (Austin, Wolters Kluwer, 2007) 646–47. 20   R Rebhahn, ‘Collective labour law in Europe in a comparative perspective’ 2004 20 International Journal of Comparative Labour Law 107, 111–12. 21   See the commentary of J Peeters and M Rigaux, ‘De werkstaking in het Belgisch arbeidsrecht’ in P Humblet and G Cox, Collectieve conflicten (Mechelen, Kluwer, 2011) 61–62. 22   See A Lyon Caen, ‘France’ in C La Macchia, The Right to Strike in the European Union (Rome, Ediesse, 2011) 114; P Lokiec, Droit du travail. Les relations collectives de travail, II (Paris, PUF, 2011) 392–393; J Pélissier, G Auzéro and E Dockès, Droit du travail (Paris, Dalloz, 2010) 1365. 23   G Giugni, Diritto sindacale (Bari, Cacucci editore, 2006) 239–42. 24   APhCM Jaspers, Nederlands stakingsrecht op een nieuw spoor (Deventer, Kluwer, 2004) 51–57. 25   In this respect, see 219 and 244 of the Trade Union and Labour Relations (Consolidation) Act 1992; K Ewing, ‘British Labour Law and Private International Law Report’ in F Dorssemont, T Jaspers and A Van Hoek (eds), Cross-border Collective Actions in Europe: A Legal Challenge (Antwerp, Intersentia, 2007) 219–20. For a critique, see KD Ewing and J Hendy, Days of Action: The Legality of Protest Strikes Against Government Cuts (London, Institute of Employment Rights, 2011).



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recourse to strike action is immunised solely in relation to trade disputes, whereas in Germany a legitimate recourse to strike action presupposes that the demands fall within the realm of collective bargaining.26 In my view, this traditional argument can be deployed in favour of strikes to combat austerity measures that restrict collective autonomy. Indeed, because these strikes might combat a legal framework that is at odds with the freedom of collective bargaining, they might be considered as truly tarifvertragbezogen (related to collective bargaining). The overall picture is that the legal status of a strike against austerity measures is controversial. Due to these legal divergences in the domestic laws of the member states, the prospect of pan-European collective action/strike is unlikely. III  ALTERNATIVE AVENUES TO CONSTRUE THE LEGITIMACY OF COLLECTIVE ACTIONS AGAINST AUSTERITY MEASURES

In their chapter, Ewing and Hendy point out that Article 11 of the European Convention on Human Rights (ECHR) also consecrates the freedom of assembly, which is recognised without any ‘teleological’ restriction. Insofar as the European Court of Human Rights (ECtHR) would take a restrictive attitude to the interpretation of the ‘defence of (worker) interests’, freedom of assembly would indeed constitute a means of avoiding such restrictions. The mere fact that a number of prohibitions of collective actions regarding the Turkish civil service have been dealt with under the heading of the freedom of assembly instead of under the freedom of association seems to warrant such a conclusion.27 However, it remains to be seen whether the Court will adopt such an attitude when the strike affects the private sector. Insofar as a distinction between the employer and the authority authorising the demonstrations can be drawn, the question indeed arises whether a potential prohibition for the authority to ban a demonstration also entails an obligation for that authority to protect those citizens against disciplinary sanctions taken by their private employers. In such a scenario, the freedom of assembly will need to be assessed in light of the freedom of association. In fact, the ECtHR has a disappointing record in dealing with freedom of expression cases which had to be assessed ‘in light of’ the freedom of association. In a recent case, Szima v Hungary, the ECtHR seems to reduce the freedom of expression of a police officer who as a trade union leader criticising clear-cut abuses in the functioning of the 26   See W Däubler, ‘Zulässige und nicht zulässige Streikziele’ in W Däubler (ed), Arbeitskampfrecht, 3rd edn (Baden-Baden, Nomos, 2011) 242. (The author refers to the prevailing status quaestionis in case law and legal doctrine, though the author does not agree with this position in the subsequent pages of his contribution.) 27  ECtHR Karaçay v Turkey, App no 6615/03 (27 March 2007); ECtHR Urcan and others, App nos 23018/04, 23034/04, 23042/04, 23071/04, 23073/04, 23081/04, 23086/04, 23091/04, 23094/04, 23444/04 and 23676/04 (17 July 2008); ECtHR Saime Özcan v Turkey, App no 2953/04 (15 September 2009); and Kaya and Seyhan v Turkey, App no 30946/04 (15 September 2009); ECtHR Dilek and others v Turkey, App nos 74611/01, 26876/02 and 27628/0257 (28 April 2008).

162  Filip Dorssemont Hungarian police to ‘the protection of labour related interests’.28 Thus, the freedom of expression of a trade union official at first sight seems to be more restricted than the freedom of expression of an ordinary staff member who would have been granted the right to engage in whistle-blowing. There might, however, be a case to be made in favour of the legitimacy of a purely political strike. In her book, Novitz has already pointed out that there can be a moral issue at stake when trade unions do have recourse to a purely political strike in order to challenge government policies in repressive regimes.29 The author deplores the fact that the ILO does not distinguish between repressive regimes and democratic government. In sum, the idea of a purely political strike in order to challenge regimes that consistently violate basic human rights or do not respect the rule of law needs to be contemplated. In Belgium, universal suffrage was recognised only after successive strikes in order to change the electoral legislation. Democracy as we know it is the result of purely political strikes which were violently suppressed, killing numerous workers. Purely political strikes can be justified not solely on moral grounds; there is also a legal case. In fact, the recognition of human rights in the Déclaration des droits de l’homme et du citoyen (1789) has been concomitant with the recognition of a ius resistendi. Article 2 states: ‘Le but de toute association politique est la conservation des droits naturels et imprescriptibles de l’homme. Ces droits sont la liberté, la propriété, la sûreté et la résistance à l’oppression’. (The aim of political union is the preservation of natural and imprescriptible human rights. These rights are freedom, property, security and the resistance against oppression.)The French Constitution refers to the 1789 Déclaration in the Constitution. Hence the ‘droit de résistance’ continues to be part of French constitutional law. This right is echoed in a number of European constitutions. Thus, Article 20, §4 of the German Basic Law enshrines a Widerstandsrecht: ‘Gegen jeden, der es unternimmt, diese Ordnung zu beseitigen, haben alle Deutschen das Recht zum Widerstand, wenn andere Abhilfe nicht möglich ist’. (German citizens have the right to resist against anyone who undertakes to undermine the constitutional order, insofar as other means are not available). The Portuguese Constitution recognises a right to resistance in Article 21: ‘Everyone shall possess the right to resist any order that infringes their rights, freedoms or guarantees and, when it is not possible to resort to the public authorities, to use force to repel any aggression’. Article 120, § 4 of the Greek Constitution holds in a similar vein: ‘Observance of the constitution is entrusted to the patriotism of the Greeks who shall have the right and the duty to resist by all possible means against anyone who attempts the violent abolition of the Constitution’.

 ECtHR Szima v Hungary, App no 29723/11 (9 October 2012).   Novitz, above (n 12) 297–302.

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The question thus arises whether such a ius resistendi might serve as an alternative avenue in those domestic legal orders that do not allow trade unions or workers to exercise a right to take collective action against austerity measures. The validity of such an alternative needs to be construed under EU law, as well as under domestic law. As far as the EU level is concerned, it is worth noting that the Nice Charter does not refer to the existence of such a right in either the Preamble or the body of the text. It does construe a notion of citizenship of the European Union. The Preamble contemplates that the people of Europe have ‘created an ever closer union’. It might be argued that such a Union does or will constitute a political union (‘association politique’) in the spirit of the Déclaration, despite the use of the plural ‘peoples’. However, it is difficult to construe the European Union as an association that has primarily, let alone originally been built as an association for the preservation of ‘human rights’. One might argue that the nature of EU citizenship does not automatically entail the recognition of a ius resistendi by the EU legal order. Another obstacle to the relevance of the ius resistendi is the idea that it can be exercised only insofar as the institutions of the European Union reveal themselves to be incapable of or unwilling to protect the fundamental rights, that is, to preserve European citizens against oppression. In this respect, the Pringle judgment can be construed only as a clear-cut refusal on the part of the ultimate guardian of the fundamental rights enshrined in the Charter to protect its citizens. Such a decision is problematic because it induces its citizens to exercise their ius resistendi. Furthermore, insofar as the Court would outlaw, as it has done in the past, a pacific form of resistance, such as collective action, it creates the preconditions for recourse to outright violence. As far as the exercise of a ius resistendi at the level of the member states is concerned, the main obstacle seems to be the ultima ratio character of its exercise. Part of the German legal doctrine is sceptical about the question of whether the constitutional provision allows recourse to a purely political strike in defence of the constitutional order.30 The ultima ratio principle that seems to be deeply rooted in the German approach to the right to strike and to which the constitutional provision on the Widerstandsrecht formally refers, would warrant – according to some authors – an exhaustion of legal remedies, in other words, a judicial action before the Constitutional Court. Insofar as the Widerstandsrecht could be useful to prevent or combat a coup d’état, I fear the functioning of the Constitutional Court risks being suspended by the time workers were able to carefully draft such a judicial appeal. A responsible part of the German trade union movement did not prepare a judicial but a collective action when in 1920 it was confronted with a military putsch against the 30  See W Däubler, ‘Nationale Rechtsgrundlagen des Streiksrechts’ in W Däubler (ed), Arbeitskampfrecht, 3rd edn (Baden-Baden, Nomos, 2011) 82; H Otto, Arbeitskamf und Schlichtungsrecht (München, CH Beck, 2006) 104–05; and OR Kissel, Arbeitskampfrecht (München, CH Beck, 2002) 236.

164  Filip Dorssemont government by Kapp and Lüttwitz.31 When former President de Gaulle appealed to workers to manifest their allegiance to republican institutions in order to disapprove of a potential coup d’état following the difficulties in Algeria, the French judiciary had to assess whether participation in an ‘arrêt de travail’ was indeed legitimate. A worker had been dismissed. In a judgment of 19 June 1963 the Cour de cassation ruled that such an ‘arrêt de travail’ was indeed legitimate and that dismissal was not justified.32 In sum, in those member states in which protest strikes fall outside the ambit of the right to take collective action, two alternative avenues can be envisaged. The most unproblematic is the exercise of the freedom of assembly. Such a right has also been firmly anchored in the EU legal order. In contrast to the right to take collective action, it is not subject to the condition of exercise in accordance with EU law, nor has it been referred to in the Protocol regarding the application of the Charter in the United Kingdom and Poland. Another avenue – the idea of a ius resistendi – suffers from two major obstacles. At EU level such a right has never been formally enshrined. Furthermore, the idea that the European Union constitutes the kind of political union warranting such recognition is controversial, despite its ever closer character. The other obstacle – its ultima ratio character – is not as insurmountable as might be expected. In the Pringle judgment, the CJEU capitulated as the ultimate guardian of the Charter in a crucial field of economic governance. At national level, the deferential attitude of constitutional courts vis-a-vis European legal orders suggests that the ultima ratio condition might be met. In other words, judicial action might prove to be useless. Obviously, constitutional courts might adopt a more critical attitude towards the precepts of European economic governance. In fact, the refusal of the CJEU to uphold the Charter suggests that the kind of vigilance which was professed in the Solange I judgment33 is now warranted. IV  DOES A STRIKE/COLLECTIVE ACTION AGAINST ECONOMIC AUSTERITY MEASURES CONSTITUTE A ‘PURELY’ POLITICAL STRIKE OR A LEGITIMATE PROTEST STRIKE?

The question arises of the extent to which collective action ‘against’ the austerity measures adopted pursuant to the (new) European economic governance could be qualified as a purely ‘political’ strike. This question will be addressed in order to assess whether these collective actions could be considered lawful or not according to the approach adopted by the ILO’s FAC Committee. Whether such a qualification is relevant to the issue of domestic labour law will have to be answered according to the domestic labour law held applicable in order to assess the contractual or extra-contractual liability of the parties at stake. Public   M Kittner, Arbeitskampf (München, CH Beck, 2005) 421–27.   Cass Soc, 19 June 1963, D 1963, 686.   BVerfGE 37, 271.

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interest litigation will help to determine the applicable law for the sake of determining the contractual or extra-contractual liability. However, at least Belgian, Dutch, French and Italian law seem open to the lawful character of strikes related to the economic and social interests of workers, which could be jeopardised by public policies. The narrow interpretation of the teleological restrictions under German law, as well as that of the restriction on ‘trade disputes’ under British law, seem to outlaw such strikes for that very reason. They seem at first sight neither to be tarifvertragbezogen nor relevant in a context of an industrial dispute. In my view, for those countries which in conformity with ILO standards do provide leeway for strikes directed at government to attack social and economic policies, there is an obvious case to be built. Indeed, the new economic governance does amount to measures that have important consequences for workers’ economic and social interests. An analysis of the Six-pack is not very revealing in this respect. However, an analysis of the so-called European Plus Pact is crystal clear. The Euro Plus Pact34 puts forward a number of objectives that can only be saluted. Who would dare to suggest that the European Union should foster an erosion of competitiveness, enhance unemployment, raise the unsustainability of public finances and weaken financial stability? However, the means suggested – which are echoed in many of the recommendations issued within the so-called European Semester – have a direct impact on workers’ social and economic interests. These means are well known: they involve aligning the level of wages to productivity levels assessed at enterprise level; challenging systems of indexation; supporting a shift from centralised to decentralised bargaining; promoting flexicurity with an emphasis on flexibility; and proposing less generous pension systems and early retirement schemes. It is difficult to see how these measures do not affect the social and economic interests of workers. In sum, collective actions against austerity measures cannot seriously be qualified as so-called ‘purely political strikes’. V  PRIVATE INTERNATIONAL LAW ISSUES OF PAN-EUROPEAN COLLECTIVE ACTION

To date, most strikes against austerity have not had a pan-European character, despite the fact that the policy that provoked them was deeply rooted in panEuropean economic governance. In some countries affected by austerity measures, general strikes against austerity have come to the fore in recent years.35   See: www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/120296.pdf.   For a survey, see A Dufresne and JM Pernot, ‘Les syndicats face à la nouvelle gouvernance’ européenne (2013) 143–44 Chronique internationale de l’Ires. In this issue, which does not cover all the member states, strikes against austerity are reported to have taken place in Greece, Ireland and Romania. 34 35

166  Filip Dorssemont The organisation of a truly ‘pan-European’ collective action – for example, strike action – will have to confront many practical difficulties, which cannot be envisaged, let alone solved in the context of this chapter. Instead, I will focus on ‘legal obstacles’. A pan-European ‘strike’ needs to be distinguished from a panEuropean ‘demonstration’ by officials employed by trade unions all over Europe as well as from a pan-European demonstration outside working hours. By means of a hypothesis, I envisage a pan-European strike called by the ETUC directed towards the European institutions in order to contest the EU’s (new) economic governance policies in view of their impact on the social and economic conditions of European workers. Let us suppose that the ETUC called for such a strike in the capitals of the European member states. In my view, the first question which needs to be addressed is whether such a pan-European strike can be construed as falling within the scope of private international law (PIL). In my view, at first sight such a pan-European strike needs to be deconstructed as a set of purely ‘domestic’ or ‘internal’ strikes which do not feature a ‘foreign element’ sufficiently strong to trigger PIL issues. The collective action can be cross-border from a labour law perspective only, because it affects a collective or collectivities of workers situated in different states, but neither the individual industrial actions as such nor the employment contracts of the participants feature any foreign element. These cases are analysed for private international law purposes as a juxtaposition of purely domestic industrial actions. There is only a small caveat as far as the role of the ETUC is concerned, because there is the issue of whether such a call for a strike might generate a debate related to its extra-contractual liability. Because the tortious act might generate damages abroad affecting ‘victims’ not situated in the place of residence of the ETUC, there might be a PIL issue. In my view, the link of causality between a call by the ETUC which does not support the strikers financially and the strike can be seriously questioned. Insofar as the liability of the ETUC would come into play, there seems to be a role for Belgian judges on the basis of the general rule of the forum rei (Article 2, Council Regulation (EC) 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters). However, Article 5(2) of Regulation 44/2001 provides a supplementary jurisdiction in favour of the courts for the place in which the harmful event occurred or may occur. The SEKO judgment of the CJEU seems to provide much leeway to the victim in interpreting the locus delicti commissi.36 Following its ruling in the Mines de Potasse d’Alsace the Court held that the locus delicti commissi may concern the place of the harmful event (locus actus)

36  European Court of Justice, C-18/02 SEKO (5 February 2004). Commentators include F Dorssemont, ‘Grensoverschrijdende collectieve arbeidsconflicten. op de grens van arbeidsconflicten en wetsconflicten’ (2005) Arbeidsrechtelijke annotaties 1; P Chaumette, ‘Fragment d’un droit des conflits internationaux du travail?’ (2005) 3 Droit social 295 and E Pataut, ‘La grève dans les rapports internationaux du travail: questions de qualification’ (2005) 3 Droit social 303.



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as well as the place where the harmful event caused damage (locus damni). The harmful event seems to be the call for a strike. In practice, this seems to suggest that victims have a choice between Belgium (the place of residence as well as the locus actus) and the place where the damage can be situated. It is my view that as far as national trade unions and national employees would be ‘sued’, there is no genuine PIL issue, except if some of the employees were working in one of the member states in a ‘transnational employment relationship’, whether as a posted worker or as a worker with a contract of employment governed by a law different from the lex loci laboris. However, it is clear that the legitimacy of the strike would need to be assessed according to the national law where it takes place. The national law of each member state will be applicable to assess the behaviour of the national trade unions and the national workers. This will not be due to PIL, but due to the fact that the majority of the situations will not raise a PIL issue. To the extent that a judge considers that there is a PIL issue at stake, I think it is reasonable to suggest that for most workers the contractual liability will be regulated by the locus laboris (due to the Rome I Regulation), just as the extra-contractual liability will be regulated by the locus actus. As a general rule, this means that collective and individual actors will be judged according to a law with which they are familiar. However, the fact that the legitimacy and liability issues stemming from the pan-European collective action will be governed by 27 different laws is not helpful. Indeed, as is shown by comparative labour law research, there is a divide regarding the definition of what constitutes a forbidden ‘purely’ political strike and an acceptable ‘political strike’. In my view, the formal recognition of a right to take collective action in the Charter of Fundamental Rights of the European Union will not alter the assessment according to national law. Although the member states have to respect the rights under the Charter while implementing European law, restrictions on the right to take collective action do not flow from this implementation, but rather from the previous state of the law of the member states. Furthermore, the Charter only recognises the right to take collective action conducted in accordance with national law and practices. In view of the fact that the legal status, or rather the definition of so-called political strikes will be different from one state to another, the question may receive different responses in 27 member states. Furthermore, even insofar as there is some leeway to recognise recourse to collective action against state policies, other factors restricting such a right might come into play (for example, procedural requirements or issues of proportionality). Though some unification might stem from the case law of the ECSR, it does not provide sufficient guidance in this area. In sum, a private international law assessment seems to reveal that the divergences between the legal protection of the right to strike constitute an insurmountable obstacle to a pan-European response to a general call to strike. Evasion through ‘law shopping’ is not an option. The rather shallow response to the ETUC call for a pan-European action day on

168  Filip Dorssemont 14 November 2012 can at least partially be explained by the existence of this legal obstacle.37 There might be a way to overcome this legal hurdle. Paradoxically, PIL is not the problem, but the solution. For workers in a member state not affected by the austerity measures who have recourse to a strike, there is a case to be made that they are thereby participating in a solidarity strike. If these workers express their solidarity through a secondary action in support of a primary action conducted in another country, the collective action might enter into the realm of PIL. Indeed, as evidenced by part of German legal doctrine, the legitimacy of such a secondary collective action in Germany will not be assessed solely under German law. According to a number of scholars, the assessment of the legit­ imacy of the secondary action depends on the legitimacy of the primary action. More importantly, they argue that the legitimacy of the latter will need to be assessed by the law of the member state in which that primary action takes place.38 This line of reasoning might help to overcome the hurdle that such a primary action not aimed at the conclusion of a collective agreement would have to be assessed as illegal under German law, because German law would not be relevant in such a case. If the primary collective action takes place in a country where it would be seen as a legitimate protest strike, the German workers would be able to step in and express their solidarity. CONCLUSIONS  

In analysing the three primary law or constitutional pillars of the economic governance exercised by EU institutions, it becomes apparent that the involvement of social partners in the field of economic governance is subject to legal insecurity. The way in which social partners under the TFEU are involved in the design of employment and social policy issues is divergent, whereas the Title on monetary and economic policy is mute on the role of social partners. This picture is only partially remedied by the secondary law instruments. Despite the formal lip service which is being paid to the ‘consistency between its policies and activities, taking all of its objectives into account’, the economic and monetary policies have in practice developed as the predominant background of employment and social policies, as evidenced by the Euro Plus Pact and to some 37   See A Dufresne and C Gobin, ‘La grève européenne du 14 Novembre 2012’ (2013) 2174/2175 Courrier hebdomadaire du Crisp 49. See also the testimony of Pieber and Hensche: M Pieber, ‘Die erste Frage lautet bei uns in Osterreich meisten: “Darf man das überhaupt?”’ in A Gallas, J Nowak and F Wilde (eds), Poltische Streiks im Europa der Kreise (Hamburg, Verlag VSA, 2012) and D Hensche, ‘Das Tabu des politischen Streiks in Deutschland’ in A Gallas, J Nowak and F Wilde (eds), Poltische Streiks im Europa der Kreise (Hamburg, Verlag VSA, 2012). 38  See, inter alia, W Däubler, ‘Kollisionsrecht’ in W Däubler (ed), Arbeitskampfrecht, 3rd edn (Baden-Baden, Nomos, 2011) 919–21; O Deinert, Internationales Arbeitsrecht (Tübingen, Mohr Siebeck, 2013) 457; and CW Hergenröder, ‘German Private International Law Report’ in F Dorssemont, T Jaspers and A Van Hoek (eds), Cross-border Collective Actions in Europe. A Legal Challenge (Antwerp, Intersentia, 2007) 326–27.



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extent by some specific references within the Employment and Social Policy titles. As a result, the lack of influence of social partners therefore risks being detrimental to the useful effect of their involvement in the latter policies. Though a holistic interpretation of the TEU and the TFEU Treaties, warrant a more proactive involvement of social partners, the practice of the EU institutions is not considered to be entirely satisfactory for the social partners at European level. The ESM and Fiscal Treaties which have constituted a parallel system of governance involving some of the EU institutions do not pay tribute in a similar way to the importance of the involvement of social partners. Whereas the ESM Treaty does not formally anchor such an involvement, the Fiscal Treaty constitutes some progress. However, since both Treaties have been ratified outside the realm of EU law, the odds that the EU Charter of Fundamental Rights can be held applicable, let alone enforced in the implementation of the stability mechan­ism and the Fiscal Treaty is poor. The debate surrounding the legal status of strikes and/or collective actions against austerity measures is haunted by the existence of the spectre of the ‘purely’ political strike. In our assessment, there can be little doubt that such a strike can be qualified as a legitimate protest strike in the defence of workers’ rights. An analysis of the austerity measures reveals that they obviously affect workers’ interests. Strikes and collective actions in defence of workers’ rights are legitimate protest strikes according to long-standing case law of the ILO’s supervisory bodies. The approach of the right to take collective action in the Revised European Social Charter is less lenient from a teleological perspective. The ECHR provides more leeway to uphold the legitimacy of collective actions insofar as they can be construed as the exercise of the freedom of assembly. Another avenue to strengthen the legitimacy of collective actions against austerity measures is the idea of a ius resistendi. There is no explicit reference to such a right in the Charter, but such a right has been anchored in the constitutions of a number of member states. The classical argument against the recourse to a ius resistendi based upon national constitutional law – the argument that the condition of ultima ratio has not been met – is not convincing at all. The access to the CJEU for citizens and trade unions is problematic and the deferential attitude of many constitutional courts vis-a-vis the European legal order risks making a judicial avenue rather pointless. The overall picture from a comparative labour law perspective is not encouraging. Some countries have submitted the legitimacy of collective action to strong teleological restrictions, whereas other countries favour a broad vision on legitimate goals for collective action. The second vision is much more in line with the approach adopted by the ILO supervisory bodies monitoring ILO Convention 87. Due to these legal divergences within the domestic law of the member states, the prospect of a pan-European collective action/strike is unlikely. In fact, these divergences are perceived as an obstacle to the likelihood of such an action. In our view, PIL tends to strengthen the application of the law

170  Filip Dorssemont where the collective action actually takes place. This is the major evolution. The only way to overcome this hurdle seems to be a participation of a pan-European action in a state hostile to so-called purely political strikes. Provided it is being construed as the expression of solidarity with workers in a state which has a more liberal approach to the legitimacy of protest strikes, such a secondary action might still be legitimate.

7 Decentralisation of Labour Law Standard Setting and the Financial Crisis ANTOINE JACOBS 1

INTRODUCTION

T

HE CURRENT FINANCIAL and economic crisis has led to considerable changes in labour law and social security law in several member states of the EU. These changes concern the substance of wages, working hours, the law on dismissal, pensions and unemployment benefits.2 However, this crisis has not only brought about many changes in the substance of working conditions, but it has also led to changes in the way working conditions/ labour standards are set. In most industrialised market economies labour standards are set in multiple ways. On an individual basis they are laid down in the terms of contracts of employment. Collectively, they are laid down in Acts of Parliament, collective agreements, company rules and international documents, among other things. The relations between standard setting at such multiple levels are dominated by rules on the hierarchy of sources of labour law. Although this hierarchy is not entirely uniform in industrialised market economies, it is fairly comparable: Acts of Parliament have priority over collective agreements and company rules; collective agreements have priority over company rules and contracts of employment. However, this rule is reversed as soon as a lower source contains standards that are

1   Emeritus Professor of Labour Law, Social Security Law and Social Policy at the University of Tilburg, the Netherlands. The views and opinions expressed in this chapter are those of the author. 2  L Laulom, ‘How has the Crisis Affected Social Legislation in Europe?’ ETUI Policy Brief 2/2012; S Clauwaert and I Schömann, ‘The Crisis and National Labour Law Reforms. A Mapping Exercise’ ETUI Working Paper 2012/4; C Hermann, ‘Die Finanzkrise und ihre Auswirkungen auf Sozialstaaten und Arbeitsbedingungen’ in U Filipic and E Beer (eds), Sozialer Aderlass in Europa – Arbeit und Soziale Sicherung unter Druck (Vienna, Wien, 2012); S Deakin and A Koukiadaki, ‘The Sovereign Debt Crisis and the Evolution of Labour Law in Europe’ in N Countouris and M Freedland (eds), Resocialising Europe in a Time of Crisis (Cambridge, Cambridge University Press, 2013).

172  Antoine Jacobs more favourable to workers. Then, usually, the lower source has priority over the higher source. However this so-called principle of favourability is not absolute.3 It may be that the higher source is dominant even if it is less favourable to the worker. Or that a lower source is dominant, even if it is less favourable to the worker. If labour standards tend to be set collectively and by higher, broader sources, we can speak of centralisation. If labour standards are generally set in an individual way and by lower, narrower sources, we speak of decentralisation. Trade unions tend to favour centralised forms of standard setting as this guarantees widespread application of the standards attained by their struggle. Employers, however, naturally favour decentralised standard setting as this gives them maximum flexibility. Most industrialised market economies have developed a certain compromise between centralisation and decentralisation, and they also have seen periods in which the trend was towards more centralisation, succeeded by periods in which decentralisation was in the air. The aim of this chapter is to explore whether the current financial and economic crisis has nourished trends towards further decentralisation of labour law standard setting and how we should assess such developments. I  DECENTRALISATION OF STATUTORY LABOUR LAW

Traditionally, the trade union movement and many politicians have considered Acts of Parliament (labour legislation) to be the best way of setting standards on the labour market. This guarantees widespread application and the domin­ ance of its norms over other sources of working conditions, and facilitates awareness and enforcement of the norms. However, the great differences between companies and sectors in the labour market constrain the suitability of this method of standard setting. In general it is only fit for minimum norms. Even then it may be too broad a method of standard setting, because it is always possible that certain companies and sectors, because of their specific characteristics, cannot comply with the statutory norm. Of course this problem can be solved by making exceptions in the statute. Another interesting method is to allow lower sources to deviate in peius from the statutory norm; in other words, to make the norm dispositive instead of mandatory. However, if the norm is made completely dispositive the chances are that it will be widely disregarded in employment contracts, because at that level the employee is generally the weaker party and normally not in a position to demand application of the statutory norm. In response to this an interesting legal technique has been devised – first in Germany – to make the statutory norm applicable for derogations in peius if these derogations are laid down in collective agreements. The theory is that in collective bargaining there is a balance of forces between employers and employ3   See in France, the Cour de Cassation, 17 July 1996; Conseil Constitutionnel, 25 July 1989 and 6 November 1996.



Collective Bargaining and the Crisis  173

ees. Thus, one may assume that trade unions will consent to a deviation in peius from the statutory norm only if they are convinced of the necessity and have put in place sufficient guarantees that the loss of advantages under the norm will be compensated in one form or another. In Germany this approach has been applied in labour law for more than half a century and is called Tarifdispositives Gesetzesrecht (statutory law with derogations by collective agreement). However, this has had very limited use, for example, in the rules on periods of notice (§ 622 IV BGB), paid holidays (§ 13 I BUrlG), part-time work and work sharing (§ 6 BeschFG) and the continuation of wage payments (§ 4 IV EFZG). Furthermore, even this limited use has already given rise to a debate on its acceptability.4 On the example of Germany, this legal technique was introduced in the Netherlands in 1954 and called Driekwart dwingend recht (‘threequarters dispostive law’). Some minor provisions in the law on dismissal made them dispositive for derogations in peius in collective agreements only. In later years – and especially in 1999 – the number of provisions in statutory labour law open for derogation by collective agreement was increased substantially.5 Some years later the government tried to further expand this kind of norm in the law on dismissals and on works councils, but these proposals were rejected by Parliament. However, new government proposals for expanding this type of norm in the law on dismissals are on the table. In France the first wary steps towards introducing this type of provision were made in the 1960s in the area of working time, gathering pace from the 1980s; legislation on workers’ participation in the profits of the enterprise is also covered. French regulations on working hours have, in a number of recent cases, no longer been construed as mandatory law but as ‘default rules’, applicable only when no collective agreement has been negotiated. Companies are therefore authorised to negotiate the length of the working week, overtime, rest periods and other similar matters in company agreements, which take precedence even over collective agreements negotiated at a higher level (even when the latter are more favourable to employees). However, the French legislature has built in a safety provision: the company agreement must be a ‘majority agreement’, that is, approved by the trade unions that won the majority of votes in workplace elections. Nevertheless, this development has been met with suspicion among French labour lawyers and trade unionists. They argue that the principle of the most favourable source should be considered absolute (‘ordre public social’), so that collective agreements that are less favourable for workers than Acts of Parliament should not be permitted. The question was referred to the French Conseil Constitutionnel, which ruled in 2004 that the principle of the most favourable source was not an absolute principle under French law. Lawmakers 4   See D Ulber, Tarifdispositives Gesetzesrecht im Spannungsfeld von Tarifautonomie und grundrechtlichen Schutzpflichten (Berlin, Duncker & Humblot GmbH, 2010). 5   See R Houweling and L Langedijk, ‘The End of Mandatory Rules in the Employment Contract Law’ in L Nogler and U Reifner (eds), Life Time Contracts (Hamburg, Eleven publishing 2013).

174  Antoine Jacobs have the competence to issue norms from which derogation is possible.6 Since then such norms have further expanded in French labour law. They are referred to as the ‘ordre public dérogatoire’. In Italy the number of statutory labour law provisions subject to deviations in peius was expanded substantially by a law of 2011.7 Derogation is possible from various norms on wages, working hours, atypical labour relations and dismissals by way of regional or company collective agreements. Such agreements must have been signed by the majority of the representative unions in the company/ region. The three largest trade union confederations – CGIL, CISL and UIL – have pledged not to implement these new options, but it is uncertain how long this will continue. In Hungary the Labour Code was amended in 2010 to allow many more derogations from norms by virtue of collective agreements.8 Finally, this legal technique has made its appearance at the level of the European Union. A major example at EU level is in the Working Time Directive (Articles 17–19 of Directive 2003/88/EC). Another example is Article 5(3) of the EU Directive on Temporary Agency Work. All these examples in theory should not lead to the conclusion that statutory labour law is weakened by the expansion of provisions allowing derogations by collective agreements. This technique was not originally intended to be used in this way. It was assumed that the parties are of equal strength at the level of collective bargaining. However, this is often not the case today. Many trade unions have seen their strength weakened by lower membership and the rise of yellow unions. This being the case the expansion of statutory labour law subject to derogation by collective agreement is certainly a way of weakening labour law. Against this background there is even more reason for concern now that we have seen in recent years legal opt-outs in some countries, using Acts of Parliament: the competence to opt out of statutory rules is granted not only to the parties to collective agreements, but also with regard to covenants between the employer and an employees’ representative body, such as a works council. In the Netherlands such clauses are called Vijfachtste Dwingend Recht (fiveeighths dispositive law). This variant is even more specific than opt-out clauses, which can be used only by the partners to collective agreements. This is because such employees’ representative bodies are generally considered to be even weaker than trade unions. The risk of abuse is greater.

6   Conseil Constitutionnel, Decision No 2004-494 DC of 29 April 2004; see also F Bocquillon, Loi susceptible de dérogation et loi suppletive: les enjeux de la distinction en droit de travail (Paris, Dalloz, 2005) 803. 7   Art 8 of Manovra-bis, Decree no 138, ratified by Legge no 148/2011 of 14 September 2011; S Sanz, ‘Unions slam new law allowing opt-outs on labour rules’ (2012) Eironline, available at: www. eurofound.europa.eu/eiro/2011/10/articles/it111009i.htm. 8   Revision of the Labour Code of 26 October 2010.



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II  DECENTRALISATION OF COLLECTIVE BARGAINING

There is also a problem concerning the hierarchy between collective agreements. Which one is the higher source? In some member states a company agreement is seen as higher than a sectoral agreement and a sectoral agreement as higher than a cross-sectoral collective agreement; this because of the principle that ‘the specific pre-empts the general’. However, for political reasons, after the Second World War this rule was partly or wholly reversed in many EU member states in order to give the broader collective agreement priority over the narrower one, unless the narrower one is more favourable to workers than the broader one. In Belgium this has been laid down in fairly absolute terms in the law on collective agreements of 1968. In other countries it has been less absolute. Nevertheless, a rule on the priority of broader over narrower collective agreements is an indispensable and important pillar of a centralised collective bargaining system. Priority of the narrower agreement over the broader one will foster the decentralisation of collective bargaining. No wonder, therefore, that the decentralisation of collective bargaining has been accompanied by attacks on centralisation in terms of the hierarchy of sources between collective agreements. A  Deterioration of the All-Industry Level The change to a more decentralised system of collective bargaining was already under way before the banking crisis started in formerly highly centralised countries, such as Sweden, Denmark and the Netherlands. Now, after the onset of the banking crisis their examples were followed by other member states that had hitherto stuck to a centralised system of collective bargaining, namely Ireland and Romania. In Ireland the long tradition of cross-sectoral collective bargaining imploded in December 2009. The items that were previously dealt with at cross-sectoral level now have to be dealt with at a lower level. As the structures of collective bargaining are often not present at sectoral level, collective bargaining at company level must fill the gap. This means that in many firms employees can no longer enjoy these rights, as workers’ representatives are not strong enough to have them included in company agreements.9 In Romania, too, the banking crisis prompted a decentralisation of collective bargaining. In the past, every four years a cross-sectoral collective agreement was negotiated laying down minimum standards for wages, working hours and working conditions. The brutal abolition of this centralised system of collective bargaining has left thousands of workers devoid of this protective 9   M Doherty, ‘It must have been love . . . but it’s over now: The crisis and collapse of social partnership in Ireland’ (2011) 17(3) Transfer: European Review of Labour and Research 371.

176  Antoine Jacobs shield; often, collective bargaining structures are lacking at the sectoral or company level.10 It is also clear that at the European Union level all cross-sectoral negotiating between the social partners has come to a halt since the beginning of the financial crisis. This is remarkable because the EU, via the so-called ‘Troika’ (comprising representatives from the EU Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF)), is heavily involved in putting pressure on EU member states to change their labour market regulations. One might have imagined that the main lines of this pressure would have been negotiated in Brussels within the framework of the European Social Dialogue (see Mélanie Schmitt in this volume). Tapiola rightly said that the social dialogue has been the first victim of the crisis.11 However, it would not be correct to highlight just these examples. In Austria, Finland, France and the Netherlands, in the very midst of the crisis (2012/13), the central social partners were able to negotiate pacts on adapting labour market regulations. B  Deviations from Broader Collective Agreements by Narrower Collective Agreements It is clear that all Western European nations are faced with the challenge of globalisation, internationalisation and competition from countries with signific­ antly lower wage levels. Manufacturing companies in particular are moving their activities from high-cost to low-cost countries. As so-called ‘labour market rigidities’ have been blamed for the problems in the economy, throughout Western Europe this has provoked a strong demand for deregulation of labour law and for more ‘flexibility’. As part of that endeavour, in several EU member states the relations between the various levels of collective bargaining have come under discussion. In most Western European countries since the Second World War the employment conditions of most workers have been determined predominantly by sectoral-level (industry-wide) collective agreements, although traditionally there have also been single-employer agreements. For a number of years there has been increasing pressure to decentralise the establishment of employment conditions to the company level.12 Because many employers were not satisfied with the existing possibilities for derogation from sectoral-level collective agreements, they 10   C Ciutacu, ‘National unique collective agreement ended by law’ (2011) Eironline, available at: www.eurofound.europa.eu/eiro/2011/07/articles/ro1107029i.htm; A Triff, ‘Romania, Collective bargaining institutions under attack’ (2013) 19(2) Transfer: European Review of Labour and Research 227. 11   K Tapiola, ‘Die ILO und die internationale Finanzkrise’, speech at the seminar in honour of K Lörcher (Hamburg, 11 October 2013) 8–9. 12   A Jacobs, ‘Collective Labour Relations’ in B Hepple and B Veneziani (eds), The Transformation of Labour Law in Europe (Oxford, Hart Publishing, 2009).



Collective Bargaining and the Crisis  177

have pushed for further options at company level. Employers may also obtain the desired flexibility by leaving their employers’ association, as well as through opening clauses and hiatuses in sectoral-level collective agreements and by exemptions from the extension of those agreements to all firms in the sector (extension erga omnes).13 In the United Kingdom, since the 1980s sectoral-level collective bargaining has all but disappeared from the private sector. Although employers are by statute obliged to recognise a union, this applies only if the union is backed by more than 50 per cent of the workers concerned, which in the private sector rarely happens. The result is that in most cases management unilaterally determines and the employees agree.14 This system allows maximum flexibility for enterprises to adapt employment conditions to the specific needs of the company. This flexibility was created during the reign of the Conservative Government (1979–97), which revoked many statutory rules on trade unions, collective bargaining and strikes, severely weakening the trade unions’ position. In Germany the idea of ‘opening clauses’ was introduced in the 1980s, allowing for enterprise-level deviations with regard to sectoral remuneration or working time agreements. In the 1990s this was supplemented by the introduction of ‘hardship-clauses’, notably in order to prevent eastern German companies avoiding coverage by sectoral collective agreements. Since the late 1990s in companies facing the imminent risk of unemployment, concession bargaining (‘Bündnisse für Arbeit’) was born.15 These are agreements, largely about wages and working hours, which often deviate in a unfavourable way (in peius) from the sectoral collective agreement. They were accepted by employees and trade unions in exchange for promises of employment stability16 by the employer.17 These agreements are negotiated mainly by the employer with the works council. They either fit within the existing opening clauses or hiatuses in sectoral collective agreements and/or they are subsequently ratified by the trade unions that negotiated the sectoral collective agreement. On such a basis the highest German Labour Court was prepared to accept them as legitimate. It is import­ ant to note that, while in the 1980s and 1990s the opening clauses were mainly used in firms with severe economic problems, in subsequent years employers and employees agreed on plant-level concessions in an increasing pre-emptive 13   ATJM Jacobs, Labour and the Law in Europe. A Satellite View on Labour Law and Social Security Law in Europe (Nijmegen, Wolf Legal Publishers, 2011). 14   B Bercusson and B Ryan, ‘The British Case: Before and After the Decline of Collective Wage Formation’ in R Blanpain, T Blanke and E Rose (eds), Collective Bargaining and Wages in Comparative Perspective, Bulletin of Comparative Labour Relations 56 (The Hague, Kluwer, 2005). 15   T Blanke and E Rose, ‘Erosion or Renewal? The Crisis of Collective Wage Formation in Germany’ in R Blanpain, T Blanke and E Rose (eds), Collective Bargaining and Wages in Comparative Perspective, Bulletin of Comparative Labour Relations 56 (The Hague, Kluwer, 2005). 16   W Eichhorst and P Marx, ‘Reforming German labour market institutions: A dual path to flexibility’ (2011) 21(1) Journal of European Social Policy 73. 17  H Massa-Wirth and H Seifert, ‘German pacts for employment and competitiveness. Concessionary bargaining as a reaction to globalization and European integration?’ (2005) Transfer: European Review of Labour and Research 26.

178  Antoine Jacobs way, in other words, in the absence of acute problems. By 2005, 29 per cent of all employees working under a collective agreement in western Germany (and 21 per cent in the east) were covered by opening clauses.18 The trade unions seem to have accepted the widespread use of opening clauses as the lesser of two evils, the other being the decline in bargaining coverage (in western Germany down from 76 per cent in 1998 to 65 per cent in 2005; in eastern Germany down from 68 per cent to 56 per cent in 2006; both figures seem to have stabilised since then).19 Within this framework it should be noted that the extension erga omnes procedure is not much used in Germany. Another phenomenon in this field is that a growing number of sectoral collective agreements no longer contain clauses on wages or wage increases. In Denmark, where the system already offered substantial flexibility to cope with severe economic problems on the part of particular enterprises, in 2000 socalled pilot schemes were introduced that made it possible for company agreements to disregard also in peius several sections (for example, working hours) of the sectoral agreement. Since 2004 this may even take place without the requirement of the sectoral-level parties’ control and endorsement.20 In Austria and Belgium,21 as well as in the Netherlands collective agreements with narrower scope may lay down rights and working conditions that are less favourable to employees than the conditions in the collective agreement with broader scope only if the latter explicitly allows it. However, this barely exists in these countries. In the Netherlands22 at the end of the 1990s some companies or sub-sectors tried to escape the binding force of extended collective agreements by concluding company or sub-sectoral collective agreements with weak trade unions or even with yellow unions and then demanded to be exempted from extensions of sectoral collective agreements. The relevant minister initially did so, which led to abuses, and therefore since policy changes in 2007 this way has practically been barred. However – and quite remarkably – the Netherlands has steered clear of erosion of the binding force of the sector-level collective agreement. This is notably because Dutch employers still strongly support sectoral collective bargaining and erga omnes extension. In France the law was changed in 2004. It was provided that sector-level or company agreements may include provisions that depart wholly or in part from rules that apply under agreements covering a broader geographic area or industrial 18   S Kohaut and C Schnabel, ‘Tarifliche Öffnungsklauseln: Verbreitung, Inansprüchname und Bedeutung’ (2007) 56(2) Sozialer Fortschrittt 33. 19   R Bispinck and T Schulten, Sector-level Bargaining and Possibilities for Deviations at Company Level: Germany (Eurofound, 2011). 20   A Ilsoe, ‘Negotiated flexibility: Comparative perspectives on Danish employment relations at local and national levels’ (PhD thesis, Copenhagen University, 2010) 96–97. 21  M Keune, ‘Derogation clauses on wages clauses in sectoral collective agreements in seven European countries’ (Dublin, Eurofound, 2010). 22   ATJM Jacobs, ‘The Netherlands: In the tradition of intersectoral pacts’ in R Blanpain, T Blanke and E Rose (eds), Collective Bargaining and Wages in Comparative Perspective, Bulletin of Comparative Labour Relations 56 (The Hague, Kluwer, 2005).



Collective Bargaining and the Crisis  179

field, unless such departures are expressly forbidden in an agreement at a higher level. However, this possibility of derogation in peius was not opened on the most important item of all – wages – as well on a few other items (Article L 2253, paragraphs 1 and 3 of the Labour Code). In reality the main subject of the derogations is working hours.23 In 2008 it was added that the company agreement may also adapt wage increases laid down in higher/broader collective agreements, provided the wage increase is at least equal to that in the higher/broader collective agreement and hierarchical minimum wages are respected. It seems that this possibility has rarely been used. The labour law reform of 2013 went one step further. Companies in serious economic difficulties may ask their employees to agree to a reduction of working time, work organisation and/or salary in exchange for employment stability, the prohibition of any dismissal on economic grounds. The agreement can have a maximum duration of two years, should not affect a number of statutory labour rules or wages below 120 per cent of the French statutory minimum wage and requires managers and executive staff to make proportional sacrifices. Such concession bargaining (l’accord de maintien de l‘emploi) must be signed by one or more of the representative trade unions that obtained at least 50 per cent of the votes in the company during the previous ‘social’ elections. If a worker does not agree he may be dismissed according to the normal rules on dismissal on economic grounds (Article L 5125 CdT).24 In Ireland since 2003 the national social pacts have included an inability-topay clause. This concerns employers that can prove that they are in difficult financial circumstances in which full payment of nationally agreed wages would mean serious loss of competitiveness and unemployment. If their application is successful, they can refrain from paying all or some of the wage increases due in a wage agreement. These clauses have been invoked fairly often.25 In Italy a cross-sectoral agreement on 22 June 2008 provided that all sectoral agreements shall contain opening clauses, according to which at the enterprise level there may be deviation from sectoral standards under certain circumstances (economic difficulties, restructuring, introduction of significant new investment). Such deviations must be agreed in a company collective agreement signed by a majority of the unitary workplace union structures. The workforce must confirm the diverging company agreement if one of the signatory trade unions or at least 30 per cent of the employees request it. In 2009 a national collective agreement was concluded that introduced a general opening clause for wage regulations at company level which deviate from sectoral agreements – 23   C Vigneau and A Sobczak, ‘France: The helping hand of the State in R Blanpain, T Blanke and E Rose (eds), Collective Bargaining and Wages in Comparative Perspective, Bulletin of Comparative Labour Relations 56 (The Hague, Kluwer, 2005). 24   M Morand, ‘L’adaptabilité contractuelle par l’accord collectif’ (8 July 2013) 1592 La Semaine Sociale Lamy 35; S Béal, ‘Les accords de maintien de l’emploi en quête de sécurité juridique’ (8 July 2013) 1592 La Semaine Sociale Lamy 38; A Braun, ‘Accord de maintien de l’emploi: et pourtant ils signent’ (8 July 2013) 1592 La Semaine Sociale Lamy 43. 25   Keune, above (n 21) 7.

180  Antoine Jacobs this agreement was not signed by the largest Italian trade union federation (CGIL), however. One step further was taken by the Fiat Pomigliano Agreement 2010,26 which brought for the workers at the Fiat plant in Pomigliano a signific­ ant deterioration of their working conditions in relation to the national sectoral agreement.27 The main motive for the Fiat-Pomigliano agreement was the need for the Fiat company to survive in a globalised market and to be competitive on a transnational level. Later the inter-confederal agreement of 28 June 2011, concluded between the largest employers’ confederation (Confindustria) and all three main trade union confederations (CGIL, CISL and UIL)28 defined the criteria for trade union representativeness; provided for the mandatory effect for all workers of a company of company agreements approved by a majority of unions/works councils; and extended the possibilities for company-level derogations from national collective agreements. In contrast to the 2009 agreement the 2011 agreement provides that derogation in peius be allowed only if there are no restrictions in the national collective agreement.29 In Spain an Act of 1994 contains a mandate to include opt-out clauses in collective agreements at sectoral and inter-sectoral level, thus allowing companies to adopt lower wages than those agreed at higher level when they temporarily experience economic difficulties. The options for derogation from the sectoral agreement at company level were further widened by two Royal Decrees of 201030 and 2011.31 Finally, an Act of 201232 has given the company agreement priority over sectoral agreements, even if they are less favourable than the sectoral collective agreement and even if agreements at higher level state otherwise. Such possible divergences may concern almost all aspects of employment and working conditions (including wages and wage structures, working time and work/life balance). This Act also made more precise the possibility for employers to opt out from collective bargaining: this may occur if the enterprise records a drop in its reve-

26   See text at: confederazione.usb.it/index.php?id=20&tx_ttnews%5D=27265&cHash=7b5871a ff3&MP=63-552. 27  F Carinci, Se quarant’anni vi sembrano pochi: dallo Statuto dei lavoratori all’Accordo di Pomigliano, Centro Studi di Diritto del Lavoro Europeo ‘Massimo d’Antona’; 2010, available at: www.lex.unict.it/eurolabor/ricerca/wp/it/carinci_n108-2010it.pdf; P Tomassetti, The shift to singleemployer bargaining in the Italian car sector: Determinants and Prospects at FIAT’ (2013) 2(1) E-Journal of International and Comparative Labour Studies 93. 28  See text at: www.cisl.it/sito.nsf/Documenti/8EA455D14281179FC12578BF003EA257/$File/ AccordoInterconfeAccord28giugno2011.pdf. 29   F Carinci, L’accordo interconfederale der 28 Giugno 2011: armistizio o pace?, available at: www. lex.unict.it/eurolabor/ricerca/wp/it/carinci_n125-2011it.pdf; S Leonardi, ‘Labour Law Deregulation and the Erosion of Collective Bargaining in Italy’, presentation at the annual TURI conference on 7 and 8 June 2012 in Paris, available at: www.turi-network.eu/About-TURI/News/Annual-TURIconference-7-8-June-2012-Paris; A Jacobs, ‘Who is afraid of derogatory agreements at company level?’ in Liber Amicorum. Spunti di diritto del lavoro in dialogo con Bruno Veneziani (Bari, Cacucci, 2012) 159. 30   Royal Decree 10/2010. 31   Royal Decree 7/2011 of 10 June 2011. 32   Law no 3/2012 of 6 July 2012.



Collective Bargaining and the Crisis  181

nues or sales for six consecutive months.33 Although three-quarters of workers are covered by collective agreements containing opt-out clauses, most enterprises in economic difficulties seem to prefer dismissals.34 In Greece a new type of ‘special company-related collective agreement’ was introduced in companies facing serious financial difficulties.35 These new company agreements may provide for wages and some other working conditions that are less favourable than those provided for by the respective sectoral collective agreements, but not less favourable than the minimum conditions agreed in national cross-sectoral collective agreements. The new company agreements can be signed either by the unions at company level, or – where they do not exist – by sectoral union organisations. Lately,36 the company agreement has been given priority over sectoral agreements, even if they are less favourable than the sectoral collective agreement with regard to all kinds of working conditions. C  Parties to Collective Agreements As we have seen, collective bargaining at company level does not necessarily take place with (sections) of trade unions, but also with other bodies, including works councils and less organised groups of workers. This is not unproblematic as such possibilities entail the risk that weak enterprise-level workers’ representatives may outflank stronger trade unions. To avoid this, in Italy an earlier ambiguous definition of the parties to company agreements was replaced by ‘trade union organisations operating in the company following existing laws and interconfederal agreements’.37 In Spain the law still gives priority to negotiations with trade unions over bargaining with local works councils,38 but in companies without union representation company agreements can be concluded by non-union groups of workers.39 In Hungary, too, works councils have the right to conclude collective agreements, provided that there is no trade union at company level whose membership covers at least 10 per cent of the employees.40 33   FN Nieto, ‘Collective bargaining in Spain: The reform of the regulatory framework’ (2012) 1(3–4) E-Journal of International and Comparative Labour Studies 27; G Meardi, ‘Labour market reforms in Italy and Spain: Diversity and convergence’ (2012) 19 (2) International Union Rights 3. 34   Keune, above (n 21) 7. 35   Law no 3899/2010 of 17 December 2010. 36  Law no 4024/2011 of 27 October 2011; see H Voskeritsian and A Kornelakis, ‘Institutional change in Greek industrial relations in an era of fiscal crisis’ 2011, available at: www2.lse.ac.uk/ europeanInstitute/research/hellenicObservatory/pdf/GreeSE/GreeSE52.pdf.; E Patra, ‘Social Dialogue and Collective Bargaining in Times of Crisis: The Case of Greece’ ILO Industrial and Employment Relations Department Working Paper 38 (Geneva, 2012). 37   Art 8 of Act 148/2011. 38   Tapiola, above (n 11) 3. 39   Law no 3/2012 of 6 July 2012. 40   Revision of the Labour Code of 26 October 2011; I Szabó, ‘Between polarisation and statism – effects of the crisis on collective bargaining processes and outcomes in Hungary’ (2013) 19(2) Transfer: European Review of Labour and Research 205.

182  Antoine Jacobs The Slovak Republic has made it easier for non-union employee representatives to conclude collective agreements, in particular in small and non-unionised companies.41 Portugal has been under pressure to lower the current threshold that requires that in companies with 150 or more employees, collective agreements can be concluded by works councils if the trade unions have authorised them to do so. There are also demands that the latter requirement be abolished.42 In Greece the reform of collective bargaining abolished the monopoly of the trade unions. It was provided that collective agreements can now also be negotiated by ‘other associations of employees’ which represent at least three-fifths of the staff. In large firms (with 50 or more employees) such forms of workers’ representation can only be established if there is no trade union active in the company. In smaller firms they can also be installed if there is a trade union active in that firm.43 Together with the change described in section II.B above, this has resulted in a new practice under which, in many sectors, collective agreements are now agreed with such workers’ representatives. In these agreements wages are on average 22 per cent below the sectoral average. Concerning the situation in Greece, it is further reported that 90 per cent of jobs are in firms with fewer than 20 workers. As trade unions must have at least 20 members in a company in order to negotiate an agreement, the result is that trade unions usually can no longer conclude company-level agreements.44 A similar development is reported in Romania. Although here, too, company collective agreements can be concluded only with ‘other employee representatives’ if there is no union in the company;45 that last situation is created more often than before. Trade unions used to need one-third of the workforce to be party to a company collective agreement. Now this has been raised to 50 per cent.46 To found a trade union at least 15 per cent of the workers in the sector are needed, but now it is also required that at least 15 employees are working with the same employer. This is a difficult criterion to meet, because 90 per cent of Romanian enterprises have fewer than 10 employees.

  Clauwaert and Schömann, above (n 2) 13.   Law no 23/2012 of 25 June 2012. 43   Law no 4024/2011 of 27 October 2011; Voskeritsian and Kornelakis, above (n 37); P Georgiadou, ‘Company-level employment contracts trigger wages drop’ (2012) Eironline, available at: www. eurofound.europa.eu/eiro/2012/06/articles/gr1206019i.htm. 44   Tapiola, above (n 11) 4. 45   Law no 62/2011 of 10 May 2011. 46  ibid. 41 42



Collective Bargaining and the Crisis  183

III  ADDITIONAL CHANGES IN THE LAW ON COLLECTIVE AGREEMENTS

A  Maximum Duration In Greece the law was reformed to give collective agreements a maximum duration of three years, while in Romania a reform set a minimum duration of one year and a maximum of two years. B After-Effects In Spain the previous situation was that collective agreements remained applicable until a new collective agreement came into force. A recent reform of collective bargaining law has limited this after-effect to one year after the scheduled end of the collective agreement.47 In Greece the after-effect of expired collective agreements was reduced from six to three months.48 In Estonia the after-effect of collective agreements was abolished altogether. Portugal, too, is under pressure to limit the after-effect of collective agreements.49 C Extension Erga Omnes The power of governments to give general binding effect to collective agreements (extension erga omnes) is an important prop to the role of collective agreements in worker protection. This protection is substantially weakened when governments tighten the criteria for obtaining extension erga omnes. In Romania the automatic extension (erga omnes) of sectoral agreements was abolished. Now extension is possible only if the signing employer associations represent more than 50 per cent of the workers in the sector. In Portugal extensions erga omnes were initially stopped and later reduced by a revised procedure. In future the government will only give an erga omnes order if at least 50 per cent of all employees in the sector work for companies that are members of the signatory employers’ associations.50 And even when this

  Law no 3/2012 of 6 July 2012.   Law no 4046/2012 of 14 February 2012; M Karamessini, ‘Der Neoliberalismus statuiert ein Exempel. Die griechische Tragödie’ in S Lehndorff (ed), Ein Triumph gescheiteter Ideen. Warum Europa tief in der Krise steckt. Zehn Länder-Fallstudien (Hamburg, VSA Verlag, 2012). 49   Deakin and Koukiadaki, above (n 2) 182. 50   Council of Ministers Resolution 90/2002 of 10 October 2012. 47 48

184  Antoine Jacobs condition is fulfilled, the government reserves the right to refuse the erga omnes order if competitiveness is at risk.51 In Greece similar stricter criteria for the extension of sectoral agreements were introduced. Extension is possible only when the employers covered by the agreement represent at least 51 per cent of the workforce in the respective sector.52 Also here the government has stopped issuing such extension orders. D  Intervention in Collective Agreements Finally, intervention in collective bargaining agreements was fairly common in the Netherlands up to the 1980s, as in some Nordic countries. Recently in Greece a government decree revoked a decision of the social partners to increase the minimum wage. Moreover, clauses in the law and in collective agreements that provide for automatic wage increases dependent on time, including those based on seniority, were suspended until unemployment falls below 10 per cent.53 There has been further pressure on the Greek government that it would, together with the social partners, prepare a timetable for overhauling the national general collective agreement in order to replace its wage rates with a statutory minimum wage rate legislated by the government, in consultation with the social partners. All this in order to bring Greece’s minimum wage framework in line with that of comparable countries and to allow it to fulfil its basic function of ensuring a uniform safety net for all employees. In Portugal Act 23/2012 imposed restrictions on collective bargaining, prohibiting the provision of more favourable terms through collective agreements for two years. Moreover, the country was under pressure to launch an independent review to examine ‘how the tripartite concentration on wages can be reinvigorated with a view to defining norms for overall wage developments that take into account the evolution of the competitive position of the economy’. During negotiations in autumn 2012, the Troika demanded that the new framework for the determination of the minimum wage should start to come into effect in April 2013. In Ireland the 2009 Recovery Plan included a suspension of the private sector pay agreement, except in certain circumstances. In addition, the Industrial Relations (Amendment) Act 2012 set stricter conditions for the establishment and variation of Registered Employment Agreements (REAs) and Employment Regulation Orders (EROs).54

51   R Naumann, ‘Portugal 2011–2013: Deregulation of the Labour Market under the Diktat of the Troika’, presentation at the annual TURI conference on 7 and 8 June 2012 in Paris, available at: www.turi-network.eu/About-TURI/News/Annual-TURI-conference-7-8-June-2012-Paris. 52   Law no 3899/2010 of 17 December 2010. 53   Art 6 of the Act of 28 February 2012 of the Ministerial Council. 54   Deakin and Koukiadaki, above (n 2) 181, 184–85.



Collective Bargaining and the Crisis  185 IV ANALYSIS

The above sketch of industrial relations developments in various EU countries shows that decentralisation of labour law standard setting is not something that started only with the current financial crisis. This development dates back to the 1980s and since those years it has progressed in a number of northern EU member states (the United Kingdom, Germany, the Netherlands, Ireland and the Nordic countries), albeit to different degrees. On the one hand, there is Denmark with its traditionally well advanced degree of decentralisation of the setting of working conditions at company level. On the other hand, there is Austria, Belgium and the Netherlands where decentralisation is still underdeveloped. In Germany 15 years of practice and experience with collectively agreed opening clauses has changed the basic structure of collective bargaining. The widespread introduction of these clauses has triggered a process of decentralisation that has shifted an increasingly large part of bargaining responsibilities to the company level. On the other hand, in the United Kingdom, the almost complete abolition of sectoral-level collective bargaining did not end up generalising company bargaining, but resulted in largely individualised wage formation. Employers are usually seen as the driving force behind far-reaching decentralisation of collective bargaining. However, not all employers are of the same opinion about this. Whereas larger firms may push for decentralisation to increase the scope for local adjustments of regulations (and thereby savings on operational costs), smaller firms may prefer sectoral agreements (extended erga omnes) to be assured of peace on the labour market and to save regulatory costs. They do not have the organisational back up (human resource management departments) to institutionalise company-level bargaining. When European economies were in a good shape in the 1960s the trade unions were often in favour of decentralised bargaining. However, in the ailing economies of the past 35 years most trade unions in Europe have become highly sceptical about it. They generally oppose the introduction of opening clauses that allow the undercutting of agreed sectoral standards. However, given the seeming irreversibility of decentralisation, many trade unions in Germany that do business with larger firms have now softened their attitude, hoping that a process of ‘controlled decentralisation’ via opening clauses could help to stabilise the entire bargaining system. They do not want to abandon sectoral collective agreements altogether, however, notably because worker representation either by trade unions or by works councils is often weaker in small firms than in large firms. In Germany even the majority of works councillors are still sceptical. They doubt that decentralisation can help secure jobs and believe that decentralisation leads to more conflicts at company level. For them, the main winners of bargaining decentralisation are management.55   Bispinck and Schulten, above (n 19).

55

186  Antoine Jacobs The southern EU member states (Italy, Spain, Portugal and Greece) kept their comparatively high level of bargaining centralisation and high bargaining coverage until very recently. More than the northern member states they now see themselves confronted with a dismantling of existing wage-setting arrangements and a de-collectivisation of labour relations. Recent data from Spain56 and Portugal57 indicate that there has been a sharp decline in the bargaining coverage in these countries.58 The result of all these developments may be an increased convergence of collective bargaining structures in the EU as the southern member states move closer to the fragmented and decentralised model of collective bargaining that is characteristic of several countries in northern Europe. Across Europe the economic push is now for more decentralisation in collective agreements, so sectoral collective agreements are losing their dominance, albeit to various degrees: most of all in the United Kingdom, least of all in the Netherlands and Belgium; other countries lie somewhere in between. Increasingly, company agreements are deviating from sectoral agreements in peius. The trend everywhere is in the same direction, but the ways in which this trend may be realised or frustrated by existing national labour law systems differ. Here attention should be drawn to the fact that legal texts in this area are not always clear. Often such texts speak only of ‘derogations’ from statutory labour law or higher/broader collective agreements, without specifying whether such derogations can be in peius or in melius or both. Obviously, derogations in melius are much less problematic than derogations in peius, although not necessarily. For instance, in Germany and the Netherlands trade unions are sceptical of allowing works council derogations in melius of collective agreements because this may destroy equilibrium in the bargains struck by trade unions and may devalue the status of trade unions in the eyes of employees. However, it is clear that derogations in peius are the most dangerous kind. In addition it should be stressed that nowhere has it been proved that decentralisation of labour law standard setting guarantees that labour market problems will be resolved. All European economies are facing economic problems as a result of the financial crisis, but it cannot be deduced from this that the more the setting of essential working conditions is decentralised, the more the employment situation will improve. An important lesson to be drawn from the developments in Germany, France, the Netherlands, Finland and Austria is that it is possible to adapt existing labour law standards to the needs of the ailing 56   A Baylos and F Trillo ‘Europe in Crisis – Social Dimension of European Union and the situation of the labour law in the Member States: The Spanish case’, paper presented at a seminar of the Ministry for Federal Affairs, Europe and Media of North Rhine Westphalia in Düsseldorf, 25–26 January 2013; T Schulten and T Müller, ‘A New European Interventionism? The impact of the New European Economic Governance on Wages and Collective Bargaining’ in D Natali and B Vanhercke (eds), Social Developments in the European Union (Brussels, ETUI, 2013). 57   Naumann, above (n 51). 58   Between 2008 and 2012 a decrease of 41 per cent in Spain and 84 per cent in Portugal according to the ETUI, Getting Europe back to Work (Brussels, 6 November 2013).



Collective Bargaining and the Crisis  187

economy by way of negotiations between the social partners, at either the crosssectoral or sectoral level. Nevertheless, the decentralisation of labour law standard setting may be deemed a good thing in a world of individualism, market forces and liberal lifestyles. In recent decades we have learned from various examples that a certain amount of decentralisation in labour law standard setting is not only desirable in the post-industrial era, but is also possible in a responsibly organised world. Notably, the Scandinavian countries,59 but also Germany offer examples of well organised and socially responsible decentralised labour law standard setting. In these countries the sectoral and cross-sectoral social partners often give leeway to the social partners at company, regional or sectoral level to deviate in peius from wider collective agreements. They do so by opening clauses or even by completely deleting certain items (for instance, even real wages/wage increases) in the broader collective agreements, relying on the certainty that the freedom at decentralised level would not be abused. Sometimes this was guaranteed by conflict resolution procedures. The German example seems to indicate that controlled paths to more flexibility inside collective bargaining presuppose a strong legalised and formal system.60 However, the very informal Danish example does not support that conclusion, but it is a fact that the successful Danish path to decentralisation has been enabled by its very unitary system (single-channel workers’ representation, no rival trade unions). The systems of ‘organised decentralisation’ deserve more admiration than suspicion for the creativity they have engendered, but apparently there are important prerequisites for such two-tier bargaining models.61 Such prerequisites include, notably: • A  strong trade union workplace representation and high union coverage in small firms; if, as is now happening in various member states, derogations in peius of broader collective agreements are allowed in agreements at company level with works councils or other workers’ representatives only ‘if there is no trade union at company level’ this, at first sight, seems to protect the unions and the sectoral collective agreement, but in fact undermines them when the trade unions are hardly present at company level. • Collective labour law that does not allow abusive exploitation of multiple unionism and a dual model of workers’ representation at company level (works’ councils besides trade unions); if no compulsory representativeness criteria are in place or works’ councils are outside the control of the trade unions, collective bargaining at company level is a highway to undermining the position of trade unions and sectoral collective bargaining. 59   TA Stokke, ‘The Anatomy of Two-tier Bargaining Models’ (2008) 14(1) European Journal of Industrial Relations 7. 60   R Bispinck, ‘Kontrollierte Dezentralisierung der Tarifpolitik – Eine schwierige Balance’ (2004) 57 WSI Mitteilungen 237. 61   J Visser, ‘Beneath the Surface of Stability: New and Old Modes of Governance in European Industrial Relations’ (2005) 11(3) European Journal of Industrial Relations 287.

188  Antoine Jacobs • D  ecentralisation organised either by the law, in accordance with proposals by the most representative social partners at cross-sectoral level or by these partners themselves (autonomous decentralisation). If decentralisation is imposed by the law against the wishes of these social partners (heteronymous decentralisation) it is much more dubious. If one or more of these prerequisites of ‘organised decentralisation’ are lacking, decentralisation of labour law standard setting becomes problematic. That exactly describes the problematic side of many of the above-mentioned collective bargaining developments that are due to the banking and financial crisis. V  THE LEGAL SIDE

Undoubtedly, the recent financial crisis has encouraged several countries to embark on or to strengthen the decentralisation of collective bargaining by introducing new possibilities for companies to opt out of sectoral collective agreements in peius as a way of surviving the crisis.62 The question arises of whether all the developments outlined above are compatible with international law. The strongest test available is Article 11 of the European Convention on Human Rights, which for a number of years has embraced the right to bargain collectively.63 There is still no case law of the European Court of Human Rights about the consequences of this recognition for the decentralisation of labour law standard setting. However, we may assume that the Court will be inspired by other enunciations of fundamental rights and the quasi case law64 on them.65 Other tests are available under the European Social Charter (see Klaus Lörcher in this volume) and under the Conventions/Recommendations of the ILO (see Niklas Bruun). In that respect it is worth mentioning that the ILO’s Collective Agreements Recommendation 1951 (No 91) defines the principle of the binding effect of collective agreements and their primacy over individual contracts of employment, with the exception of provisions in the latter that are more favourable to workers covered by collective agreements. In this light both the Freedom of Association Committee (FAC)66 and the Committee of Experts on the Application of

  Laulom, above (n 2) 4; Clauwaert and Schömann, above (n 2) 15–16.   See ECtHR Demir and Baykara v Turkey, App no 34503/97 (12 November 2008); (2009) 48 EHRR 54. 64  ILO–FAC, Digest of Decisions and Principles on the Freedom of Association Committee of the Governing Body of the ILO, 5th edn (Geneva, 2006); ILO-CEACR, Giving Globalization a Human Face. General Survey on the fundamental Conventions concerning Rights at Work in the light of the ILO Declaration on Social Justice for a Fair Globalization (Geneva, 2008). 65   A Jacobs, ‘The Right to Bargain Collectively’ in F Dorssement, K Lörcher and I Schömann (eds), The European Convention on Human Rights and the Employment Relation (Oxford, Hart Publishing, 2013). 66   ILO– FAC Digest, above (n 64) § 1057. 62 63



Collective Bargaining and the Crisis  189

Conventions and Recommendations (CEACR)67 have criticised the tendency for the legislature in a number of countries to give precedence to individual rights over collective rights in employment matters. The ILO has also developed certain norms covering situations in countries where collective bargaining takes place at several levels. The first norm is that the parties should seek to ensure that there is coordination between these levels (paragraph 4(2) of the Collective Bargaining Recommendation No 163, 1981). The FAC considers that, in the event of persistent disagreement concerning the level of bargaining, the best procedure is to provide for a system established by common agreement between the parties so as to take into account the interests and points of view of all concerned, rather than having recourse to a legal ruling to determine a specific level of bargaining. Nevertheless, if it is decided that this issue is to be determined by an independent body, the FAC has considered that in such cases the body should be truly independent.68 The CEACR has adopted a somewhat different position, accepting both systems which leave it up to collective agreements to determine the means for their coordination, as well as systems characterised by legal clauses distributing subjects between agreements, giving primacy to a certain level or adopting the criterion of the most favourable provision for workers. The CEACR, however, considers that the interference, as set out in law, of higher-level organisations in the bargaining process undertaken by lower-level organisations is incompatible with the autonomy that must be enjoyed by the parties to bargaining.69 Finally, the ILO Committees have also taken a position on labour law standard setting by agreements between employers and, on the employees’ side, works collectives or works councils. Thus, the CEACR has criticised that in certain countries direct agreements between employers and groups of non-unionised workers are much more numerous than collective agreements concluded with the representative workers’ organisations.70 The Committee called on governments to take measures to prevent direct agreements with non-unionised workers being used for anti-union purposes.71 Both this Committee and the FAC72 consider collective bargaining with representatives of non-unionised workers to be possible only when there are no trade unions at the respective level. This also appears from the first pronouncements of the ILO Committees on various cases brought before them within the framework of the financial crisis. The FAC already found that the Troika request to suspend and/or derogate from collective agreements and decentralise collective bargaining violated

  ILO–CEACR, above (n 64) 82.  ILO–FAC Digest, above (n 64) § 991; ILO–FAC, Case 2375 (Peru), Report no 338, § 1226; and Case 2326 (Australia) Report no 338, § 457. 69   ILO–CEACR, above (n 64) 84. 70   ILO–CEACR, above (n 64) 82. 71   ibid, 96–97. 72  ILO–FAC Digest, above (n 64) § 944. 67 68

190  Antoine Jacobs ILO Conventions 87 and 98.73 The FAC has further noted (and the Governing Body has supported this) that it is a general rule that the public authorities should not exercise their financial competences in such a way that the effect of collective agreements is prevented or limited, as this is not compatible with the freedom of collective bargaining. Restrictions on collective bargaining should be exceptional. They can only be taken if necessary and for a limited, reasonable period. In addition they have to be accom­ panied by sufficient protective measures in order to protect the existing standards of living of the workers in the sectors concerned.

On the extension erga omnes the FAC has said that although the concept of free collective bargaining does not embrace such a procedure, there should be a tripartite analysis by the social partners and the state on the effects of changes in this field on the workers in the sectors concerned. In general terms, the FAC holds that it should not be possible to deviate in peius on the negotiated level of wages and other working conditions. Especially ‘changes in statutory law, which allow to deviate from agreements at a higher level by negotiations with unorganised structures, most likely have an important – and potentially disturbing – effect on the national systems of industrial relations’. The FAC has notably underlined that procedures that systematically give priority to decentralised negotiations in order to negotiate less favourable conditions than those established at a higher level, generally destabilise the negotiation mechanisms and the organisations of employers and workers. They therefore weaken the freedom of association and the right to collective bargaining, which clearly contradict the principles of ILO Conventions 87 and 98. Also the CEARC has expressed its grave concern that negotiations between non-organised partners may lead to a weakening of existing agreements.74 (For further details see Niklas Bruun in this volume.) The European Committee of Social Rights (ECSR), monitoring the European Social Charter,75 is not less critical of the negative consequences of decentralisation of collective bargaining. It once said of the Spanish rule (sections 82–83 of the Workers’ Statute) – which provides that wage clauses may be suspended if they would pose a threat to the company and to employment stability; determining the circumstances in which this provision may apply is left to the parties themselves – that this could lead to the undermining of the mandatory nature of collective agreements, if no procedural safeguards are provided for.76 The ECSR was even critical of the Slovenian model in which it is provided that rights and working conditions that are different from existing ones or less favourable to employees may be determined by collective agreement at a narrower level under conditions determined by a collective agreement at broader level.77   ILO–FAC, Case 2820, 1–6 November 2012.   Tapiola, above (n 11) 4–5. 75   Council of Europe–ECSR, Digest of the Case Law of the European Committee of Social Rights (Strasbourg, 2008). 76   ECSR, Conclusions XIV-1, Spain, Art 6(2) ESC. 77   ECSR, Conclusions 2010, Slovenia, Art 6(2) ESC. 73 74



Collective Bargaining and the Crisis  191

Also the ECSR holds that collective bargaining with representatives of nonunionised workers may only be possible when there are no trade unions at the respective level.78 CONCLUSIONS

But none of this, not to mention other parts of the verdicts of the various committees on the decentralisation of labour law standard setting are, in my view, sufficient to defend statutory labour law and sector-level collective agreements against a race to the bottom on the labour market. The prerequisites that I formulated above are more demanding. Moreover, the verdicts of the said Committees – moderate as they are – are entirely neglected in the new systems of European economic governance in the EU. The Directorate General for Economic and Financial Affairs in 2012 recorded in a study that the new economic–political instruments of control must be used with the aim of reducing the ‘wage-setting power of trade unions’.79 This brought Schulten and Müller to the conclusion that the new system of European economic governance with its newly introduced mechanism of monitoring sanctions and intensified coordination has led to a new European interventionism in the area of wage policy.80 This was affirmed in a document issued by the same Commission Department in 2013, which recommended that: • S pain implements further employment market reforms because ‘incrustations on product and job markets contribute to high unemployment’.81 • In Slovenia and France the minimum wage should be lowered, because otherwise further losses loom and the profits of corporations would be put under pressure.82 • Italy should create a general framework that is friendlier to big business,83 a clear allusion to collective bargaining negotiations that are still taking place, mainly at supra-company level. In a recent Country-Specific Recommendation of the European Council Belgium was requested to decentralise its bargaining system by ‘facilitating the use of opt-out clauses from sectoral collective agreements to better align wage growth and labour productivity developments at local level’.84

  ECSR, Conclusions 2004, Lithuania, Art 6(2) ESC.   DG ECFIN, Labour Market Developments in Europe 2012 (European Commission) 104. 80   Schulten and Müller, above (n 56). 81   Announcement of the Commission of 10 April 2013, results of the close examination according to Regulation (EU) 1176/2011 on the avoidance and correction of macroeconomic imbalances, COM (2013) 199, 7. 82   ibid, 8, 11. 83   ibid, 9. 84   European Council, 11244/12 of 6 July 2012. 78 79

192  Antoine Jacobs Protagonists of a more decentralised system of labour law standard setting may see an alternative to the current system of statutory labour law and sectoral collective bargaining in the Anglo–American approach to wage formation in the private sector, which is often based on benchmarking: employers feel the need to adhere to the ‘going rate’ in order to obtain qualified labour. These ‘benchmark’ wage levels are made available through surveys carried out increasingly by specialised commercial services. As a consequence, the role of the British unions has shifted from collective bargaining to monitoring compliance with legal requirements regarding pay and other working conditions. However this ‘benchmarking’ method only yields decent working conditions in relatively tight labour markets. That does not seem in prospect for most EU countries in the years ahead. Under the present circumstances we cannot really afford to see statutory law and sectoral bargaining crumble. Statutory labour law and sectoral collective bargaining are means of achieving justice in the workplace between the conflicting interests of the employer and the workers. Both devices are also mechanisms for preventing competition by undercutting labour costs and thus encourage competition by investment and development. The decline in statutory protective labour law and collective bargaining coverage is mirrored by the growth in inequality. Only if there is a statutory floor of minimum employment conditions plus broad coverage of collective bargaining can one be sure that there will be a safety net against indecent employment conditions. We cannot afford to allow statutory labour law and sectoral collective agreements to be eroded on a massive scale by company bargaining that may derogate in peius from sectoral collective agreements, let alone by individual bargaining.

8 Evaluation of EU Responses to the Crisis with Reference to Primary Legislation (European Union Treaties and Charter of Fundamental Rights) MÉLANIE SCHMITT1

INTRODUCTION2

T

HIS CHAPTER EXAMINES the legality of measures adopted by the European Union (EU) and the ‘Troika’ with a view to remedying the economic, financial and budgetary crisis affecting member states since

2008. Section I briefly presents these measures and the legal issues stemming from both their contents and the processes of their adoption. After distinguishing between the responses according to their purpose and scope, the discussion focuses on the new framework of ‘economic governance’3 and on the individual responses adopted for member states experiencing particular difficulties, in the context of the financial support provided to them. In the sections that follow, we analyse the conformity of those measures with the core elements of primary legislation. It is difficult to evaluate these ‘anti-crisis’ responses in terms of the rules governing the distribution of competences between the Union and member states (section II). On the one hand, the Treaty on the Functioning of the European Union (TFEU) does not clearly establish the scope of the EU’s (lack of) competence in matters of wages, collective bargaining and the right to organise. On the other hand, the uncertain legal force of many major primary law provisions should be stressed, in particular the fundamental rights

1   The author would like to warmly thank Klaus Lörcher for his enthusiastic suggestions and advice, and express her deep gratitude to Professor Sylvaine Laulom for the comments she made at the TTUR Seminar on 28 May 2013. 2   The views and opinions expressed in this chapter are those of the author. 3   See the chapters by Isabelle Schömann and Lukas Oberndorfer in this volume.

196  Mélanie Schmitt proclaimed by the Charter of the European Union. This is the case with the fundamental right to collective bargaining, whose interpretation by the Court of Justice of the European Union (CJEU) needs to be modified in order to comply with the requirements laid down by the Charter itself (section III). At European level, EU anti-crisis responses need to be assessed in light of the absence of the European Social Partners from the elaboration of austerity programmes and in the legislative processes (section IV). The final section shows that the legal remedies accessible to workers and trade unions are ill suited to challenging the conformity of EU austerity measures with primary legislation (section V). I  THE OBJECT OF EVALUATION: GENERAL AND INDIVIDUAL EU RESPONSES TO THE CRISIS

Evaluation of the EU’s anti-crisis responses calls, first, for differentiation of the measures involved. A distinction must be made between two categories of response, depending on their object and their scope. Certain measures are general and structural in nature, aimed at strengthening the mechanisms of coordination and surveillance of the economic and budgetary policies of member states as a whole (I.A below). Other responses are more specific and aimed at remedying the financial and budgetary crisis affecting member states in particular difficulty (I.B below). A  General Responses: The ‘New Economic Governance’ Framework General measures laid down within the framework of the ‘new economic governance’4 are composed of hard legislation (regulations and directives forming the ‘Six-pack’, which reinforce the requirements of the Stability and Growth Pact imposed on countries in the euro area,5 as well as the procedures aimed at preventing and correcting macroeconomic imbalances)6 and soft legislation (the European Semester7 and the new structure of the existing non-binding processes, in particular the Broad Economic Policy Guidelines (BEPG), the ‘Europe 4  N De Sadeleer, ‘La gouvernance économique européenne: Léviathan ou colosse aux pieds d’argile?’ (2012) 4 Europe. 5   Regulation (EU) 1173/2011 of 16 November 2011 on the effective enforcement of budgetary surveillance in the euro area; Regulation (EU) 1175/2011 of 16 November 2011 amending Council Regulation (EC) 1466/97 on the strengthening of the surveillance of budgetary positions and the surveillance and coordination of economic policies; Regulation (EU) 1177/2011 of 8 November 2011 amending Regulation (EC) 1467/97 on speeding up and clarifying the implementation of the excessive deficit procedure, OJ EU L/306 of 23 November 2011, 1 ff. 6   Regulation (EU) 1176/2011 of 16 November 2011 on the prevention and correction of macroeconomic imbalances, OJ L306/12. 7   The European Semester was agreed by the ECOFIN Council on 6 September 2010 and made official by Regulation 1175/2011.



Evaluation with Reference to Primary Legislation  197

2020’ Strategy and the employment strategy).8 This familiar distinction between hard and soft legislation is becoming blurred because monitoring of preventive and corrective procedures concerning both economic and budgetary imbalances is carried out by the Commission within the framework of the European Semester. Coordination processes in the fields of economic, fiscal and employment policies are now gathered up in this new unique ‘meta-process’. More profoundly, economic, budgetary, employment and social policies are now totally ‘interlinked’ and are intended to be instruments supporting the EU strategy for growth and jobs.9 It is worth noting that both the preventive and the corrective parts of budgetary surveillance (Regulation 1175/2011 and Regulation 1177/2011) ‘should . . . be compatible with the Union strategy for growth and jobs’.10 i  Legal Issues The ‘social dimension’ of these mechanisms is concentrated on wage costs. It is nothing new for the EU to concern itself with this matter, which is at the heart of labour relations. Economists have shown that this subject was introduced into European debates following the adoption of the Maastricht Treaty and the setting up of the Economic and Monetary Union.11 The strengthening of budgetary constraints placed on member states may have contributed to making wages the main ‘adjustment variable’ (according to the Union institutions) in securing the competitiveness of European economies. Wage moderation, including revision of indexation clauses, has in fact been promoted by the EU for all member states.12 Although wages are a core element of collective autonomy, European social partners were not given an opportunity to take part in the elaboration of this secondary legislation.13 More generally, structural reforms of the labour market, as well as reforms aimed at modernising social security systems that are required of member states in order to comply with the requirements of the EU coordination of economic, budgetary and employment policies (via the European Semester, country-­ specific recommendations, Regulation 1176/2011 on macroeconomic imbalances, Regulations 1173, 1175 and 1177/2011 on budgetary surveillance), are elaborated and assessed without any formal involvement of European social partners, such as genuine consultation.

8   See C Barbier, ‘Semestre européen ou Pacte de compétitivité: bonnet blanc et blanc bonnet?’ OSE Opinion Paper no 4/2011. 9   See the Preamble of the Regulations composing the ‘Six-pack’. 10   Regulation 1173/2011, Preamble, para 5. 11   G Raveaud, ‘L’Union européenne contre le salaire’ (2012) 73 La Revue de l’Ires 99. 12  Communication of 12 January 2011, ‘Annual Growth Survey – Advancing the European Union’s comprehensive response to the crisis’ COM (2011) 11 final. 13   The same, moreover, is true of the formulation of the decisions of the European Council and of the memoranda adopted by the Troika and member states concerned (see section IB).

198  Mélanie Schmitt This sidelining of the European social partners appears to contradict primary legislation which contains several provisions promoting their key role in social policy, as well as in economic and employment policies. Among those provisions, Article 152 TFEU states that: ‘the Union recognises and promotes the role of the social partners at its level [italics added], taking into account the diversity of national systems’. The same provision further requires that all EU institutions both respect collective autonomy and facilitate social dialogue. By stating that its application via recommendations of the Council and of the Commission ‘shall fully observe Article 152 TFEU’, Regulation 1176/201114 seems to acknow­ ledge that the European social partners are intended to be involved in elaborating (austerity) measures that will be adopted with a view to preventing or correcting (excessive) macroeconomic imbalances. Moreover, the Preamble of Regulation 1175/2011 contains a provision whose scope extends to the entire process of coordination and surveillance: ‘Relevant stakeholders, in particular the social partners, should be involved, within the framework of the European Semester, on the main policy issues where appropriate, in accordance with the provisions of the TFEU and national legal and political arrangements’ (italics added). The question thus arises whether general anti-crisis responses already adopted by the EU and those that will be taken on the basis of Regulation 1176/2011 or Regulation 1175 can be analysed as violating primary legislation (section II). B  Individual Responses: ‘Social Conditionality’ of Financial Support The granting of international loans sought by member states in great difficulty is conditional on meeting budget criteria, but also on bringing in ‘structural reforms’. The ‘conditionality’ imposed by the Troika extends to the labour market, which should be ‘flexibilised’. To this end, national governments must undertake labour law reforms concerning the setting and level of wages, collective bargaining, contracts of employment, working time and redundancies.15 The question then arises of the legitimacy of these national austerity measures imposed by various acts: Council Decisions, ‘economic adjustment programmes’, ‘memoranda of understanding’, treaties and ‘pacts’.16 The presentation of the main reforms imposed in return for European and international financial assist­ ance in the two member states particularly affected by the crisis (Greece and Portugal) helps us to formulate general issues.   Regulation 1176/2011, Art 1(3) and Art 6(3) on preventive actions.   S Clauwaert and I Schömann, ‘The crisis and national labour law reforms: A mapping exercise’ ETUI Working Paper 2012/4. 16   See P Vielle, ‘La légitimité des mesures de droit social en temps de crise’ in M-C EscandeVarniol, S Laulom and E Mazuyer (eds), Quel droit social dans une Europe en crise? (Brussels, Larcier, 2012) 365. 14 15



Evaluation with Reference to Primary Legislation  199

i Greece17 a  European Union Procedures and Acts Due to its dramatic economic and budgetary situation, since April 2009 Greece has been the subject of an excessive deficit procedure. Based on Articles 126 and 136 TFEU, Council Decision 2010/320 of 10 May 2010 is ‘addressed to Greece with a view to reinforcing and deepening fiscal surveillance and giving notice to Greece to take measures for the deficit reduction judged necessary to remedy the situation of excessive deficit’.18 There is no doubt from the Preamble (Recital 8) of this Decision that the adoption of austerity measures by the Greek state is imposed legally in return for the loans granted to Greece: ‘The lenders have decided that their support shall be conditional on Greece respecting this Decision. In particular, Greece is expected to carry out the measures specified in this Decision in accordance with the calendar set out herein’. Some of these measures concern essential elements (both individual and collective) of employment relationships and of labour law. According to Article 2(3) of the Decision of 10 May 2010: ‘Greece shall adopt the following measures by the end of December 2010: (c) a law to reform the wage bargaining system in the private sector, which should provide for a reduction in pay rates for overtime work, enhanced flexibility in the management of working time and allow local territorial pacts to set wage growth below sectoral agreements; (d) a law on minimum wages to introduce sub-minima for groups at risk such as the young and long-term unemployed, and put measures in place to guarantee that current minimum wages remain fixed in nominal terms for three years; (e) a reform of employment protection legislation to extend the probationary period for new jobs to one year, reduce the overall level of severance payments and ensure that the same severance payment conditions apply to blue and white collar workers, raise the minimum threshold for the rules on collective dismissals to apply, especially for larger companies, and facilitate a greater use of temporary contracts.

The Memorandum of Understanding on Specific Economic Policy Conditionality of 3 May 2010 specifies the content and calendar of the reforms, including: Among structural reforms to be undertaken in respect of the ‘actions for the first review (to be completed by end Q2-2010)’: ‘To strengthen labour market institutions: Government starts discussions with social partners in order to revise private sector wage bargaining and contractual arrangements’. Among structural reforms to be undertaken in respect of the ‘actions for the third review (to be completed by end Q4-2010)’: ‘To strengthen labour market institutions:

17  See A Koukiadaki and L Krestos, ‘Greece/Grèce’ in M-C Escande-Varniol, S Laulom and E Mazuyer (eds), Quel droit social dans une Europe en crise? (Brussels, Larcier, 2012) 189. See also B Palli, ‘Le droit du travail confronté à la faillite de l’État: le cas de Grèce’ (2013) 1 Droit social 4. 18   Council Decision 2010/320/EU, OJ EU L/145/6 (11 June 2010).

200  Mélanie Schmitt Following dialogue with social partners, the government proposes and parliament adopts legislation to reform wage bargaining system in the private sector, which should provide for a reduction in pay rates for overtime work and enhanced flexibility in the management of working time. Allow local territorial pacts to set wage growth below sectoral agreements and introduce variable pay to link wages to productivity performance at the firm level. Government amends regulation of the arbitration system (Law 1876/1990), so that both parties can resort to arbitration if they disagree with the proposal of the mediator. Following dialogue with social partners, government adopts legislation on minimum wages to introduce sub-minima for groups at risk such as the young and long-term unemployed, and puts measures in place to guarantee that current minimum wages remain fixed in nominal terms for three years. Government amends employment protection legislation to extend the probationary period for new jobs to one year, to reduce the overall level of severance payments and ensure that the same severance payment conditions apply to blue- and white-collar workers, to raise the minimum threshold for activation of rules on collective dismissals, especially for larger companies, and to facilitate greater use of temporary contracts and part-time work’.

The Decision of 10 May 2010 was amended by Decision 2011/734/EU of 12 July 2011,19 which shows, along the same lines, that the Troika is imposing reforms despite an apparent agreement between the Troika and the Greek government. A second ‘economic adjustment programme for Greece’ was adopted in March 2012, following a third Council Decision of 13 March 201220 and a new Memorandum of Understanding of 14 March 2012. These acts are directed in particular towards accelerating and reinforcing wage reductions and aim at imposing strong limits on collective bargaining. The Memorandum requires the Greek government to make the following changes, on penalty of not receiving the next tranche of financial aid: Exceptional legislative measures on wage setting Prior to the disbursement, the following measures are adopted: The minimum wages established by the national general collective agreement (NGCA) will be reduced by 22 per cent compared to the level of 1 January 2012; for youth (for ages below 25), the wages established by the national collective agreement will be reduced by 32 per cent without restrictive conditions. Clauses in the law and in collective agreements, which provide for automatic wage increases, including those based on seniority, are suspended. Reforms in the wage-setting system The Government will engage with social partners in a reform of the wage-setting system at national level. A timetable for an overhaul of the national general collective agreement will be prepared by end-July 2012. The proposal shall aim at replacing the wage rates set in the NGCA with a statutory minimum wage rate legislated by the government in consultation with social partners.   Council Decision 2011/734/EU, OJ EU L296/38 (15 November 2011).   Council Decision 2012/211/EU, OJ EU L113/8 (25 April 2012).

19 20



Evaluation with Reference to Primary Legislation  201 Measures to foster the re-negotiation of collective contracts Prior to the disbursement, legislation on collective agreements is amended with a view to promoting the adaptation of collectively bargained wage and non-wage conditions to changing economic conditions on a regular and frequent basis. Law 1876/1990 will be amended as follows: Collective agreements regarding wage and non-wage conditions can only be concluded for a maximum duration of 3 years. Agreements that have been already in place for 24 months or more shall have a residual duration of 1 year. Collective agreements which have expired will remain in force for a period of maximum 3 months. If a new agreement is not reached, after this period, remuneration will revert to the base wage and allowances for seniority, child, education, and hazardous professions will continue to apply, until replaced by those in a new collective agreement or in new or amended individual contracts.

b  National Measures The years 2010 to 2012 saw the adoption of many laws implementing Council Decisions and the first Memorandum of Understanding. The Memorandum is annexed to the laws, a sign of the constrained situation in which the Greek authorities were put. Based on the first economic adjustment programme, four acts made major changes related, on the one hand, to wages and working and employment conditions and, on the other, to the system of collective relations (Law 3845/2010, Law 3863/2010, Law 3899/2010 and Law 4024/2011).21 To pave the way for the adoption of the second economic adjustment programme, the Greek government had to set up a new austerity programme. Two sets of legislative measures were passed: Law 4046/2012 of 14 February 2012 and order 6/2012 of 28 February 2012; Law 4093/2012 of 12 November 2012 completed the programme.22 With specific regard to wages and the collective bargaining system, the following major changes have been introduced into Greek law:23 • A  three-year wage freeze in the private sector and a 2 per cent reduction in the cost of overtime. • Precedence of company-level collective agreements over industry-wide collective agreements even if they are less favourable to workers, except in the case of minimum terms of work and pay laid down by general national collective agreements. 21   S Clauwaert and I Schömann, ‘The crisis and national labour law reforms: A mapping exercise. Country report: Greece’ (March 2012). 22   Palli, above (n 17). 23  This presentation is based on Clauwaert and Schömann, ‘Country report: Greece’, above (n 21); Palli, above (n 17); C Triantafillou, ‘Crise de la dette et programmes d’austérité en Grèce: impacts de l’ajustement pour les travailleurs’, presentation at the annual TURI conference Brussels, 28 February 2012, available at: www.turi-network.eu/About-TURI/News/Annual-TURI-conference7-8-June-2012-Paris.

202  Mélanie Schmitt • Suspension of the procedure for the extension of branch-level collective agreements up to the end of 2015. • Introduction of a new type of ‘special’ branch-level collective agreement, whose content may be less favourable for workers than that of the industry or occupational collective agreement. • New company agreements introduced since the end of 2011 (approximately 70) reduce wages by 10–25 per cent, aligning them with the statutory minimum wage (thus abolishing, de facto, the provisions of existing collective agreements at sector or company level). • The possibility of signing collective company agreements in enterprises with fewer than 50 employees (up to this point covered by branch agreements). • If there are no unions in an enterprise, the possibility of signing collective agreements with ‘unions of persons’. • Amendment of the national inter-occupational collective agreement fixing the minimum wage, conferred on the Council of Ministers; measure extended to the determination of the minimum wage (with effect from 1 April 2013, the Greek minimum wage is established by a regulatory act). • Bringing branch collective agreements into question (automatic conversion of open-ended agreements to conventions for a fixed term of a maximum of three years; their implementation will cease on expiry of a term of three years at most from the time of coming into force). • Suspension of the application of the provisions of bargaining agreements on increases in basic wages or bonuses, until unemployment returns to an acceptable level of under 10 per cent of the active population. It appears that reforms adopted by the Greek Parliament on the ground of EU anti-crisis measures are a radical challenge to the structure and principles that were the essence of the system of collective bargaining, such as the competence of social partners to establish the minimum wage at national level, the structure of different levels of collective bargaining and the principle of the application of the most favourable collective agreement to the worker (‘favourability clause’). In consequence, the freedom of association of workers is substantially affected by ‘the unscrupulous violation of collective autonomy’ (italics added).24 The objective of these measures is to allow a substantial fall in wages, in particular by stimulating competition among enterprises, whether or not they are bound by a branch agreement. The differentiation imposed between categories of workers depending on their status or age contributes towards disrupting the organisation of workers and establishing general competition within society, in open contradiction of the value of solidarity that is the basis of the right to collective bargaining and freedom of association.

  Palli, above (n 17) 9.

24



Evaluation with Reference to Primary Legislation  203

ii Portugal a  European Union Procedures and Acts By a Decision of 17 May 2011, Portugal obtained financial support from the EU through the European Financial Stabilisation Mechanism (EFSM) established by Regulation 407/2010 of 11 May 2010. This Decision covers the economic policy conditions to be met by Portugal in the context of the ‘strict conditionality’ detailed in the ‘Memorandum of Understanding on specific economic conditionality’ attached to the Decision. As the Commission states, ‘The Loan Facility Agreement on the EFSF financing contribution specifies that the disbursements thereunder are subject to the compliance with the conditions of this Memorandum’.25 The Memorandum provides in particular for: • A  legislative reform of severance payments applicable to newly hired workers, with a view to substantially reducing the amount and ‘aligning the level of severance payments to that prevailing on average in the EU’. • Facilitating individual dismissals, especially those linked to unsuitability of the worker, lifting the obligation on the employer to attempt to transfer the worker. • Reducing additional pay for overtime (to a maximum of 50 per cent) and eliminating compensatory time off equal to 25 per cent of overtime hours worked. Measures affecting the collective bargaining system, as imposed on the Portuguese government as a compulsory condition of financial aid, have been listed in detail by Schömann and Clauwaert.26 The Memorandum of Understanding of 17 May 2011 also foresaw major changes to the Portuguese industrial relations system. Draft legislation was expected by the first quarter of 2012 on: • C  riteria for extending collective agreements, including the representativeness of the negotiating organisations (to be assessed on the basis of ‘both quantitative and qualitative’ indicators) and how extension would affect the competitiveness of non-affiliated firms. • A further reduction of the continued application of collective agreements that have expired and have not been renewed. • Further decentralisation of bargaining in favour of company-level bargaining. • Allowing works councils to negotiate functional and geographical mobility conditions and working-time arrangements. • Lowering the company size threshold, so that works councils can conclude agreements with companies of 250 employees.

25   European Commission, ‘The Economic Adjustment Programme for Portugal Fifth review – Summer 2012’ Occasional Papers 117, October 2012, 53. 26   S Clauwaert and I Schömann, ‘The crisis and national labour law reforms: A mapping exercise. Country report: Portugal’ (March 2012).

204  Mélanie Schmitt • Inclusion of conditions in sectoral collective agreements by which works councils would be able to conclude firm-level agreements without the involvement of trade unions. These changes must be carried out in accordance with internal requirements, but also with EU legislation and, above all, respecting workers’ fundamental rights. As stated in the Memorandum of Understanding: ‘Reforms in labour and social security legislation will be implemented after consultation with social partners, taking into account possible constitutional implications, and in respect of EU Directives and Core Labour Standards’. b  National Measures Laws 53/2011 and 23/2012 on the reform of severance payments are aligned with the Memorandum recommendations, as pointed out by the Commission in its paper on the fifth review.27 Moreover, the Portuguese Parliament has abolished the payment of thirteenth and fourteenth month bonuses to public sector workers. This measure was annulled by the Portuguese Constitutional Court in a decision of 5 July 2012, on the grounds that it is a violation of the principle of equality between workers in the public and private sectors.28 The Court nevertheless decided that the application of the measure should be retained in 2012. This decision shows that national constitutional norms, including those on the fundamental rights of workers, may represent a bulwark against regressive social measures imposed by the European Union. In October 2012, the measures affecting the collective bargaining system had not yet been implemented. c  Legal Issues In light of all the measures cited above, the issue to be examined is whether the EU institutions, in requiring member states to reduce pay and to sideline collective bargaining and freedom of association, are in breach of primary legislation. More precisely, the first question is whether the Union has a competence to take measures in matters of wage and collective bargaining (section III). Attacks on collective bargaining systems are all the more problematic that, this core element of the ‘European social model’ is recognised as fundamental rights (section IV) and that it is a key factor in promoting the attainment and effectiveness of workers’ rights as a whole, contributing towards upholding the principle of democracy and the rule of law.29

  European Commission, ‘The Economic Adjustment Programme for Portugal’, above (n 25) 67.   The European Commission has criticised this position in its report ‘The Economic Adjustment Programme for Portugal’, above (n 25) 6 ff. 29   See the chapter by Bruno Veneziani in this volume. 27 28



Evaluation with Reference to Primary Legislation  205

II  EVALUATION OF EU RESPONSES IN TERMS OF INVOLVEMENT OF THE EUROPEAN SOCIAL PARTNERS

A  The Growing Role of European Social Partners in EU Social and Economic Policies The Lisbon Treaty is helping to consolidate the role of the social partners, which has gradually been extended by the Treaty revisions since the European Single Act came into force. Europe wide, the most visible manifestation of the ‘principle of participation’30 of social partners is their involvement in the core of the legislative process of social harmonisation. Since it is mandatory that they are consulted by the European Commission on any initiative in social policy matters (Article 154(2) and (3) TFEU), they have the right to negotiate a European agreement that, at their choice, will be annexed to a directive or implemented by the national social partners (Article 155(2) TFEU). Since the recognition of a coordinated employment strategy by the Amsterdam Treaty, and then the close linking of this strategy with economic policy (today formalised as part of the Europe 2020 Strategy),31 this participation was extended beyond the social sphere in order to reach the crucial domains of employment and economic issues. European social partners also participate in the ‘macroeconomic dialogue’ side by side with representatives of the Commission, the Council and the European Central Bank. In the same way, in institutionalising the Tripartite Social Summit for growth and employment (set up in 2003)32 the Lisbon Treaty33 recognises the economic competence of European social partners and their legitimate involvement in the earlier stage of defining the strategic objectives of the European Union. This set of mechanisms enables them to be associated with discussions on economic, monetary, budgetary and fiscal policy, with the aim of encouraging growth and employment. More broadly, Article 152 TFEU recognises the social partners’ ‘autonomy’ and the duty of EU institutions to fully respect it. In the context of renovation of economic governance, the European Semester specifically aims at synchronising the calendar for the presentation and evaluation of stability and convergence programmes within the framework of the Stability and Growth Pact (economic and budgetary monitoring) and the National Reform Programmes (NRPs) whereby the countries’ implementation of the BEPG can be assessed, as well as the Employment Guidelines, in accordance with the objectives of the Europe 2020 Strategy.34 30   The term is used by the European Commission: europa.eu/legislation_summaries/employment_ and_social_policy/social_dialogue/index_en.htm 31   See: ec.europa.eu/europe2020/index_fr.htm. 32   Council Decision 2003/174/EC of 6 March 2003, JOEU L/70/31 (14 March 2003). 33   Art 152(2) TFEU: ‘The Tripartite Social Summit for Growth and Employment shall contribute to social dialogue’. 34   See Barbier, above (n 8).

206  Mélanie Schmitt Strongly influenced by the crisis, this merger of ‘soft’ economic and social processes has not helped to boost the role of the European social partners. The Tripartite Social Summit is not linked closely enough with the European Semester, and often intervenes far too late. In 2012, the spring Summit was held on 1 March, on the same day as the European Council’s announcement of the guidelines for economic and employment policies in the member states. Similarly, the European Economic and Social Committee stated that: Preventing and correcting imbalances cannot be left to the Commission and member state governments alone.35 The process of salary and price formation is a crucial element in the broader mechanism for monitoring macroeconomic imbalances: in consequence, any political action on this front must take into account Article 153(5) of the Treaty on the Functioning of the European Union and involve the social partners at both national and European levels.36

B  Giving Legal Substance to ‘Economic and Social Governance’: Recognising the European Social Partners’ Right to Consultation The management of the crisis has shown that it is time to move on from words to action. In carrying out its mission of promoting the social dialogue,37 the Commission declared, back in 2002,38 that ‘as a driving force for modernisation of the European economy and the European social model, the social dialogue holds a crucial, unique position in the democratic governance of Europe’. Strengthening the role of the social partners may in fact be viewed as the main illustration of the establishment of participatory democracy in the European Union. Ruling on the legitimacy of a directive implementing a European agreement,39 the Court of First Instance affirmed that the principle of democracy on which the Union is founded requires – in the absence of the participation of the European Parliament in the legislative process – that the participation of the people be otherwise assured, in this instance through the parties representative of management and labour.

The draft Treaty establishing a Constitution for Europe then expressly recognised the contribution of the social dialogue to participatory democracy, but 35   A Watt, ‘Economic Governance in Europe: A Change of Course only after Ramming the Ice’ (30 July 2010) Social Europe Journal, available at: www.social-europe.eu/2010/07/economic-governancein-europe-a-change-of-course-only-after-ramming-the-ice; A Watt, ‘European economic governance: What reforms are to be expected and what are needed?’ paper for (2010) European Alternatives, available at: www.euroalter.com/wp-content/uploads/2010/11/Watt-ENG.pdf. 36   Opinion No 799/2011 of 5 May 2011 on macroeconomic imbalances, ECO/286, para 5.5.1. 37   Art 154(1) TFEU. 38   Communication of 26 June 2002, ‘The European Social Dialogue, a force for modernisation and change’ COM (2002) 341 final. 39   CFI EU, Case T-135/96 Ueapme v Council and Commission [1998] ECR II-2335; M-A Moreau, ‘Sur la représentativité des partenaires sociaux européens (Tribunal de première instance des Communautés européennes, 17 juin 1998)’ (1999) Droit social 53.



Evaluation with Reference to Primary Legislation  207

the Lisbon Treaty did not take up the provisions in question, so that the European social partners do not have a specific right, expressly recognised by the Treaty on the Functioning of the EU, to be associated with economic governance. Nevertheless, Article 152 TFEU together with other provisions of the Lisbon Treaty may be mobilised in favour of extending the democratic participation of European social partners already deriving from Articles 154 and 155 TFEU. Given the place of Article 152 TFEU in the chapter on social policy, it can be considered that respect for and the promotion of the European social dialogue extend beyond the strict framework of social harmonisation – defined by Article 153 TFEU.40 It may be argued that the European social partners should be entitled to intervene in all normative and decision-making processes, hard or soft, where the general social policy objectives listed in Article 151 TFEU are at stake. From this broad interpretation (if one really wants to make the social dialogue effective) it follows that the European social partners should be involved in the surveillance of economic and budgetary processes, especially because a EU act included in the Six-pack explicitly requires compliance with Article 152 TFEU. Regulation 1176/11/EU on the prevention and correction of macroeconomic imbalances mentions this mandatory requirement for the EU institutions concerned in two provisions. By virtue of Article 1(3) of this Regulation, The application of this Regulation shall fully observe Article 152 TFEU, and the recommendations issued under this Regulation shall respect national practices and institutions for wage formation. This Regulation takes into account Article 28 of the Charter of Fundamental Rights of the European Union, and accordingly does not affect the right to negotiate, conclude or enforce collective agreements or to take collective action in accordance with national law and practices.

Article 6(3) of the same Regulation refers again explicitly to Article 152, by stating that ‘The recommendations of the Council and of the Commission shall fully observe Article 152 TFEU and shall take into account Article 28 of the Charter of Fundamental Rights of the European Union’. Although the emphasis is on the observance of national systems, these provisions do not restrict the reference made to Article 152 to the national level. It is therefore possible to interpret this reference in a broad way, including European level and respect for the prerogatives of European social partners. The Preamble of Regulation 1175/2011 reinforces this interpretation and extends its scope by stating that ‘Relevant stakeholders, in particular the social partners, should be involved, within the framework of the European Semester, on the main policy issues where appropriate in accordance with the provisions of the TFEU and national legal and political arrangements’.41 European social partners should thus be able to use their main prerogative as recognised by the TFEU   On this subject, see the chapter by Bruno Veneziani.   Regulation 1175/2001, Preamble, para 16 (author’s italics).

40 41

208  Mélanie Schmitt – their right to consultation – on economic and budgetary policies insofar as these policies are interlinked with employment and social policies. This interpretation of Article 152 TFEU is supported by Article 9 TFEU, containing the ‘horizontal social clause’ and by the practice of impact assessment that the Commission has developed in order to take account of the requirement for consistency ensuing from this clause. According to Article 9 TFEU, in defining and implementing its policies and activities, the Union shall take into account requirements linked to promoting a high level of employment, guaranteeing adequate social protection, fighting social exclusion and ensuring a high level of education, training and protection of human health.

In general, the outcome is that any action initiated by the Commission (at least, where this is relevant), whether legislative or pertaining to the open method of coordination, must be preceded by a study of its social impact. It is at this stage that the European social partners should be consulted and more closely involved, which is to include involvement in the Europe 2020 Strategy.42 The European Economic and Social Committee43 states, for example, that ‘Social impact assessments should cover all ten integrated guidelines for employment and economic policies, be published and feed into the open method of coordination process’. ‘The views of organised civil society should also be taken into consideration when the Commission and the Council validate targets and assess progress’. The European social partners are also called upon to participate in both the (re)definition of the strategic targets of the Union and the evaluation of the national reform programmes. The European Economic and Social Committee, followed by the European Trade Union Confederation,44 also suggest reinforcing the European macroeconomic dialogue ‘by means of a stable structure and organisation’.45 According to the Economic and Social Committee, ‘the format, composition and preparation of the Tripartite Social Summit should also be improved in order to increase its role in economic governance’.46 This summit should intervene on the launching of the European Semester.47 As regards EU Council Decisions approving financial assistance to member states in great difficulties, these are acts of the Union and are at the heart of economic policy, on the one hand, and monetary policy, on the other. Article 9 TFEU, 42   EESC Opinion No 1586/2012 of 12 July 2012 on ‘Strengthening the participatory processes and the involvement of local authorities, NGOs and the social partners in the implementation of Europe 2020’. 43   EESC Opinion No 976/2010 of 15 July 2010 on ‘The open method of coordination and the social clause in the context of Europe 2020’; A Hick and S Nilsson, ‘Vers un nouveau programme d’action sociale et un pacte d’investissement social européen’ (2012) 1 Revue française des affaires sociales 176, 183. 44  VB Ségol, in European Commission, Guide de l’Europe sociale. Vol 2, Dialogue social (Luxembourg, Publications Office, 2012) 30. 45   Opinion No 799/2011 of 5 May 2011 on macroeconomic imbalances, ECO/286. 46   Ségol, above (n 44). 47   VE Grass, ‘Communauté réduite aux acquêts’ (2012) 1 Revue française des affaires sociales 199, 209.



Evaluation with Reference to Primary Legislation  209

then, should govern these decisions, especially as they include many provisions directed towards reducing aid and social security benefits, contradicting the objectives of ‘guaranteeing adequate social protection’ and ‘combating social exclusion’. Article 52 of the Charter, in combination with Articles 151 and 9 TFEU, imply that the European social partners should be associated in the formulation of these decisions. The only way to give substance and effectiveness to the role of European social partners and social dialogue is to admit that a right to consultation stems from these Treaty provisions and Regulation 1176/2011.

III  EVALUATION OF EU RESPONSES IN TERMS OF THE DIVISION OF COMPETENCES BETWEEN THE MEMBER STATES AND THE EUROPEAN UNION

The evaluation of EU responses to the crisis and national implementing measures is a complex task in that it relates mainly to matters – collective bargaining and pay – that are not regulated by European law. Their place within EU law must therefore be questioned, specifying first of all the division of competences between member states and the Union as it ensues from the Treaty on the Functioning of the European Union (I.A above), and then the implications of the EU Charter of Fundamental Rights vis-a-vis EU competences (I.B above). A  Division of Competences between Member States and the EU under the TFEU The EU may act in a field only if it has the competence to do so, which must be conferred by the Treaties. Any act of an EU institution must be founded on a ‘legal basis’, and this must comply with its prescriptions. The legal basis defines the power that may be exercised by the EU and the form or forms that the action of the Union must or may take. i  TFEU Provisions In the domain of social policy, Article 153 TFEU lists the fields that may be the subject of an approximation of national legislations (paragraph 1), by adopting minimum requirements by means of directives for their gradual implementation in member states (paragraph 2). Neither pay nor collective bargaining is included in this list. a Pay On the contrary, Article 153(5) TFEU expressly excludes ‘pay’ from the competence for harmonisation. EU institutions, therefore, may not impose any binding

210  Mélanie Schmitt act on the member states on this matter. But this does not mean that any action is prohibited. On the one hand, the European Social Partners retain the competence for developing contractual relations and, if they so desire, to reach agreements (Article 155(1) TFEU). On the other, the list of fields coming within the European Commission’s competence for encouraging cooperation between member states (Article 156(1) TFEU) appears to be broad enough to cover pay (under the heading of ‘labour law and of working conditions’), but this competence may give rise only to non-binding acts.48 Nevertheless, the strict distinction made by Article 153(2) between working conditions (which may be the subject of harmonisation) and pay (which is excluded from this) favours the exclusion of any action by the Union in this respect. Moreover, the Union’s lack of competence is not absolute, since the prohibition on discrimination in matters of pay is enshrined in the Treaty (Article 157 TFEU), regulated by many directives and interpreted very broadly by the Court of Justice. b  Collective Bargaining In the domain of collective bargaining, the provisions of the Treaty are less explicit. Collective bargaining is not one of the fields on which harmonisation directives may be issued (Article 153(1) TFEU) and cooperation may be encouraged (Article 156(1) TFEU). In addition, for the purpose of attaining social policy objectives,49 ‘the Union and the member states shall implement measures which take account of the diverse forms of national practices, in particular in the field of contractual relations’. Article 152(1) TFEU, arising from the Lisbon Treaty, reinforced this requirement by stating that the institutions of the Union should take into account the diversity of national systems, facilitating the dialogue between the social partners and respecting their autonomy.50 It is apparent from these provisions that the TFEU implicitly excludes the competence of the Union to adopt mandatory rules for member states in matters of collective bargaining. This exclusion is not absolute either, because the Court of Justice has interpreted Directive 98/50 on collective redundancies as imposing an obligation to negotiate arising from the obligation to inform and consult the representatives of the workforce ‘with a view to reaching an agreement’ (italics added).51 Nevertheless, the legal system of collective bargaining (procedures, stake­ holders in negotiations, the legal value of collective agreements and so on) remains outside the competence of the EU. This solution applies even if   Art 156 TFEU.   Art 151(1) TFEU. 50   Art 152(1) TFEU. See B Veneziani, ‘The Role of the Social Partners in the Lisbon Treaty’ in N Bruun, K Lörcher and I Schömann (eds), The Lisbon Treaty and Social Europe (Oxford, Hart Publishing, 2012) 123. 51   Case C-188/03 Junk (27 January 2005). 48 49



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imposing an obligation to negotiate disrupts certain domestic laws and national traditions.52 Because collective bargaining is a prerogative granted to the (representative) unions, there should also be concern about freedom of association. The ‘right of association’ is expressly excluded from the EU’s competence for harmonisation (Article 153(5) TFEU), but it may be the subject of Commission measures directed towards cooperation among member states (Article 156 TFEU). However, the current wording of Article 156(1), derived from the Treaty of Amsterdam, is contradictory: the competence for encouragement entrusted to the Commission covers ‘all social policy fields under this chapter [which should exclude, at least, the right of association], particularly in matters relating to . . . the right of association and collective bargaining’ (italics added). This contradiction can be explained by the successive amendments of the social provisions of the Treaty, more specifically Article 156 (ex-Article 118 EEC, ex-Article 140 TEC). The list of fields subject to cooperation between member states, which raised little difficulties in 1957 in the absence of legislative competence on the part of the European Economic Community, was not amended when this competence for harmonisation was established but, at the same time, expressly excluded in the field of the right of association. Even so, the absence of a binding power on the part of the EU did not prevent the Court of Justice from recognising very early that the Community legal system recognises the fundamental right to freedom of association as a general principle of Community law.53 To summarise, it is apparent from the TFEU that the EU does not have the power to adopt mandatory requirements under secondary legislation acts that are binding on member states in the areas of pay, freedom of association and collective bargaining. More broadly, ‘Articles 153, 155 and 156 TFEU, read together, do not authorise the Union to take action in the fields of, inter alia, pay or the right of association’.54 ii  Relevant Case Law a  Pay and Right of Association The Court of Justice has given significant clarification concerning the scope of Article 153(5) TFEU. In Cerro Alonso, concerning the interpretation of Clause 4.1 (the principle of non-discrimination) of the framework agreement on fixedterm work annexed to Directive 1999/70/EC, the Court stated that as Article 137(5) EC derogates from paragraphs 1 to 4 of that article, the matters reserved by that paragraph must be interpreted strictly so as not to unduly affect the 52   See M Schmitt, Autonomie collective des partenaires sociaux et principe de subsidiarité dans l’ordre juridique communautaire (Presses universitaires d’Aix-Marseille, 2009). 53   See the joined Opinion of Advocate General Jacobs delivered on 28 January 1999 in Cases C-67/96, C-115/97 to C-117/97 and C-219/97, in Albany, Brentjens and Bokken [1999] ECR I-05751. 54   Opinion of Advocate General Sharpston delivered on 20 September 2012 in Case C-363/11 Epitropos tou Elegktikou Sinedriou, para 69.

212  Mélanie Schmitt scope of paragraphs 1 to 4, nor to call into question the aims pursued by Article 136 EC. More particularly, the exception relating to ‘pay’ set out in Article 137(5) EC is explained by the fact that fixing the level of wages falls within the contractual freedom of the social partners at a national level and within the relevant competence of member states. In those circumstances, in the present state of Community law, it was considered appropriate to exclude determination of the level of wages from harmonisation under Article 136 EC et seq.55

The exclusion of the EU legislative competence, together with the justification for it, could not be stated more clearly. This solution is not affected by the attenuating statement made by the Court to the effect that ‘The “pay” exception cannot, however, be extended to any question involving any sort of link with pay; otherwise some of the areas referred to in Article 137(1) EC would be deprived of much of their substance’.56 Article 153(5) TFEU in fact prohibits only ‘direct intervention in those matters. It does not preclude measures which affect them only indirectly’.57 The same interpretation should therefore be adopted as regards the right of association. As pointed out by Advocate General Sharpston, ‘The same conclusion must apply by analogy in so far as the disputed difference in treatment relates to the exercise of the right of association’.58 The Court of Justice, having declared the reference for a preliminary ruling to be inadmissible, did not give judgment on the merits of the case.59 From these solutions, it is apparent that an intervention by the EU with the object of setting the level of pay in member states is in breach of Article 153(5) TFEU. The same applies to an act of an EU institution (the Council, the Commission, the European Central Bank (ECB) or the European Council) requiring a reduction in pay for overtime, but also in termination benefits, which in CJEU case law is classified as ‘pay’.60 Concerning acts of the Commission, these cannot be covered by Article 156 TFEU in that they are not addressed towards encouraging cooperation between member states. b  Collective Bargaining Along the same lines, any act of the Council requiring a member state to amend its legislation on union representation, on (non-union) parties entitled to enter into collective agreements and on the conditions for the validity of collective agreements, can be challenged on the grounds of its non-compliance with Article 153(5) TFEU. The EU institutions have no competence to intervene   Case C-307/05 Del Cerro Alonso [2007] ECR I‑7109, paras 39–40.   ibid, para 41. 57   Opinion of Advocate General Sharpston delivered on 20 September 2012 in Case C-363/11 Epitropos tou Elegktikou Sinedriou, para 70. 58  ibid. 59   Case C-363/11 Epitropos tou Elegktikou Sinedriou. 60   Case C-33/89 Kowalska [1990] ECR I-2591; Case C-167/97 Seymour-Smith and Perez [1999] ECR I-623. 55 56



Evaluation with Reference to Primary Legislation  213

directly in these fields. Article 156 TFEU, which cites the right of association as being one of the fields that may be the subject of cooperation between member states, in no way affects this solution: not only does the decision adopted by the Council not pursue this objective of cooperation between member states, but also and at all events, Article 156 provides only for a competence of encouragement and attributes it only to the European Commission. On the contrary, the lack of validity of these provisions having regard to Article 153 TFEU is confirmed by the new provisions derived from Article 152(1) TFEU, which contribute towards preserving national systems from binding acts of the Union institutions, including the Court of Justice. B  Implications of the EU Charter of Fundamental Rights for EU Competences The purpose of this section is to reply to the following question: was the adoption of the Charter of Fundamental Rights of the European Union in 2000 and, above all, its incorporation in primary law realised by the Lisbon Treaty of such a nature as to alter this strict division of competences between member states and the EU? i  EU Charter Does Not Create Any New Competence for the EU The EU Charter of Fundamental Rights is, according to its drafters, a catalogue of the fundamental rights already recognised in the EU or member states. It does not modify the existing powers or tasks of the Union, nor does it confer any new (legislative) competence.61 However, it does require the EU institutions and member states (only once the latter are applying EU law) to respect the rights it enshrines.62 The provisions of the Charter are therefore not ‘legal bases’ that can be mobilised to regulate the exercise of fundamental rights. But it is the mission of EU institutions as a whole to promote fundamental rights.63 The recognition of fundamental rights in the matters excluded from the EU legislative competence has significant side effects. Not only do these rights complement EU law, but they also form part of primary law by virtue of Article 6(1) TFEU.64 In consequence, the Court of Justice now has jurisdiction to uphold the application of the Charter by member states and EU institutions and the uniform interpretation of fundamental rights. Fundamental rights now become part of the ‘rules of Community law’ against which the validity of any secondary legislation act and, more broadly, all acts of EU institutions are assessed. The Court of Justice is therefore responsible for ensuring both respect for the division of competences between the member states and the Union and compliance with   Art 51(2) CFREU.   Art 51(1) CFREU. 63  ibid. 64   Art 6(1) TEU. 61 62

214  Mélanie Schmitt the Charter, while at the same time it is itself required to promote fundamental rights. ii  The ‘Juridification’ of the Charter Implies the Jurisdiction of the Court of Justice to Interpret the Charter For the fulfilment of its mission, the Court must carry out the significant work of interpreting fundamental rights. In the performance of this task, it enjoys a certain room for manoeuvre, in that certain rights are proclaimed in ambiguous and even contradictory terms, whereas considerable precision is needed in their application. This is the case with regard to Article 28 of the Charter recognising ‘the right of collective bargaining and action’.65 To date, the Court of Justice has ruled on the content and scope of the right to collective bargaining – and the same is true of the right to strike – only in situations of conflict between this right and another fundamental right, the freedom to provide services and the freedom of establishment, or the prohibition of any age-related discrimination. It has ruled on the restrictions that the exercise of the right to collective bargaining could, whether validly or not, impose on these other fundamental rights, which – in both cases – could be analysed as the manifestations of a principle structuring the legal system of the European Union: the principle of equality. This circumstance should be borne in mind, as it explains the position adopted by the Court of Justice. Although they are related to the right to collective action, the judgments in the Laval and Viking cases66 show that the lack of EU competence to legislate on a subject (Article 153(5) TFEU) does not exclude the Court from delivering its ruling on that subject. The Court of Justice recalled its settled case law to the effect that even if, in the areas which fall outside the scope of the Community’s competence, the member states are still free, in principle, to lay down the conditions governing the existence and exercise of the rights in question, the fact remains that, when exercising that competence, the member states must nevertheless comply with Community law.67

As a consequence, ‘the fact that Article 137 EC [Article 153(5) TFEU] does not apply to the right to strike or to the right to impose lock-outs is not such as to exclude collective action . . . from the domain of freedom to provide services’ and of freedom of establishment. This position has been strongly criticised by academics and unions. Professor Vincent Heuzé, for example, puts the question: 65   Art 28 CFREU: ‘Workers and employers, or their respective organisations, have, in accordance with Community law and national laws and practices, the right to negotiate and conclude collective agreements at the appropriate levels and, in cases of conflicts of interest, to take collective action to defend their interests, including strike action’. 66  Case C‑438/05 International Transport Workers’ Federation and Finnish Seamen’s Union, ‘Viking Line’ [2007] ECR I‑10779, and Case C‑341/05 Laval un Partneri [2007] ECR I‑11767. 67   Case C-438/05 ‘Viking’, para 40, and case C‑341/05 Laval, para 87.



Evaluation with Reference to Primary Legislation  215 has not the CJE made the restriction on the right to strike the last conquest of Community freedoms in the sense that it is now resolved on making them prevail, contrary to the meaning attached to them by the authors of the Treaty of Rome?68

Along the same lines, one author points out that Article 137(5) had placed collective actions ‘off market’. It recognised the existence of two systems – the system of labour and the system of competition – which were antagonistic, even in conflict. In all logic, the Court, a Community authority par excellence, should have declared itself as lacking jurisdiction . . . unless it considered itself to be a ‘universal authority’.69

On the contrary, the Court affirms that application of the primary rules on economic freedoms to collective actions is not challenged by the fundamental nature of the right to collective action, even when qualified as a ‘general prin­ ciple of Community law’. It is in fact apparent from prior case law that no fundamental right is absolute and that the exercise of all fundamental rights may be subject to restrictions. This confirmation is not surprising, since even the fundamental right to respect for human dignity does not enjoy special privileged treatment.70 In reality, it seems that, in incorporating the fundamental right to strike among the general principles of Community law of which it ensures respect, the Court of Justice submits this right to market rules and retains a significant margin of assessment in monitoring the exercise of this right, which is opposed to the market. The monitoring of proportionality, a preferential technique for the resolution of conflicts between freedoms and fundamental rights, will logically be at the heart of its reasoning. But the extent and the criteria included in this control, which depend on a political posture of the Court,71 may nonetheless be disputed. The same reasoning is adopted by the Court of Justice regarding the right to collective bargaining. The Court has implicitly ruled in Viking that: ‘the terms of collective agreements are not excluded from the scope of the Treaty provisions on freedom of movement for persons’.72 It also stated that ‘it is common ground that collective action, like collective negotiations and collective agreements, may, in the particular circumstances of a case, be one of the main ways

68   V Heuzé, ‘D’Amsterdam à Lisbonne, l’État de droit à l’épreuve des compétences communautaires en matière de conflits de lois’ (2008) I-166 La Semaine Juridique: Juris Classeur Périodique G 20. 69   B Edelman, ‘Droit du travail, droit de la concurrence. Un nouveau contrat social’ (Recueil, Dalloz, 2009), 1547­–51. 70   Case C‑36/02 Omega [2004] ECR I‑9609, para 36, quoted in Case C-438/05 ‘Viking’, para 45, and case C‑341/05 Laval, para 94. 71   C Barnard, ‘A Proportionate Response to Proportionality in the field of Collective Action’ (2012) 37(2) European Law Review 117 ff, 121. 72   Case C-438/05 ‘Viking’, para 54. See Case C‑15/96 Schöning-Kougebetopoulou [1998] ECR I-47; Case C‑35/97 Commission v France [1998] ECR I‑5325 and Case C‑400/02 Merida [2004] ECR I‑8471.

216  Mélanie Schmitt in which trade unions protect the interests of their members’.73 The exercise of the right to collective bargaining, like the right to collective action, may validly pursue this objective, but will be the subject of a test of its proportionality. The Court expressly confirms this in the Commission v Germany case, which provides it with the first opportunity to recognise the fundamental nature of the right to collective bargaining as it ensues from Article 28 of the Charter.74 It should, however, be pointed out that, unlike the right to collective action, the right to bargain collectively is not included in the category of the general principles of Union law.75 In addition, in the Commission v Germany case, as in the Laval case, the circumstance that the right to collective bargaining enjoys constitutional protection is insufficient to allow it to be excluded from the domain of economic freedoms. To justify the fact that this right falls within the scope of the Treaty, the Court ruled that ‘as provided in Article 28 of the Charter, that right must be exercised in accordance with European Union law’. Compatibility with EU law thus prevails over respect for national rights, whereas Article 28 does not impose this preference. However, it first states that ‘It is apparent from Article 28 of the Charter, read in conjunction with Article 52(6) thereof, that protection of the fundamental right to bargain collectively must take full account, in particular, of national laws and practices’.76 Furthermore, for the first time it mobilises Article 152(1) TFEU,77 the wording of which should allow the constitutional norms of the member state concerned to be taken into consideration. The Prigge judgment confirms that ‘The right to collective negotiation set out at Article 28 of the Charter must, within the scope of EU law, be performed in accordance with EU law’.78 For the Court, it is a question of securing the predominance of EU law over national law, including a member state’s constitutional law. This objective has traditionally been pursued by the Court of Justice, which has in fact developed its doctrine and case law based on fundamental rights as general principles of Community law, in order to safeguard this predominance over the national courts.79 The outcome is that the reservations as regards respect for national laws and practices (Article 28) and, more broadly, for national systems (Article 152 TFEU), are deprived of all scope. To summarise, it follows from the Charter of Fundamental Rights that: (i) the right to collective bargaining is a fundamental right that is protected in the European Union’s legal system and, as such, it is incumbent on all EU institutions: the Commission, the Council and the European Parliament (especially   Case C-438/05, ‘Viking’, para 86.   Case C-271/08 Commission v Germany, para 41. 75   See the contrary Opinion of Advocate General Trstenjak delivered on 14 April 2010, para 78. 76   Case C-271/08, Commission v Germany, para 38. 77   See section IV. 78   Case C-447/09 Reinhard Prigge and Others v Deutsche Lufthansa, para 47. 79   VB De Witte, ‘Le rôle passé et futur de la Cour de Justice des Communautés européennes dans la protection des droits de l’homme’ in P Alston, M Bustelo and J Heenan (eds), L’Union européenne et les droits de l’homme (Brussels, Bruylant, 2001) 895. 73 74



Evaluation with Reference to Primary Legislation  217

but not exclusively in their legislative work), but also the European Council, the European Central Bank, both of which are true EU institutions, together with the Court of Justice; (ii) the CJEU is charged with monitoring compliance with the Charter by the other EU institutions and by the member states (when they are implementing EU law); its mission is therefore to protect the exercise of the fundamental right to collective bargaining, which implies that it interprets that right with this in mind; (iii) this task of interpretation does not confer it with the power of regulating collective bargaining, but obliges it to define the substance, the essential elements, of the fundamental right in order to limit any impingements on the part of member states or the EU institutions. As things now stand, recent case law should be clarified in order to identify the main guidelines, as well as the shortcomings in the protection of the right to collective bargaining. Special emphasis should be placed on the obligation, laid down by the Charter, on the EU institutions and member states (when those are implementing Union law), to ‘respect the rights . . . and promote the application thereof in accordance with their respective powers’ (Article 51(1) of the Charter of Fundamental Rights of the European Union (CFREU)). The interpretation can be put forward that the Charter should impose positive obligations to protect and promote the rights enshrined by the Charter through the adoption of certain measures.80 In consequence, it is important to support action in this direction by the CJEU, which should replace the current case law that consists not of protecting the collective rights of workers, but of restricting their exercise and their very essence. IV  EVALUATION OF EU RESPONSES AS REGARDS THE FUNDAMENTAL RIGHT TO COLLECTIVE BARGAINING

To the extent that the Court of Justice has up to the present ruled only on restrictions imposed by the exercise of the right to collective bargaining on other fundamental rights, it has kept to its traditional reasoning based on a market logic implying the lifting of all obstacles to the exercise of economic freedoms. It has not therefore adopted the classic approach in the field of protecting human rights or fundamental rights, which consists of defining the content of a right in the light of the measures taken by the public authorities to interfere with it. Pending a decision on the ‘positive’ content of the right to collective bargaining,81 we need to search for present-day rules in the rulings of the 80   EU Network of Independent Experts on Fundamental Rights, ‘Commentary of the Charter of Fundamental Rights of the European Union’ 2006, 395, available at: ec.europa.eu/justice/ fundamental-rights/files/networkcommentaryfinal_en.pdf. 81   Reference to the Court for a preliminary ruling has been made by the Labour Court of Porto, at which the Court should be able to address the question of restrictions on the right to collective bargaining (Case C-264/12 Fernando Casimiro dos Santos Ferreira and Others v Companhia de Seguros Allianz Portugal SA). See section V.B.ii.

218  Mélanie Schmitt EU courts. The text of the Charter itself, opinions of Advocates General, together with many analyses in the legal literature, allow us a glimpse of a more protective interpretation, one that is in accordance with the relevant international standards. The general idea defended rests on the construction of a common foundation of protection based on the fundamental rights as they are protected by the European Union (the Charter of Fundamental Rights and the general principles of EU law), national constitutions, the Council of Europe (the European Social Charter and the European Convention on Human Rights (ECHR)) and inter­ national standards (ILO and UN). What is needed is to give substance to the collective social rights that are now recognised in all legal, national, European and international systems, for their ‘existence remains the only way of avoiding complete deregulation’,82 which is being defended by the EU as an essential remedy for the budget crisis in member states. A  CJEU Control of the Exercise of the Right to Collective Bargaining: What Guidance is Given on the Substance of the Right? The Laval and Viking judgments, as well as the Commission v Germany judgment, have shown that, while proclaiming the fundamental nature of the right to collective bargaining and action, the Court exerts extremely strict control over its exercise by unions and social partners. There appears to be great ambiguity in the Commission v Germany judgment – as there are in later decisions pertaining to the fundamental right to collective bargaining – concerning the nature of this right, and subsequently also concerning its substance. The Court’s evaluation in Commission v Germany has marked a step further towards restoring the balance in favour of the right to collective bargaining by comparison with economic freedoms. The CJEU now states that it applies the method known as ‘striking a balance’ of rights. According to this judgment, answering the question of reconciliation of the requirements related to attainment of the social objectives pursued by the parties to a collective agreement with requirements stemming from economic freedoms, entails verification . . . as to whether . . . a fair balance was struck in the account taken of the respective interests involved, namely enhancement of the level of the retirement pensions of the workers concerned, on the one hand, and attainment of freedom of establishment and of the freedom to provide services, and opening-up to competition at European Union level, on the other.83

But, on the one hand the Court restricts the autonomy of social partners by excluding from the field of collective bargaining the designation of a body 82   M-A Moreau, Normes sociales, droit du travail et mondialisation (Paris, Dalloz, 2006) and ‘Conclusion’ in ‘Les réactions du droit du travail à la crise’ (2012) Droit ouvrier 148, 150. 83   Case C‑271/08 Commission v Germany, para 52.



Evaluation with Reference to Primary Legislation  219

responsible for the management of a negotiated pension scheme, as this ‘does not affect the essence of the right to bargain collectively’ (italics added).84 On the other hand, by exerting a very stringent verification of proportionality it maintains its control over the social partners’ exercise of their right to collective bargaining. In fact, the Court does not really envisage the problem from the angle touched on by the Advocate General, according to whom ‘clarification will thus be needed on how the obligation to respect the procurement directives may be reconciled with the fundamental rights to bargain collectively and to autonomy in collective bargaining’.85 In the words of the Advocate General, the question is one of determining whether that non-observance of the procurement directives results from exercising the fundamental social rights to bargain collectively and to autonomy in collective bargaining, and, if so, whether restricting the exercise of such fundamental social rights as a result of obligations established by the procurement directives may be regarded as justified having regard to the fundamental freedoms.86

One should go even further and insist that secondary law acts are valid only if they comply with the primary law rules. In consequence, the economic directives must be interpreted not only in the light of the Treaty provisions enshrining economic freedoms but also in the light of the Charter of Fundamental Rights. Subsequent case law confirms that the Court of Justice is setting up, without saying so, control of the object and objectives of the collective agreement. It is attempting to verify whether an agreement negotiated by the social partners is ‘the reflection of a balance between diverging but legitimate interests’.87 Certainly, in the Rosenbladt judgment, the Court points to ‘the wide discretion granted to the social partners at national level in choosing not only to pursue a given aim in the area of social policy, but also in defining measures to implement it’.88 But the Court conceives collective bargaining as an instrument of ‘flexibility’, and the margin of autonomy of social partners is considerably reduced when the collective agreement comes up against the principle of equality between the workers or among economic operators. Under cover of a discourse on the ‘fair balance’ of social rights and of economic freedoms, the Court reiterates a political choice that gives special weight to the market approach to European integration, thus depriving the protection of the right to collective bargaining of its effectiveness.89 The Court does not seem to arrive at any concrete conclusion from the recognition of the fundamental nature of the right to collective bargaining. Nor,   ibid, para 49.   Opinion of Advocate General Trstenjak delivered on 14 April 2010, para 4.   ibid, para 86. 87   Case C-45/09 Rosenbladt [2010] ECR I-9391, para 68. 88   See also Case C-298/10 Land Berlin v Mai, 8 September 2011 (joined with Case C-297/10 Hennigs). 89   Barnard, above (n 71) 121. 84 85 86

220  Mélanie Schmitt moreover, is this qualification mentioned in the more recent Prigge judgment.90 Indeed, it firmly contrasts the simple ‘right to collective bargaining set out at Article 28 of the Charter’ to the requirements of the principle of non-­ discrimination, including those ensuing from secondary law, and takes as its basis case law dating back to 1993 in justifying the social partners’ obligation to comply with Directive 2000/78, which establishes the general principle of EU law of the prohibition on age discrimination.91 The Court applies to the letter the reservation included in Article 28 of the Charter, to the effect that the right to collective bargaining is to be exercised ‘in accordance with Union law’ (italics added). One might ask whether the approach taken by the Court does not have the effect of altering the very substance of the right.92 An earlier decision, however, seemed to presage more respectful treatment of the right to collective bargaining. Rather paradoxically, the Albany judgment of 21 September 1999 appears in retrospect to be more protective, even though the Court of Justice had implicitly refused to recognise the existence of a fundamental right to collective bargaining in the Community legal system. In that judgment the Court excluded collective agreements from the application of the competition rules of the Treaty if they fulfil two cumulative conditions: (i) that they arise from (genuine) collective bargaining between social partners; (ii) they have a social objective and aim at improving employees’ working conditions. The justification relies on the encouragement of collective bargaining on the part of the EC Treaty. This solution has been interpreted broadly by some scholars, for whom the social objective is to be understood as the set of social objectives mentioned in the Treaties (essentially in Article 151 TFEU).93 In the judgment in Commission v Germany, then, there is a paradox in recognising for the first time the fundamental right to collective bargaining and in holding to a more restrictive concept than the one contained in a judgment that had specifically rejected the existence of a fundamental right to collective bargaining. Two other decisions deserve attention, as they clarify the position of the Court on the nature of the right to collective bargaining and on the potential for its attachment to the freedom of association. Both in the Werhof judgment94 and the Alemo-Herron judgment,95 the question was whether the maintenance of rights under an agreement could be extended to a sectoral collective agreement coming into force after the transfer of the establishment, which is binding on the transferor but not on the transferee. In arriving at its negative response, the Court drew mainly on the freedom of contract, which implies that a collective agreement   Case C-447/09 Prigge.   ibid, para 48. 92  B Veneziani, ‘Right of collective bargaining and action (Article 28)’ in B Bercusson (ed), European Labour Law and the EU Charter of Fundamental Rights (Brussels, ETUI, 2002) 53. 93   J-F Akandji-Kombé, ‘Négociation collective et marché intérieur. La CJEU franchit-elle un cap?’ (18 October 2010) 1463 La Semaine Sociale Lamy 5. 94   Case C-499/04 Werhof. 95   Case C-426/11 Mark Alemo-Herron ao v Parkwood Leisure Ltd. 90 91



Evaluation with Reference to Primary Legislation  221

cannot impose obligations on employers who are not parties thereto. In AlemoHerron, the employer’s right to collective bargaining is based on the freedom to conduct a business enshrined in Article 16 of the EU Charter,96 while in Werhof, the Court mobilised the employer’s freedom of association (the right not to join a union), in expressly referring to the case law of the European Court of Human Rights (ECtHR) on Article 11 of the European Convention.97 This approach denotes a narrow and instrumental concept of both collective bargaining and freedom of association. Collective autonomy of social partners is in fact different in nature from individual autonomy of the parties to a contract.98 Its aim and function imply that, in the negotiation of a collective agreement, an essential element of democracy is recognised that goes well beyond the private interests of the negotiators. It is this feature that justifies setting aside the competition rules (Albany), which demonstrates that the rules applicable to economic operators cannot be imposed on the unions, at least not without adjustments. As for freedom of association, this is mentioned only briefly and merely in its individual and negative dimension.99 The selective reference to the ECtHR case law is also regrettable, whereas the interpretation of Article 11 ECHR, as early as in 2006, is a more solid motivation. The protection of the right to collective bargaining has certainly evolved considerably since then, both within the EU and in ECtHR case law. But the Werhof judgment is nonetheless interesting, in that the Court recognises the link between the right to collective bargaining and freedom of association. As we shall see later, this link should be taken up again and developed by the Court in light of the provisions of the EU Charter. The ambiguity of the Court’s position as regards the fundamental right to collective bargaining continued in another recent decision.100 First, the Court gives signs of recognition of the specific nature of collective bargaining compared with the legislative acts of the public authorities. When asked about the compatibility with the principle of non-discrimination of a collective agreement setting up a pay scale based on the age of workers, the Court indicates, in the context of its verification of the justification for the measure, that: The nature of measures adopted by way of a collective agreement differs from the nature of those adopted unilaterally by way of legislation or regulation by the member states in that the social partners, when exercising their fundamental right to collective bargaining recognised in Article 28 of the Charter, have taken care to strike a balance between their respective interests.101  ibid, paras 32–35.   Although it does not give a sufficient explanation of how the application of a collective agreement to an employer who is not a signatory to it constitutes an assault on the negative freedom of association. 98   See M Schmitt, ‘Autonomie collective des partenaires sociaux et principe de subsidiarité dans l’ordre juridique communautaire’ (Presses universitaires d’Aix-Marseille, 2009). 99   On the dimensions of the freedom of association, see F Dorssemont, ‘Article 11 – The freedom of association’ in F Dorssemont, K Lörcher and I Schömann (eds), The European Convention on Human Rights and the Employment Relation (Oxford, Hart Publishing, 2013). 100   Joined Cases C-297/10 and C-298/10 Hennigs and Mai. 101   ibid, para 66. 96 97

222  Mélanie Schmitt But the Luxembourg judges then conclude that the measure in question was disproportionate in nature and, above all, state without any explanation that ‘The fact that European Union law precludes that measure and that it appears in a collective agreement does not interfere with the right to negotiate and conclude collective agreements recognised in Article 28 of the Charter’.102 By definition, however, any rule restricting the field or content of collective bargaining and collective agreements ‘interferes’ with the fundamental right to negotiate and to reach a collective agreement. The question is whether or not this inter­ ference is justified and proportionate and whether it fulfils the conditions that Article 52 of the Charter imposes on any limitation of a right enshrined by the Charter. However, once again the Court does not adopt this inverted perspective, which would have enabled it to clarify the substance of the fundamental right to collective bargaining. The indecision evidenced by the Court in these rulings shows, more fundamentally, that it is incapable of grasping the essential regulatory function of collective autonomy and the structural principles of the collective labour law.103 Opinions of Advocates General, however, contain interesting proposals concerning the nature and content of the right to collective bargaining. The Advocate General in Commission v Germany stated that the right to collective bargaining implies the freedom to bargain collectively.104 In his opinion in the Prigge case, the Advocate General made an even more determined effort to give substance to that right: Article 28 of the Charter is associated with the concept of the ‘independence of collective bargaining’. This independence is a key factor in understanding the evolution of European labour law, around which the rules of the democratic systems of representation are constructed, and the limits of the law as regards the freedom of association are fixed. Beyond the differences that the concept of collective agreement presents from one member State to another, the independence of collective bargaining enjoys particular recognition in their legal tradition . . . The guarantee of collective bargaining, therefore, supposes the recognition of the central role played by collective agreements in the regulation of working relations, which are their natural field of action.105

This highlighting of union freedom and independence is of particular interest, as it corresponds to the right to collective bargaining adopted within the International Labour Organisation (ILO) and, in all probability, to the concept of freedom of association, including the right to collective bargaining, within the meaning of the European Convention on Human Rights.   ibid, para 78.   See A Lo Faro, ‘Toward a de-fundamentalisation of collective labour law rights in European social law?’ in M-A Moreau (ed), Before and After the Economic Crisis. What implications for the ‘European Social Model? (Cheltenham, Edward Elgar, 2012) 215. 104   Opinion of Advocate General Trstenjak delivered on 14 April 2010 in Case C-271/08, paras 78 and 80. 105  Opinion of Advocate General Cruz Villalon delivered on 19 May 2011 in Case C-447/09, para 42. In the continuation of this Opinion, however, this plea for a ‘consistent’ right to collective bargaining in EU law is considerably attenuated. 102 103



Evaluation with Reference to Primary Legislation  223

B  For the Full Application of the EU Charter of Fundamental Rights (Articles 52 and 53) The European Union’s accession to the ECHR should solve the difficulties in the linking of the EU Charter and the ECHR106 and, therefore, the linking of the two European case laws. It will reinforce the ‘coherence of the European system of protection of fundamental rights’, which calls for ‘limiting the risk of divergences between the two European case laws in their future interpretation of the demands of the fundamental rights’.107 In opening the direct control of the conformity of acts of the EU with the Convention, accession will make it possible to supersede the indirect control of those acts that the Strasbourg Court exercises today, and which in practice is very restricted: the ECtHR has jurisdiction to decide on the acts of member states implementing EU law but, pursuant to the judgment in the Bosphorus case,108 it admits that there is a ‘presumption of compliance with the Convention’ of this act where the level of protection of the fundamental rights in the legal system of the Union is equivalent to the level afforded by the Convention, unless this is ‘manifestly deficient’. Pending this accession, the Strasbourg Court is not in a position to control the interpretation of the Convention by its counterpart in Luxembourg.109 The Presidents of the two Courts have even urged the need to develop a ‘parallel interpretation’110 of the European Convention and the EU Charter. With the specific aim of solving these difficulties, the Charter contains ‘horizontal’ provisions recognising the influence of the ECHR on the EU system of protection of fundamental rights. Article 53 prohibits any lessening in the level of protection compared with other instruments for the protection of human rights. According to the Explanations related to the Charter111 this provision ‘is intended to maintain the level of protection currently afforded within their respective scope by Union law, national law and international law. Owing to its importance, mention is made of the ECHR’. We shall return to Article 53 in detail in the third sub-section. The first two sub-sections aim at determining all the potential offered by Article 52 of the Charter. 106   As the evaluation of the EU responses to the crisis having regard to the law of the Council of Europe is discussed elsewhere, we refer the reader to the relevant section. 107   See O de Schutter, ‘L’adhésion de l’Union Européenne à la Convention des droits de l’homme: feuille de route de la négociation’, 10 April 2010, text adapted from the author’s contribution to the European Parliament Constitutional Affairs Committee on 18 March 2010, available at: www.europarl.europa.eu/document/activities/cont/201004/20100427ATT73610/20100427ATT73610FR.pdf. 108   ECtHR (GC) Bosphorus Hava (‘Bosphorus Airways’) v Ireland, App no 45036/98 (30 June 2005); F Benoît-Rohmer, ‘Les enfants de Bosphorus’ (2010) 81 Revue Trimestrielle des Droits de l’Homme 18. 109   F Tulkens, ‘Pour et vers une organisation harmonieuse’ (2011) 47(1) Revue trimestrielle de droit européen 27–34. 110   Joint Communication from the Presidents of the European Court of Human Rights and the Court of Justice of the European Union, 27 January 2011. 111   2007/C 303/02, OJ EU C/303 of 14 December 2007.

224  Mélanie Schmitt i  Interpretation of the Right to Collective Bargaining According to ECtHR Case Law: The Concept of ‘Corresponding Rights’ a Texts According to Article 52(3) of the Charter: In so far as this Charter contains rights which correspond to rights guaranteed by the Convention for the Protection of Human Rights and Fundamental Freedoms, the meaning and scope of those rights shall be the same as those laid down by the said Convention. This provision shall not prevent Union law providing more extensive protection.

This is a ‘primordial provision that crystallises a major issue, that of the scope of the rights enshrined by the Charter’.112 The Explanations state that the ‘corresponding rights’ must be interpreted not only in accordance with the text of the Convention, but also by reference to the case law of the ECtHR. These Explanations also contain a list of these ‘corresponding rights’, among which features Article 12(1) of the Charter,113 enshrining the fundamental right to freedom of association in terms identical to those of Article 11 of the ECHR.114 On the other hand, Article 28 of the Charter is logically excluded, in that the right to collective bargaining is not, as such, included in the European Convention and that, on the day of the adoption of the Charter in 2000, and also on the day of its adaptation in 2007, it had not yet been recognised by the ECtHR. Since the judgment in the Demir and Baykara case of 12 November 2008 had included the right to collective bargaining among the rights protected by Article 11, the consequences should henceforth be reflected in the legal system of the Union. b  Case Law Several recent decisions show that the Court of Justice recognises that Article 52(3) has a ‘binding force’115 and that it is in line with the Explanations relating to the Charter.116 The Luxembourg Court goes even further than the requirements formulated by the Praesidium. It intends to verify itself, and independently, the existence of a correspondence on a case-by-case basis. In fact, the 112   L Burgorgue-Larsen, ‘Article II-112’ in L Burgorgue-Larsen, A Levade and F Picod (eds), Traité établissant une Constitution pour l’Europe. Partie II. La Charte des droits fondamentaux de l’Union européenne – Commentaire article par article (Brussels, Bruylant, 2005) 661. 113   Art 12(1) CFREU: ‘Everyone has the right to freedom of peaceful assembly and to freedom of association at all levels, in particular in political, trade union and civic matters, which implies the right of everyone to form and to join trade unions for the protection of his or her interests’. 114   Art 11(1) ECHR: ‘Everyone has the right to freedom of peaceful assembly and to freedom of association with others, including the right to form and to join trade unions for the protection of his interests’. 115   According to the suggestion made by Advocate General Mengozzi, Opinion delivered on 2 September 2010 in Case C-279/09 DEB, para 98. 116   See Case C-279/09 DEB, para 35, on the subject of the judicial aid under Art 47, para 3 of the Charter.



Evaluation with Reference to Primary Legislation  225

Court does not limit the ‘corresponding rights’ to those classified as such by the Explanations, but seeks a correlation by conducting a comparative analysis of the substance of the rights, incorporating in this operation a searching reference to the case law of the ECtHR.117 On the subject of the right to collective bargaining, the Appeal chamber of the General Court recognised that Article 28 corresponds to Article 11 of the Convention in a judgment of 18 June 2013. In this instance (Heath v ECB), a referral to the Civil Service Tribunal was made by a retired official of the ECB, who disputed the Bank’s decision to apply a method of calculating the amount of his pension that led to a lower increase than the one from which he had benefited up to that time based on another method of calculation. In particular he claimed that his former employer had infringed his right of association and argued that the ‘ECB’s refusal to establish a collective bargaining procedure (is) contrary to the provisions of article 28 of the Charter of Fundamental Rights and those of article 11 of the ECHR’ as interpreted by the Demir and Baykara judgment.118 The claimant added that ‘the useful effect of . . . [these] provisions . . . would require the ECB actively to promote a culture of dialogue and negotiation by setting up a procedure whereby collective agreements could be concluded’. In a judgment delivered on 29 September 2011 the Civil Service Tribunal dismissed this reasoning, stating that: As for article 28 of the Charter of Fundamental Rights and article 11 of the ECHR, although they recognise the right to freedom of association, which includes the right of workers to found unions to uphold their economic and social interests, their pro­ visions do not entail an obligation to establish a collective bargaining procedure or to grant the said unions a power of co-decision for the purpose of formulating the workers’ terms of employment.119

The judges thus establish an implicit correspondence between Article 28 CFREU and Article 11 ECHR, which is to be welcomed in that it enshrines the ‘principle of homogeneity’120 between the two texts. The formula is surprising, however, due to the shortcut adopted by the Tribunal: unlike Article 11 of the ECHR, Article 28 of the Charter does not recognise the right to freedom of association. In its judgment of 18 June 2013 the General Court dismissed the appeal, ruling that a bargaining process was not required by the fundamental right to collective bargaining since the rights and obligations at issue were already sufficiently determined in the applicable provisions, which set up a methodology offering sufficient guarantees for workers’ protection.121 However, the General Court explicitly 117   Case C-279/09 DEB, para 36; on the content of the right to a fair trial according to ECtHR case law, see paras 45–52. 118   EUCST Case F‑121/10 Heath, point 113 (29 September 2011). 119   ibid, para 121. 120   According to the expression used by Advocate General Kokott in Case C-110/10 P Solvay v Commission, para 95. 121   Case T-645/11 P Heath, para 155 (available only in French).

226  Mélanie Schmitt mentions the wording of Article 11 ECHR, as well as the Demir and Baykara judgment, filling the gap of the first judgment. Furthermore, it states that, ‘by virtue of Article 52, paragraph 3, of the Charter of Fundamental Rights, the meaning and scope of article 28 are considered to be the same as those laid down by Article 11 ECHR’.122 Despite the reasoning that follows, this ruling must be seen as an important first step towards the full recognition of the right to collective bargaining. For the first time indeed, an EU Court acknowledges that the rights deriving from Article 28 of the EU Charter correspond to those protected by Article 11 ECHR. This correspondence must now be deepened by the EU courts, on the basis of the ECtHR ‘doctrine’ of positive obligations incumbent on the member states in order to guarantee the effectiveness of the rights under the Convention. Although the correlation between Article 28 CFREU and Article 11 ECHR is now established, it is only indirect, so that the use of Article 12 of the Charter remains necessary.123 From a simple textual point of view, it is in fact Article 12 that corresponds – word for word as regards the freedom of association – to Article 11 ECHR. According to the Convention and ECtHR case law, the right to collective bargaining as protected in the EU legal order has to be analysed as essentially linked to the freedom of association. The fact that Article 28 grants the right to collective bargaining to workers or their organisations has no bearing since, in the member states as a whole, the parties empowered to negotiate are the unions (as a priority), even where the prime holder of the right is the worker. The interest of linking Article 28 to Article 12 of the Charter also lies in the legal regime that it would be appropriate to apply. Article 12 of the Charter does not make the exercise of the freedom of association subject to compliance with EU law (unlike Article 28), so that the only limitations that can be applied are those laid down in the general provisions of the Charter (Article 52(1)). As we have seen, however, the restrictive case law of the CJEU regarding the subject and objectives of collective agreements, and regarding the very essence of the right to collective bargaining, is founded mainly on the restriction imposed by Article 28 of the Charter. ii  Interpretation of the Limitations on the Right to Collective Bargaining According to ECtHR Case Law a Texts The Charter contains a general clause limiting the rights it recognises. Article 52(1) states that:   ibid, para 151.   EU Network of Independent Experts on Fundamental Rights, ‘Commentary of the Charter of Fundamental Rights of the European Union’ 2006, 124, available at: ec.europa.eu/justice/ fundamental-rights/files/networkcommentaryfinal_en.pdf. 122 123



Evaluation with Reference to Primary Legislation  227 Any limitation on the exercise of the rights and freedoms recognised by this Charter must be provided for by law and respect the essence of those rights and freedoms. Subject to the principle of proportionality, limitations may be made only if they are necessary and genuinely meet objectives of general interest recognised by the Union or the need to protect the rights and freedoms of others.

Article 28 of the Charter contains an additional limitation in that the right to collective bargaining must be exercised in accordance with EU law. We have seen that when the right to collective bargaining conflicts with economic freedoms or the principle of non-discrimination between workers, the Court of Justice has no hesitation in making this exercise subject to secondary law, and that it strictly verifies its proportionality. It should also be pointed out that the Court has not applied Article 52(1) of the Charter in the cases concerned. b  Case Law In the important Volker judgment of 5 October 2010, the Court resorts to the combined application of Articles 52(1), 52(3) (corresponding rights) and 53 (non-regression clause) in ruling that ‘the limitations which may lawfully be imposed on the right to the protection of personal data [articles 7 and 8 of the Charter] correspond to those tolerated in relation to Article 8 of the Convention’.124 It therefore follows from Articles 52(3) and 53 of the Charter that the limitations on the rights under the Charter – as defined by Article 52(1) – must be compatible with those stated by the relevant provision of the ECHR. The conditions for the validity of the restrictions provided by Article 52(1) must therefore be applied and interpreted in accordance with the case law of the ECtHR, in particular as regards the principle of proportionality. Conflict between two fundamental rights must, in consequence, be regulated in accordance with this case law. On this subject, the Court states that when several rights protected by the European Union legal order clash, such an assessment must be carried out in accordance with the need to reconcile the requirements of the protection of those various rights and striking a fair balance between them.125

c  Comparison with the Limitations Provided for in Article 11(2) of the ECHR Pursuant to Article 11(2) of the Convention, No restrictions shall be placed on the exercise of these rights other than such as are prescribed by law and are necessary in a democratic society in the interests of national security or public safety, for the prevention of disorder or crime, for the protection of health or morals or for the protection of the rights and freedoms of others. 124   Joined Cases C-92/09 and C-93/09 Volker und Markus Schecke GbR and Hartmut Eifert v Land Hessen, para 52. 125   Case C‑12/11 McDonagh, para 62.

228  Mélanie Schmitt These specific restrictions appear to be more protective than the general limitation clause derived from Article 52(1) of the Charter.126 Principally, the condition that the restriction must meet an objective of general interest recognised by the Union opens up broad scope for justification of the restrictions on the right to collective bargaining. The case law appears to show that the Court contrasts Article 52(1) and the general interest of the Union with interpretations of the rights under the Charter that might result in exceeding the standard of protection offered by the ECHR.127 Along the same lines, the protection of the freedoms of others (service providers, for example) might well justify a restriction on collective bargaining imposed by derived law, as demonstrated by CJEU case law. iii  Interpretation of the Right to Collective Bargaining According to ILO Conventions According to Article 53 CFREU on the ‘level of protection’: Nothing in this Charter shall be interpreted as restricting or adversely affecting human rights and fundamental freedoms as recognised . . . by . . . international law and by international agreements to which the Union, the Community or all the member states are party, including the European Convention for the Protection of Human Rights and Fundamental Freedoms.

According to the Explanations related to the Charter, it follows that ‘In any event, the level of protection afforded by the Charter may never be lower than that guaranteed by the ECHR’.128 There would then be little doubt that this provision further reinforces the authority of the European Convention, but is it the same with ILO conventions? In legal doctrine, the interpretation of Article 53 proves to be a more delicate matter than it might appear on a first reading, especially as the Explanations attached to the Charter do not contribute any detail. Some authors expressed optimism just after the Charter was adopted, envisaging the express recognition, by the Court of Justice, of the provisions laid down by the ECHR or of the international law of human rights.129 Others, however, have adopted a more measured stance, seeing Article 53 as merely creating ‘spaces for the recognition of the fundamental norms of competing systems’ without affecting ‘the power [of the Court of Justice] to determine the level of protection granted in EU law’.130   See F Sudre, Droit européen et international des droits d’homme, 9th edn (Paris, PUF, 2008) 158.   M Afroukh, ‘La notion de droit correspondant dans la jurisprudence de la Cour de justice de l’Union européenne’, (2004) 4 Revue des affaires européennes 765–79,776; see Case C-400/10 PPU J McB v LE. 128   According to the French version of the Explanations relating to the Charter, 17. 129  F Sudre, ‘L’apport du droit international et européen à la protection communautaire des droits fondamentaux’ in Droit international et droit communautaire: perspectives actuelles (Paris, Pedone, 2000) 169. 130   L Azoulai, ‘Article II-113’ in L Burgorgue-Larsen, A Levade and F Picod (eds), Traité établissant une Constitution pour l’Europe, Partie II, La Charte des droits fondamentaux de l’Union européenne – Commentaire article par article (Brussels, Bruylant, 2005) 711. 126

127



Evaluation with Reference to Primary Legislation  229

However that may be, we feel that Article 53 creates an obligation to respect the level of protection afforded by the ILO conventions (once they are ratified by all the EU member states) and that this obligation assumes, at least, that the Court of Justice is concerning itself with the content of these conventions, and is making a comparison of the levels of protection that each one confers. Moreover, the ratification of the conventions by all the member states, as is the case with Conventions 87 and 98, added to the protection of rights by the ECtHR, paves the way for a European consensus in favour of the recognition of a general principle of European Union law. Direct influence of ILO conventions on CJEU case law, however, is encountering serious obstacles, arising from the position of the Luxembourg Court on international instruments. First, the CJEU is not subject, in the hierarchical sense, to the Strasbourg Court and does not regard itself as being bound by the interpretation of international conventions by non-jurisdictional bodies.131 It then goes on to make a contextualised application of the rights protected by the international instruments. It applies the rights recognised by the international conventions (including the ECHR) in light ‘of the objectives and the structure’ of the Union.132 According to one author,133 the CJEU’s interpretation of fundamental rights ‘must make it possible to attain the level of protection appropriate to the specific conditions and requirements of the Union, which consist of not only the guarantee of rights but the realisation of its objectives’. The reference made by Article 28 to the right to collective bargaining ‘in accordance with Community law’ supports this constraint. This strict case law position justified the selection of human rights that the Court intended to protect, as well as an independent interpretation of these rights up to the late 1990s. But, now that ‘respect for human rights’ forms part of the Union objectives (since the entry into force of the Amsterdam Treaty), it should evolve towards systematically taking into consideration the universally recognised social rights or, at least, those on which consensus exists at European level. This evolution is all the more relevant in that the Lisbon Treaty has profoundly reshaped the Union objectives and is giving a more important place to the objectives and social rights.134 As regards substance, the ILO Committees have on several occasions ruled on the restrictions placed on the right to collective bargaining and freedom of association in crisis periods.135 The 2011 report on the ILO high level mission to Greece points this out when it indicates the position of principle of the ILO committee of experts for the application of the conventions and recommendations, a position reiterated in 2011 on the subject of the first adjustment measures adopted by Greece and that country’s compliance with ILO Convention 98:   See Case C-249/96 Grant [1998] ECR I-636.  CJEC International Handelsgesellschaft [1970] ECR 1125. 133   See Azoulai, above (n 130). 134   See M Schmitt, ‘La dimension sociale du Traité de Lisbonne’ (2010) 6 Droit social 682. 135   See the chapter by Niklas Bruun in this volume. 131 132

230  Mélanie Schmitt [I]f, as part of its stabilization policy, a government considers that wage rates cannot be settled freely through collective bargaining, such a restriction should be imposed as an exceptional measure and only to the extent that it is necessary, without exceeding a reasonable period, and it should be accompanied by adequate safeguards to protect workers’ living standards.136

More broadly, solutions arrived at by the ILO Committees offer significant guidance on evaluating the compliance of the ‘anti-crisis’ measures with the fundamental rights of the EU. It is noted that they do not specify an absolute application to the right to bargain collectively; that they apply proportionality in evaluating the restrictions; and that they aim to preserve the substance of the law irrespective of the context. These are, however, precisely the rules and principles already at work in the CJEU case law – despite their strict application – and that are also recognised by the EU Charter of Fundamental Rights. The ‘case law’ of the committees could lead the CJEU, on the one hand, to invert its reasoning (by ‘protecting’ the fundamental right to collective bargaining and by limiting the restrictions placed on this right) and, on the other, to introducing new criteria in its test of proportionality, especially the ‘incompressible’ guarantees that the workers should enjoy and prior consultation of the social partners on every occasion. V  CHALLENGING EU RESPONSES TO THE CRISIS: WHAT JUDICIAL REMEDIES?

National measures implementing EU acts may be brought against national measures before national courts, depending on the conditions and procedures laid down by each country’s own domestic law. Of particular interest is the possibility of challenging the constitutionality of a law (or another domestic act) adopted for the implementation of an act of the Union. Even so, the national court will rule only as regards the constitutional rules within its own legal system and does not have the power to invalidate an act of the Union. Proceedings may also be challenged on the basis of the international undertakings of the member state concerned: before the ECtHR, the European Committee of Social Rights, or the competent ILO bodies.137 The answer to the question of whether direct judicial avenues before the Court of Justice or the General Court of the EU are available depends on the legal nature of the EU acts that are challenged. As the reforms imposed on member states in very great economic and budgetary difficulties are the result of a decision of the Council they may be challenged, but on such strict conditions as to constitute insurmountable obstacles for national trade unions. 136  ILO, Report on the High Level Mission to Greece, § 304, 59. See also ILO–CEACR, Giving globalization a Human Face, General Survey on the fundamental Conventions concerning Rights at Work in the light of the ILO. 137   See the chapters dedicated to these avenues in this volume.



Evaluation with Reference to Primary Legislation  231

However, the recognition of a right to consultation deriving from primary and secondary legislation would open the way for European social partners to challenge these decisions, as well as EU acts based on Regulation 1176/2001, with the adoption of which they have not been associated. Direct challenges to Council acts are thus limited but not entirely closed (see V.A). Consideration should also be given to the possibility of recourse to other legal channels to challenge the legality of Council Decisions (or other Union acts) by using indirect judicial remedies. Lastly, the national measures adopted on the basis of EU acts may be the subject of a case brought before the EU Court, but only indirectly by means of a reference for a preliminary ruling (see V.B). A  Direct Challenges to Acts of the Council By virtue of Article 263(1) TFEU, the Court of Justice has jurisdiction to ‘review the legality of legislative acts, of acts of the Council other than recommendations and opinions, and of acts of the European Parliament and of the European Council intended to produce legal effects vis-à-vis third parties’. If it holds the action to be well founded, the Court declares the contested act to be null and void (Article 264 TFEU). The bringing of action for annulment is available to the member states, the European Parliament, the Council and the Commission which form the category of ‘privileged applicants’ (Article 263(2) TFEU). These applicants may bring an action against any act or decision, even when their interests have not been affected by the act in question (‘infringement of an essential procedural requirement’). Article 263(2) TFEU allows them to challenge a EU act by reason of an ‘infringement of the Treaties or of any rule of law relating to their application, or misuse of powers’. In contrast, ‘ordinary’ or ‘non-privileged applicants’ do not benefit from such preferential status. This concerns national trade unions which have to face insurmountable obstacles (see V.A.ii). In between those two alternatives the ‘semi-privileged applicants’ (Article 263(3) TFEU) refer to the Court of Auditors, the European Central Bank and the Committee of the Regions. The main restriction is that they may bring an action only ‘for the purpose of protecting their prerogatives’. The recognition of a right to consultation within the framework of anti-crisis and austerity measures within economic and budgetary policies should open this avenue to European social partners (see V.A.i). i  Opening Action for Annulment Brought by European Social Partners The direct access to the Court of Justice for semi-privileged applicants implies that two conditions are met. The first limits EU acts which might be challenged. Following the second one, the purpose of an action for annulment is limited to

232  Mélanie Schmitt protection of the applicant’s own prerogatives, presupposing that such prerogatives exist. a  First Condition The first sentence of Article 263(1) lists three different types of EU acts that can be subject to an action of annulment: legislative acts, acts of the Council, of the Commission and of the European Central Bank other than recommendations and opinions and acts of the European Parliament and of the European Council intended to produce legal effects vis-a-vis third parties. Pursuant to Article 288 TFEU, Council ‘Decisions’ are acts of the European Union that have a binding effect on the member state(s) that they designate. In this respect, their validity may be challenged by those to whom they are addressed through an action for annulment. Insofar as they are part of secondary legislation, decisions must be in compliance with rules of primary legislation, including treaties, the general principles of EU law and the EU Charter of Fundamental Rights. Acts adopted on the basis of Regulation 1176/2011 are more problematic because the main instruments used are recommendations. In principle, they appear to be excluded from any direct action. However, ‘it is settled law that an action for annulment must be available in the case of all measures adopted by the institutions, whatever their nature or form, which are intended to have legal effects’.138 The denomination of the act is not a decisive criterion.139 Among the indices used by the Court of Justice are the contents of the act, its wording, the legal and factual context in which the act occurred, the intention of the institution, the division of powers between the Union and the member states, circumstances in which it was adopted and the manner of its preparation, its writing and its publication.140 Following these criteria, it may be argued that recommendations taken within the framework of the ‘Opening of the excessive imbalance procedure’ should be considered to be intended to have legal effect. It results from the wording of Article 7(1) sub-paragraph (2) of Regulation 1176/2011 that the term ‘recommendation’ is used in a legally binding way: those acts are ‘to be followed’ and they determine ‘a deadline within which the member State concerned is to submit a corrective action plan’. Furthermore, the factual context in which they should be adopted lets us think that the Commission’s intention is to constrain member states from implementing structural reforms recommended by itself or the Council.

138   Case 22/70 Commission v Council [1971] ECR 263, para 42; Case C-316/91 Parliament v Council [1994] ECR I-625, para 8. 139   See J Rideau, ‘Recours en annulation – Conditions de recevabilité’ (2011) Fasc 330 JurisClasseur Europe Traité 44 ff. 140  F Mariatte and D Ritleng, ‘Contentieux de l’Union européenne 1, Annulation. Exception d’illégalité’ (2010) 39 Lamy Axe droit 79 ff.



Evaluation with Reference to Primary Legislation  233

An interesting parallel can be made with Regulations 1173, 1175 and 1177/2011 on budgetary surveillance, which reinforce ‘sanctions’ that can be taken by the Commission vis-a-vis the member state in the case of non-­compliance with Council recommendations. There is no doubt about the EU legislator’s intention to give binding legal effect to these recommendations. Along the same lines, the provisions of Regulation 1175/2011 detailing the European Semester process suggest strongly that member states are obliged to comply with the guidance addressed to them by the Council on the basis of Commission’s recom­ mendations.141 As a consequence, all ‘recommendations’ based on Articles 6 and 7 of Regulation 1176/2011 and on Regulation 1175/2011 could and indeed should be considered as legally binding acts and therefore be challengeable. But any further ‘recommendation’ or other measure based on this Regulation might also have to be considered a legally binding act for the purposes of Article 263(1) TFEU. The second condition that is to be met by semi-privileged applicants for the admissibility of an action for annulment is that they benefit from a ‘prerogative’ whose violation will justify the action. European social partners’ organisations are not mentioned as semi-privileged applicants in Article 263(3) TFEU, although their prerogatives in law-making processes are enshrined and protected by Article 154 TFEU, as well as in Article 152(1) and (2) TFEU. However, as pointed out previously, it may be argued that European social partners are entitled to be consulted within the European Semester process. The precise scope of the prerogatives in question remains undetermined. This issue was referred to the Court of Justice by the European Parliament at a time when its status of privileged applicant was not yet recognised by Article 173 ECC (Article 263 TFEU). In the European Parliament v Council judgment the Court held that the prerogatives cover the right to be consulted in accordance with a provision of the Treaty, so that adoption of an act on a legal basis not providing for such mandatory consultation infringed Parliament’s prerogatives.142 Such reasoning may be extended to European social partners, on the ground of Articles 154–155, 152, 151 and 9 TFEU, Articles 28 and 12 CFREU, in combination with the relevant provisions of the ‘Six-pack’ Regulations. This is all the more necessary bearing in mind the absence of the European Parliament from the European Semester process,143 which calls into question both the ‘institutional balance’ whose preservation is guaranteed by the Court of Justice in 141   Regulation 1175/2011, Article 1(3): ‘Member States shall take due account of the guidance addressed to them in the development of their economic, employment and budgetary policies before taking key decisions on their national budgets for the succeeding years. Progress shall be monitored by the Commission. Failure by a Member State to act upon the guidance received may result in: (a) further recommendations to take specific measures; (b) a warning by the Commission under Article 121(4) TFEU; (c) measures under this Regulation, Regulation (EC) No 1467/97 or Regulation (EU) No 1176/2011’. 142   Case C-316/91 Parliament v Council [1994] ECR I-625. 143   See the chapter by Andreas Fischer-Lescano in this volume.

234  Mélanie Schmitt the framework of Article 263(1) and the democratic nature of the EU. In the Ueapme judgment, the Court of First Instance recognised that European social partners, without being EU institutions, contribute in an ‘alternative’ way to the ‘institutional balance’ and the principle of democracy: [T]he principle of democracy on which the Union is founded requires – in the absence of the participation of the European Parliament in the legislative process – that the participation of the people be otherwise assured, in this instance through the parties representative of management and labour.144

b  The Time Limit for an Action for Annulment Proceedings for annulment must be instituted within two months – depending on the nature of the act at issue – of the publication of the measure, or its notification to the plaintiff, or the day on which it comes to the plaintiff’s know­ ledge (Article 263(5) TFEU). Since decisions and recommendations are addressed to the member state, they are not notified to the European social partners but published in the Official Journal of the EU. According to Article 102(1) of the Rules of Procedure of the General Court: Where the period of time allowed for commencing proceedings against a measure adopted by an institution runs from the publication of that measure, that period shall be calculated, for the purposes of Article 101(1)(a), from the end of the 14th day after publication thereof in the Official Journal of the European Union.

Article 102(2) states that ‘The prescribed time-limits shall be extended on account of distance by a single period of ten days’. ii  Obstacles to an Action for Annulment Brought by National Trade Unions a  Conditions of Admissibility of an Action for Annulment under Article 263(4) Admissibility of actions for annulment brought by individuals – natural or legal persons, such as trade unions – is extremely limited. According to Article 263(4) TFEU, Any natural or legal person may, under the conditions laid down in the first and second paragraphs, institute proceedings against an act addressed to that person or which is of direct and individual concern to them, and against a regulatory act which is of direct concern to them and does not entail implementing measures.

This provision ensued from an amendment made by the Lisbon Treaty in order to extend the terms on which private persons as ‘ordinary applicants’ may bring an action for the annulment of acts adopted by the institutions of the Union. As worded before the Lisbon Treaty, Article 230(4) TEC stated that:   Case T-135/96 Ueapme v Council and Commission [1998] ECR II-2335, para 89.

144



Evaluation with Reference to Primary Legislation  235 Any natural or legal person may, under the same conditions, institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation or a decision addressed to another person, is of direct and individual concern to the former.

Since the Lisbon Treaty came into force (on 1 December 2009), ordinary applicants have therefore had a third option for bringing an action, namely against ‘self-sufficient’ regulatory acts which are of direct concern to them. This new concept of ‘regulatory act’ is a debated topic. The question arose of whether it includes only regulations in the strict sense (in other words, in form) or if it can extend to decisions according to a material definition. According to firmly established case law,145 reliance should be placed on the substance of the act rather than its form. A regulatory act can therefore be a regulation, but also a decision, albeit on condition that the latter is general in scope.146 This is not the case, however, with the Council Decisions with which we are concerned in this chapter, which are individual because they are addressed solely to a single member state. In addition, these decisions are not self-sufficient but, on the contrary, are a forerunner of the targets and general outlines of the anti-crisis measures that the national government will have to formulate in specific terms. In consequence, it does not appear that individual applicants such as trade unions can avail themselves of this third option for seeking the annulment of Council Decisions. The conditions of admissibility for the second hypothesis (‘proceedings against an act . . . which is of direct and individual concern to them’) were not revised by the Lisbon Treaty. However, the interpretation by the Court of Justice and its former Court of First Instance of the condition of being personally and individually concerned by the disputed act is extremely stringent,147 so that the trade unions, in the context of their collective bargaining activities, do not satisfy this condition.148 As regards this case law, therefore, it can be stated that national trade unions do not have the locus standi allowing them to contest directly an act of the European Council before the General Court. This position is open to dispute, in particular in the light of the Court’s statement that ‘the provisions of the treaty regarding the right of action of interested parties must not be interpreted restrictively’.149   Case 22/70 Commission v Council (European Agreement on Road Transport) ECR 263, para

145

42.

146   See L Coutron, ‘Premières précisions sur la clause “Jégo-Quéré”’ (2012) 19(1) Revue des affaires européennes 163, 167. 147   According to the Plaumann judgment (Case 25/62 [1963] ECR-222), applicants who are natural persons are individually concerned only if that decision affects them ‘by reason of certain attributes which are peculiar to them, or by reason of factual circumstances which differentiate them from all other persons and thereby distinguish them individually in the same way as the person addressed’. 148  See F Berrod, La systématique des voies de droit communautaires (Paris, Dalloz, 2003); Schmitt, Autonomie collective des partenaires sociaux et principe de subsidiarité dans l’ordre juridique communautaire, above (n 52) 584. 149   Case 25/62 Plaumann [1963] ECR 222.

236  Mélanie Schmitt With regard to the precedent of the Jégo-Quéré case,150 however, it is unlikely that the Court of Justice itself would modify this case law. The Court had in fact criticised the interpretation adopted by the Court of First Instance, considering, on the grounds of the requirement to respect the right to ‘effective judicial protection’, that a person is to be regarded as individually concerned by a Community measure of general application ‘if the measure in question affects his legal position, in a manner which is both definite and immediate, by restricting his rights or by imposing obligations on him’.151 According to the Court, this interpretation means that ‘such an interpretation cannot have the effect of setting aside the condition in question, expressly laid down in the Treaty [and] the Community Courts would otherwise go beyond the jurisdiction conferred by the Treaty’. The inclusion in Article 263(4) TFEU of a new channel of action shows that the appeal made to the member states has been taken into account, but there are still situations in which individuals will have no recourse other than contesting national measures adopted in implementation of an act of the Union, in order to bring about a referral to the CJEU by the domestic court before which the case has been brought. b  Interim Conclusion As legislation and case law now stand, legal remedies allowing proceedings to be brought directly by European social partners are uncertain but promising. As for national trade unions, direct actions against Council Decisions adopted under the European mechanism of financial aid are entirely closed. For them, the right of any applicant to effective jurisdictional protection is thus reduced to a referral to national courts. In consequence, the following developments focus on the judicial remedies against national measures based on Council Decisions. B  Indirect Challenges against Council Decisions: Challenging National Measures by a Reference for a Preliminary Ruling Actions may be brought before national courts against the legislative, regulatory or administrative measures themselves, where these are adopted by national authorities in implementation of Council Decisions, according to the forms of actions, conditions and procedures current in each member state. In general, it is for the national court to interpret its own domestic national law in accordance with EU law. The national court itself must incorporate the relevant elements of EU law in its evaluation of the national measure at issue, in particular the fundamental rights proclaimed by the Charter (where this is applicable). The national courts have jurisdiction to interpret EU law, as ordin­   Case C-263/02 P Jégo-Quéré; see former Case C-50/00 P Union de Pequeños Agricultores.   Case T-177/01 Jégo-Quéré [2002] ECR II-2365.

150 151



Evaluation with Reference to Primary Legislation  237

ary courts of EU law. The Court of Justice even requires the authorities and courts of member states, in implementing secondary law (directives, in this instance) to ‘make sure that they do not rely on an interpretation of them which would be in conflict with those fundamental rights’.152 The Court of Justice, on the other hand, has a ‘monopoly in authentic interpretation’.153 The national court to which a case is referred must accordingly take into consideration the interpretation of EU law where this has already been provided by the Court of Justice on the occasion of a referral for a preliminary ruling. ‘The interpretation, endowed with binding force, is incor­ porated in the rule being interpreted’.154 On the occasion of an action brought against a national measure adopted in implementation of a Council Decision, the national court may apply to Court of Justice for a preliminary ruling on the interpretation of primary law and/or secondary law, or on the validity of secondary law. i  Jurisdiction of the Court of Justice Under Article 267 TFEU, ‘The Court of Justice of the European Union shall have jurisdiction to give preliminary rulings concerning: (a) the interpretation of the Treaties; (b) the validity and interpretation of acts of the institutions, bodies, offices or agencies of the Union’ (italics added). From this it is apparent that the Court does not have jurisdiction to interpret national law (an operation that lies with the national court), but solely for EU law.155 In addition, the Court does not rule on the application of EU law provisions to the factual situation underlying the main proceedings.156 The reason for this limitation has been declared by the Court of Justice many times, in that the Court has no power ‘to rule . . . on the compatibility of the provisions of internal law with the provisions of the Community law’.157 The Court ‘however, may provide the national court with the criteria enabling it to deal with the action before it, in particular as regards any incompatibility of national provisions with community rules’.158 a  The Nature of the Acts to be Challenged The CJEU’s jurisdiction to give a preliminary ruling on interpretation and on validity extends to ‘all acts of the institutions of the Community without   Case C‑275/06 Promusicae [2008] ECR I‑271, para 68.   J Pertek, ‘Renvoi préjudiciel – Renvoi préjudiciel en interprétation’ (2010) 50 JurisClasseur Europe Traité 361. 154   ibid, para 57. 155  Case 131/85 Gül [1986[ ECR CJEC 1573; Case C-17/92 Distribuidores Cinematogràficos [1993] ECR CJEC I-2239 156   Case 10/86 VAG France [1986] ECR CJEC 4071. 157   Case 38/77 Enka [1977] ECR CJEC 2203; Case C-130/93 Lamaire [1994] ECR CJEC I-3215. 158  ibid. 152 153

238  Mélanie Schmitt exception’.159 These concern the legally binding acts of the institutions – decisions in particular – but also acts that do not have this quality such as a recommendation adopted by the Commission (or the Council) on the basis of the Treaty.160 The Court also has jurisdiction to rule on the interpretation (but not on the validity) of the Treaties, including provisions of the Treaty on the Functioning of the European Union, the Treaty on the European Union and their Protocols, as well as the Charter of Fundamental Rights and the general principles of law. These elements of primary law constitute the ‘reference norms’161 that guide interpretation of secondary law, but they may themselves be the subject of a referral on interpretation. The Court of Justice may therefore be asked to interpret Articles 28 and 12 of the Charter of Fundamental Rights, and/or Article 152 TFEU, or again Article 9 TFEU, so that it can clarify the meaning of these provisions, as well as their value and scope. The reference may also relate to the interpretation of the Council’s decisions. Furthermore, on the occasion of a referral on the interpretation of EU law, the Court of Justice does not exclude giving a ruling on the validity of an act of an EU institution. Professor Pertek emphasises the ‘permeability between the two branches’ and, in light of an in-depth examination of the case law, states that the Court gives itself the latitude to move, of its own volition, from a request relating to the interpretation of an act to an evaluation of its validity . . . In this way it examines ex officio the validity of an act, with a view to determining whether a sufficient legal base can be found for it in primary law . . . The Court may, for example, ascertain the invalidity of a measure or an act where the referring court was merely seeking an interpretation.162

ii  Role of the National Court and Parties a  Role of the National Court If there is a doubt concerning the interpretation of EU law, the national court may refer the matter to the Court of Justice if it feels that the doubt should be resolved in order to settle the dispute that has been referred to it. This option becomes an obligation if the national court is ruling in last instance (Article 267(3) TFEU). The Court of Justice has extended this obligation to all national judges where they doubt the validity of an act of the Union having regard to primary law.163 While national courts may consider whether an EU act is valid, the   Case C-322/88 Grimaldi [1989] ECR CJEC 4407, para 8.  ibid. 161   Pertek, above (n 153) no 32. 162   ibid. See Case 16/65 Schwarze [1965] ECR CJEC 1082; Case C-383/98 Polo v Lauren [2000] ECR CJEC I-2519; Case C-395/00 Cipriani [2002] ECR CJEC I-11877. 163   Case C-314/85 Foto Frost [1987] ECR CJEC 4199. 159 160



Evaluation with Reference to Primary Legislation  239

CJEU has exclusive jurisdiction to declare such an act invalid. But, if a national court has serious doubts about the validity of an act of an EU institution on which a national measure is based, it may exceptionally suspend application of that measure temporarily or grant other interim relief with respect to it. It must then refer the question of validity to the Court of Justice. Failure to comply with this obligation of referral may be sanctioned by an action for non-fulfilment, but the Commission has never implemented such a procedure. Moreover, the state’s responsibility may be sought by more reliable procedures.164 The national court may/must submit a request for a preliminary ruling to the Court of Justice if it ‘considers that a decision on the question is necessary to enable it to give judgment’ (Article 267(2) TFEU). As stated by the Court itself, a reference for a preliminary ruling may prove particularly useful when there is a new question of interpretation of general interest for the uniform application of European Union law, or where the existing case-law does not appear to be applicable to a new set of facts.165

National courts must pay careful attention to the wording of the order for reference, even if the Court of Justice shows great indulgence towards them. b  Role of the Applicant The decision to refer a matter to the Court of Justice for a preliminary ruling lies not with the applicants but with the national court before which the case has been brought. Nor could the applicants force the national court to apply for a preliminary ruling. However, as pointed out by one author, the role of the parties is nevertheless far from negligible in the generation of a referral. It is often a party (or his counsel) who points out the elements of EU law present in the dispute. The parties also contribute to this court’s diagnosis of the need for an interpretation or an assessment of validity in order to arrive at its own solution to the case. The parties may also, if necessary, arouse the interest of the court in using the preliminary ruling mechanism.166

c  The Wording of the Order for Reference Despite the leniency of the Court of Justice towards national courts, the wording of the order for reference is of the utmost importance. The referring court may simply ask one or more ‘neutral’ questions, but it may also specify in detail its doubts about the compliance of national measures 164  Case C-224/01 Köbler [2003] ECR CJEC I-10239. A-S Botella, ‘La responsabilité du juge national’ (2004) 2 Revue trimestrielle de droit européen 283; D Simon, ‘La responsabilité des États membres en cas de violation du droit communautaire par une juridiction suprême’ (2003) Europe comm no 45. See also Case C-173/03 Traghetti del Mediterraneo [2006] ECR CJEC I-5177. 165   Court of Justice, Recommendations to national courts and tribunals in relation to the initiation of preliminary ruling proceedings OJ C/338/2, para 13. 166   Pertek, above (n 153) no 57.

240  Mélanie Schmitt with the relevant EU law provisions,167 so as to guide the interpretation of these provisions. In any case, it is recommended to national courts to explain why the interpretation sought is necessary to enable the Court of Justice to give judgment. The same applies to references for preliminary rulings on validity: the referring court may specify the arguments that call into question the validity of an act of secondary law. According to the CJEU itself: If it considers itself able to do so, the referring court or tribunal may . . . briefly state its view on the answer to be given to the questions referred for a preliminary ruling. That information may be useful to the Court.168

The request for a preliminary ruling is not limited to the questions submitted to the Court of Justice. Although it must be succinct, it must also ‘be sufficiently complete and must contain all the relevant information to give the Court . . . a clear understanding of the factual and legal context of the main proceedings’.169 Moreover, since the Court of Justice ‘can only interpret EU law within the limits of the competences conferred upon the Union’,170 the national court shall specify the link between the national measure at issue and the Union law. This connection is essential to establish the jurisdiction of the court. This is all the more important in cases where a national measure and the EU act on which it is based are challenged under the Charter of Fundamental Rights. Since the Charter is binding on the member states ‘only when they are implementing Union law’ (italics added) (Article 51 (1)), the Court of Justice will have jurisdiction only if this link between domestic law and EU law exists. It is for the referring court to specify explicitly that the national measure at issue has been taken in implementation of EU law. Otherwise, the Court of Justice will declare that it has no jurisdiction to hear the preliminary ruling. Regarding national anti-crisis measures, this implies that the referring court makes clear that these measures have been adopted in application of a Council Decision granting financial assistance. A recent Portuguese case shows how crucial the writing of an order for reference is. This case provided the Court of Justice with its first opportunity both to hear on a national measure reducing wages in the context of the crisis171 and to rule that the right to working conditions which respect the dignity of the worker (Article 31(1) of the Charter) includes pay. The Court cannot but note the absence of any ‘concrete element in the order for reference to consider that the [Portuguese] law seeks to implement Union law’.172 As a consequence, the Court ‘clearly lacks jurisdiction with regard to the request for a preliminary ruling’.173   Court of Justice, Recommendations to national courts, above (n 165) para 23.   ibid, para 24.   ibid, para 22. 170   Case C-128/12 Sindicato dos Bancários do Norte ea (not available in English) para 9. 171   The case deals with the Portuguese budget law 2011 which reduced wages in the public sector. 172   CJEU Order, 7 March 2013, Sindicato dos Bancários do Norte ea, para 12. 173   ibid, para 14. 167 168 169



Evaluation with Reference to Primary Legislation  241

Another Portuguese case174 dealing with the compliance of the national Budget Law 2012 with Article 31(1) and with the right to collective bargaining (but without any reference to Article 28 of the Charter),175 is pending before the Court. Although the national legislation at issue was adopted in order to fulfil the conditions imposed by the Council Decision of 30 May 2011 and the Memorandum of Understanding of 17 May 2011, the labour court of Porto does not mention these texts in its questions. Nor does it challenge their validity on the basis of the relevant primary law provisions. As a consequence, the Court could rule again that it does not have jurisdiction. Therefore, it is crucial that national courts mention in their questions all EU law and ECHR provisions that seem to be relevant (at least Articles 28, 12, 52 and 53 of the CFREU, and Article 11 of the ECHR), as well as the link between the national measure(s) challenged and EU law.

  Case 264/12 Sindicato Nacional dos Profissionais de Seguros e Afins, lodged on 29 June 2012.   The wording of the sixth and last question referred is as follows: ‘Is the abovementioned Lei do Orçamento de Estado para 2012, which establishes that the rules governing suspension of the payment of the allowances referred to above cannot be derogated from by collective regulatory agreements and takes precedence over such agreements, contrary to the right to collective bargaining?’. 174

175

9 Legal and Judicial International Avenues: The ILO NIKLAS BRUUN

I INTRODUCTION1

T

HE FINANCIAL CRISIS brought about a radical shift in the assessment of collective bargaining as an element of the European social model. Collective agreements and multi-employer collective bargaining that extend beyond company level have often been seen as one essential institutional feature of this model. Nowhere else can such well-developed systems of multi-employer collective bargaining – which may apply to whole industries or even nationally – be found. The existence of collective agreements with such extensive coverage is one of the reasons why a clear majority of employees continue to be covered by collective bargaining in Europe. Although we have seen a weakening of trade unions in Europe and a shift towards decentralisation of collective bargaining, the multi-employer collective agreements have remained remarkably stable in most (Western) European countries since the 1980s. In the European Union member states only the United Kingdom has undergone a significant change from a system with industry-level bargaining to one that consists mainly of workplace bargaining. After 1990, also in a number of eastern European (former Soviet bloc) countries systems of industry or national-level bargaining have been lacking. With these exceptions, multi-employer collective agreements, embracing a number of workplaces or even sectors, have remained an important constitutive feature of collective bargaining in Europe.2 However, against the background of the financial and economic crisis in Europe, an increasing number of European countries are now facing a radical decentralisation of collective bargaining, often promoted or brought about by   The views and opinions expressed in this chapter are those of the author.  See N Bruun, ‘The Autonomy of Collective Agreement’ in R Blanpain (ed), Collective Bargaining, Discrimination, Social Security and European Integration (The Hague, Kluwer Law International, 2003) 8. 1 2

244  Niklas Bruun direct state intervention in free collective bargaining. Such intervention has in many cases led to the destruction of long-standing structures of national and industry negotiation. In several cases, the driving force behind these developments has been the so-called ‘Troika’ of the European Commission (EC), the European Central Bank (ECB) and the International Monetary Fund (IMF), which has linked the granting of loans or purchasing of government bonds to the implementation of extensive ‘structural reforms’, especially of the labour market.3 The way in which these reforms have been designed and decided upon is very different from the ordinary legislative procedures that we know from the Lisbon Treaty. The actual legislation might be contained in the ‘Memoranda of Understanding’ (MoUs) and similar documents. These are followed up and new MoUs are adopted in order to come up with adequate measures in the crisis state concerned. Although the measures prescribed in the MoUs must be adopted formally as law in the national parliament there are very limited possibilities for redesigning the content or finding alternative solutions for the relevant legislator. Furthermore, the legal status of the MoUs differs in the individual ‘bail-out’ cases: the European Union is formally a contractual party to the MoU of Portugal, but not to the one concerning Greece.4 The reality of the governance of the economic crisis in the European Union is therefore rather different from what one might expect from reading only the text of the Lisbon Treaty. State intervention in free collective bargaining is controversial from a legal point of view. Freedom of association has since the Second World War has been regarded as an important international human right, protected by several global and regional human rights instruments. The International Labour Organization (ILO), with its unique tripartite structure and comprehensive standard-setting tradition, can certainly be regarded as the forerunner and leading institution in this regard. In this chapter I want to explore the tensions between the labour market crisis policy and its implications for collective bargaining. A starting point for the analysis is that member states are bound by their international human right obligations when implementing crisis measures. There are also strong reasons to argue that at least the European Union institutions that are parties to the Troika should respect these obligations when designing the crisis measures for individual member states. In particular the EU Charter of Fundamental Rights, which is integrated in the Lisbon Treaty, should be respected and although there can be a discussion about when the EU institutions are actually ‘implementing EU law’ it seems clear that there is a general 3   See K Heikki Tuori, ‘The European Financial Crisis: Constitutional Aspects and Implications’ EUI Working Papers LAW 28/2012 and C Barnard, ‘The Financial Crisis and the Euro Plus Pact: A Labour Lawyer’s Perspective’ (2012) 41(1) Industrial Law Journal 98. 4   In its implementing Decision of 30 May 2011 granting Union financial assistance to Portugal 2011/344/EU the Council directly refers to the MoU and confirms the Portuguese government’s commitment to the adoption of concrete ‘flexible’ labour laws; see Art 3, para 5c: ‘Portugal shall adopt the first batch of measures aimed at strengthening labour market functioning by limiting severance payments and making working time arrangements more flexible’.



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obligation for them to respect at least those human rights that form part of the common constitutional traditions of the member states as general principles of EU law.5 All the member states of the European Union have ratified the import­ ant ILO Conventions 87 and 98 regarding the principles of freedom of association. The European Union also strongly presses trade partners and developing countries to respect the principles of freedom of association and the relevant ILO Conventions. II  FOCUS OF THE PRESENTATION

This chapter will focus on the impact of the crisis measures – primarily legislative measures – on fundamental collective labour rights in the crisis countries. My intention is not to present a comprehensive review of all the different measures undertaken, but rather to analyse the different types of legislative measures that are problematic from the point of view of the fundamental ILO Conventions on freedom of association. We shall focus in particular on the core issues related to freedom of association and collective bargaining and on how measures undertaken can be evaluated from the perspective of ILO jurisprudence. We will look especially at crisis countries in which the Troika has directly intervened, namely Cyprus, Greece,67 Portugal, Ireland and Spain, but also very briefly at other crisis states, such as Romania, Lithuania, Hungary and Italy. In section I we will focus on rights under the following ILO Conventions: 1. ILO Convention 87, Freedom of Association and Protection of the Right to Organise, 1948; 2. ILO Convention 98, Right to Organise and Collective Bargaining, 1949; 3. ILO Convention 151, Convention concerning Protection of the Right to Organise and Procedures for Determining Conditions of Employment in the Public Service, 1978; and 4. ILO 154, Convention concerning the Promotion of Collective Bargaining, 1981. In accordance with the procedural approach mentioned in respect of the ILO, the relevant procedures will be described in brief in order to show how to access the competent bodies. 5  See CJEU C-370/12 Thomas Pringle v Government of Ireland, Ireland and the Attorney General, Judgment 27/11/2012 (not yet reported). See also C Barnard, ‘The Charter in Time of Crisis: A case Study of Dismissal’ in N Countouris and Freedland (eds), Resocialising Europe in a Time of Crisis (Cambridge, Cambridge University Press 2013). 6   There are several country-specific or general publications on the impact of labour law: for instance, S Clauwaert and I Schömann, ‘The crisis and national labour law reform: A mapping exercise’ ETUI Working Paper 2012/4, but there are no systematic attempts to evaluate these reforms from the point of view of the ILO Freedom of Association Conventions. 7  Greece is clearly the member state most affected by the crisis; see A Koukiadaki and L Kretsos, ‘Opening Pandora’s Box: The Sovereign Debt Crisis and Labour Market Regulation in Greece’ (2012) 41(3) Industrial Law Journal 276.

246  Niklas Bruun III  ILO STANDARDS AND CRISIS MEASURES

A  Principle of Consultation In the context of the economic crisis in the European Union economic governance has to a large extent been transferred to non-state actors, such as the Troika, and international organisations, such as the IMF and the European Union, as creditors. This development has clearly made its mark on the discourse concerning crisis measures and ILO member state obligations. The supervisory bodies within the ILO clearly address not only the state party concerned, but also the international organisations and actors exerting pressure on the state party. In the case of Greece, the Committee on Freedom of Association (CFA) sums up its analysis as follows: The Committee considers that it is a matter of utmost importance that the Government and the social partners urgently come together to review all the above mentioned measures and their impact not only on labour relations in the country, but also on the hopes for economic development and social cohesion. It has the firm expectation that they hold the key to the elaboration of a labour relations system that is workable and will be conducive to rebuilding the economy. In this regard, the Committee expects that the social partners will be fully implicated in the determination of any further alterations within the framework of the agreements with the European Commission, the IMF and the European Central Bank (ECB) that touch upon matters core to the human rights of freedom of association and collective bargaining and which are fundamental to the very basis of democracy and social peace.8

In a similar manner the Committee of Experts encourages the Greek government and the social partners to rapidly re-engage in intensive social dialogue with a view to developing a comprehensive vision for labour relations in the country and requests the government to indicate in its next report the steps taken in this regard. The Committee once again urged the creation of a space for the social partners that would enable them to be fully involved in the determination of any further alterations within the framework of the agreements with the EC, the IMF and the ECB that touch upon aspects which go to the heart of labour relations, social dialogue and social peace, and trusts that the views of the social partners will be fully taken into account. In the Spanish case CFA 2918 (2013) the Committee again highlighted the complexity of the case, due in large part to the commitments stemming from adhesion to the single currency, moreover in the context of an economic crisis seriously affecting a number of countries. Formally the supervisory bodies of the ILO only address the state party concerned, but in situations in which actual policymaking and decision making are in the hands of the Troika and in which governments refer to economic necessities   See CFA, Report No 365, November 2012, Case No 2820 (Greece).

8



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due to external pressure, the ILO supervisory bodies do not avoid direct mention of the international actors that in their interaction with the state party should respect its human rights obligations under the ILO Conventions generally, and under the Core Conventions9 in particular.10 B  Principle of Voluntary Collective Bargaining (Article 4, Convention 98) i  Intervention or Restriction The typical form of interference or intervention in collective bargaining in the context of austerity policy has been state intervention in the content of valid (collective) agreements, typically cuts in agreed levels of pay and pay-related benefits, especially in the public but also in the private sector, including other restrictions of the principle of free and voluntary negotiation. Examples of wage cuts violating existing collective agreements can be found in several crisis states. In the case of Spain (CFA 2918) the Committee points out that the negotiated increase in question adopted and improved the previous wage and that the decree, which suspended it, led to a wage cut greater than 5 per cent. Collective bargaining being a fundamental right, the Committee recalled that, in the context of economic stabilisation, priority should, in accordance with earlier practice of the CFA, be given to collective bargaining as a means of determining the employment conditions of public servants, rather than adopting legislation to restrain wages in the public sector. The Committee also recalled that if, as part of its stabilisation policy a government considers that wage rates cannot be settled freely through collective bargaining, such a restriction should be imposed as an exceptional measure. In addition, in previous cases, the Committee considered that if a government wishes the clauses of a collective agreement to be brought into line with the economic policy of the country, it should attempt to persuade the parties to take account of such considerations voluntarily, without imposing on them the renegotiation of the collective agreements in force.11 The Committee has highlighted the importance 9   These are the eight Core Conventions as defined by the ILO Declaration on Fundamental Principles and Rights at Work and its Follow-up, which was adopted by the International Labour Conference at its eighty-sixth session, Geneva, 18 June 1998 (Annex revised 15 June 2010), in respect of freedom of association Conventions Nos 87 and 98. 10   Also other human rights bodies have directly mentioned the role of the Troika when addressing human rights problems in the context of austerity. See, for instance, the CEDAW Committee, Concluding observations on Greece, March 2013. 11   The complainant described the process of wage reduction in Spain in the following way: On 20 May 2010 the Secretary of State of the Public Service called the trade unions to a meeting of the General Negotiating Table of the Public Administrations with no fixed negotiating agenda, aiming to explain how a 5 per cent cut in public servants’ wages would be carried out, which they were assured would be approved in the Council of Ministers to be held that same day. Far from holding ‘real’ negotiations, the Administration at the meeting was not even capable of explaining the content of what was going to be approved a few hours later, directing trade union representatives to listen to the radio between 6:00 pm and 6:30 pm, when the last press conference would be transmitted to the Council of

248  Niklas Bruun of maintaining permanent and intensive dialogue with the most representative workers’ and employers’ organisations, and that adequate mechanisms for dealing with exceptional economic situations can be developed within the framework of the public sector collective bargaining system.12 From the argumentation of the CFA it seems to be clear that some restraints on collective bargaining can be justified in times of serious economic difficulties, but it should be restricted in time and tripartite procedures should be applied. The CFA has stated that such a ‘restriction should be imposed as an exceptional measure and only to the extent that is necessary, without exceeding a reasonable period, and it should be accompanied by adequate safeguards to protect workers’ living standards’.13 In its 2012 report on Greece the Committee of Experts found a clear violation of Article 4 in Convention 98 regarding the National General Collective Agreement (NGCA) and other collective agreements.14 The Greek General Confederation of Labour (GSEE) had indicated that the government had legislatively imposed a reduction of the minimum daily/monthly wages established by the NGCA by 22 per cent compared with the level of 1 January 2012. A further reduction of 32 per cent was made for young workers (between 15 and 25 years old). While acutely aware of the grave and exceptional circumstances being experienced in the country, the Committee of Experts deeply regretted these numerous interventions in voluntary concluded agreements, including the NGCA for which the social partners, cognisant of the financial and economic challenges, declared their continuing support in February 2012. In the case of Portugal the Committee of Experts noted the General Confederation of Portuguese Workers’ (CGTP) statement, in connection with the impact of the financial crisis on the trade unions, that Act 23/2012 of 25 June 2012 amended a number of sections of the Labour Code. It entered into effect on 1 August 2012 and cut pay and cash benefits in state enterprises, even when these had been applied under collective agreement. The government explained that the cut applied to salaries exceeding €1500 and was an attempt to consolidate the state finances in the economic crisis; this salary reduction was declared constitutional by the Constitutional Court. The Committee stressed, in general, the importance it attaches to full compliance with collective agreements and referred to its general principles regarding free and voluntary negotiations even in times of economic crisis.15 It is not only in the member states that intervention in existing collective agreements has taken place. During the economic crisis a key trend in several Ministers taking place that same evening, so that they could find out the details of the restrictions on public servants’ wages, which they had announced would be implemented. See 368th report, Case No 2918 (Spain) para 329. 12   Here the CFA refers to the 364th report, Case No 2821 (Canada) para 378. 13  CFA, Digest of Decisions and Principles of the Freedom of Association Committee of the Governing Body of the ILO, 5th edn (2006) para 1024. 14   Observation (CEACR) – adopted 2012, published 102nd ILC session (2013), Right to Organise and Collective Bargaining Convention, 1949 (No 98) on Greece. 15   ibid, on Portugal.



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EU countries has been that public sector pay cuts and freezes have been introduced unilaterally by the state. Even in countries with a tradition of free collective bargaining in the public sector, such as Ireland, Italy and the United Kingdom, public sector collective bargaining procedures have been bypassed. The same is true for countries with weaker traditions in this regard, such as Hungary, Latvia, Lithuania and Romania.16 Within the Committee of Experts (CEACR) the consistent approach for more than 30 years has been that collective agreements must be respected, but that limitations on future collective agreements, particularly in relation to wages and imposed by the authorities by virtue of economic stabilisation or necessary structural adjustment policies, are admissible on condition that they have been subject to prior consultations with workers’ and employers’ organisations and meet the conditions mentioned above: (i) they are applied as an exceptional measure; (ii) they are limited to the extent necessary; (iii) they do not exceed a reasonable period; and (iv) they are accompanied by safeguards to protect the standard of living of the workers concerned effectively, in particular those who are likely to be the most affected.17 CEACR has also emphasised that adequate mechanisms for dealing with exceptional economic situations can be developed within the framework of the public sector collective bargaining system. It has considered that especially in the case of collective bargaining, mechanisms involving representatives of the state at the highest level and the most representative confederations of workers and employers should be established without delay in the event of serious crises in order to address their economic and social impact in a united approach, paying particular attention to the most vulnerable groups. Such mechanisms should have access to the means of dispute settlement provided for in Article 8 of Convention 151 when, in cases of force majeure, it is found that certain aspects of labour legislation or collective agreements need to be rapidly amended or renegotiated, whether provisionally or not. The need for such mechanisms is particularly acute in view of the severe impact of recovery measures, as a result of which trade unions and employers’ organisations face difficulties and problems on such a scale that it is not possible to come up with a global and coordinated response within the established dialogue framework.18

16   See T Schulten and T Müller (eds), ‘A New European Interventionism? The Impact of the New European Economic Governance on Wages and Collective Bargaining’ in D Natali and B Vanhercke, (eds), Social Developments in the European Union 2012 (Brussels, ETUI, 2013) 191. Regarding the Baltic States, see J Masso and K Krillo, ‘Mixed Adjustment Forms and Inequality Effects in Estonia, Latvia and Lithuania’ in D Vaughan-Whitehead (ed), Work Inequalities in the Crisis. Evidence from Europe (Cheltenham, Edward Elgar 2011). 17   See ILO, International Labour Conference, 102nd session, 2013, ‘Collective bargaining in the public service. A way forward’ Report III (Part 1B) (Geneva, ILO, 2013) 124. 18   ibid, 208–09.

250  Niklas Bruun ii  Restriction of Personal Coverage of Collective Agreements in Force Another way of limiting the effects of collective agreements is to restrict their personal coverage. In particular young persons under a certain age might be excluded. A clear-cut example of this can be found in Greece.19 Here young unemployed people up to 24 years of age are allegedly excluded from the scope of relevant collective agreements through apprenticeship contracts that provide for extended probationary periods and remuneration at 80 per cent of the minimum basic wage. Subsequently, in Greece, Law 3863/2010 abolished the general applicability of the mandatory national minimum wage with respect to young workers up to 25 years of age who, if entering the job market for the first time, would be remunerated with 84 per cent of the minimum wage and minors, between 15 and 18 years of age, under apprenticeship contracts, would be remunerated at 70 per cent of the minimum wage with reduced social security coverage and be excluded from the protective framework of the NGCA and national legislation as regards working hours, rest periods, paid annual leave and time off for school work. The Greek government argued that these measures were necessary for restructuring the labour market and fighting youth unemployment and affirmed that these provisions constitute necessary employment policy measures to combat youth unemployment and do not contravene the freedom of collective bargaining or infringe fundamental trade union rights. The CFA did not agree but observed that the special wage remuneration for young workers is similar to systems of special job offers that it has examined in the past, which introduce a new set of rules for determining the wages of a particular category of employees on the pretext that they would otherwise face long-term unemployment due to unfamiliarity with the labour market. In accordance with its previous considerations, the CFA expects that such measures will be restricted to a limited period of time and will not restrict the collective bargaining rights of these workers as regards their remuneration for longer than 12 months. The CFA further expected that in all other respects these workers’ freedom of association rights were fully guaranteed and requested the government to review the use and impact of these measures with the workers’ and employers’ organisations concerned.20 Here it can be noted that in the context of the principles of freedom of association the CFA does not assess the level of minimum income, an issue that the European Committee of Social Rights has addressed in the crisis context.21 The intervention in the collective bargaining process in order to exclude young employees from the minimum benefits stipulated in the collective agreements has also occurred in other European countries. It can also be linked with changes in employment status or dismissal protection for young workers. Such a policy can be problematic not only from the point of view of the principles of   CFA, Report No 365, November 2012, Case No 2820 (Greece) para 953.   CFA, Report No 365, November 2012, Case No 2820 (Greece) para 993.   See the chapter by Klaus Lörcher in this volume.

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freedom of association, but also from the perspective of age discrimination or the ILO Termination of Employment Convention 158. In this regard one can refer to the Representation case under ILO Convention 24 against France.22 The case consisted of complaints against French Ordinances (2005-892 and 2005893) relating to contracts for new employment. The first ordinance prescribed that any employee engaged after 22 June 2005, who was below 26 years of age should not be counted in the calculation of the workforce of the enterprise concerned. Under the second ordinance, enterprises with fewer than 20 employees were exempted from having to grant their employees under the age of 26 any protection against unlawful dismissals during the two first years of employment.23 The first part of the complaint was withdrawn after a judgment from the French Supreme Court on 6 July 200724 cancelling Ordinance 2005-892 following a preliminary ruling from the Court of Justice of the European Union (CJEU).25 Regarding the second part of the complaint, the ILO requested a careful reassessment of Ordinance 2005-893 in terms of the requirements of the principles of non-discrimination and employment protection and asked France to give effect to Article 4 of the Termination of Employment Convention (158) by ensuring that contracts for new employment can in no case be terminated in the absence of a valid reason. iii  The Principle of Favourability The common cornerstones of different collective bargaining systems have been the mandatory effects of collective agreements at individual level and the favourability principle meaning that, for instance, an industry-level agreement cannot be undermined by local or individual agreements, although it might be possible to agree on more favourable terms and conditions for employees at lower levels. The austerity policy designed by the Troika has attacked and partly abolished this principle in some of the crisis countries. This has led to a radical decentralisation of collective bargaining in Greece and Spain where company agreements were given general priority over sectoral agreements, which clearly undermined sectoral standards and the role of sectoral bargaining.26 Such an effect becomes even stronger if the competence to deviate from the sectoral standard is given to individual employees or groups of employees, regardless of their trade union affiliation and relationship to the union which is part of the sectoral agreement. The CFA stated very clearly in its case on Greece that abolition of the principle of favourability constitutes a violation of the principles of freedom of association:

  ILO Representation (Art 24), France-Co 87, C Nos 87, 98, 11 and 158, ILO (6 November 2007).   See ibid. 24   See ibid, para 61. 25   See CJEU C-385/05 CGT and Others v France [2007] I ECR-611. 26   See Schulten and Müller, above (n 16) 197. 22 23

252  Niklas Bruun In this regard, the Committee notes the recent measures taken to promote special firm-level agreements which shall prevail in case of concurrent implementation of sectoral or occupational agreements. It further observes that, with the annulment of any extension effect of higher-level agreements, the only potential conflict that could arise between collective agreements is in the situation where an employer is actually directly bound by the higher-level agreement due to his or her voluntary membership in the employers’ organization concerned. While taking due note of the Government’s indication that the abolition of the favourability principle in this context supports collective bargaining at firm level for the regulation of pay and working conditions under the special financial conditions of the individual enterprise, the Committee considers that legislation should not constitute an obstacle for collective bargaining at industry level [see Digest, op cit, para 990] and signals its concern that the concordance of all the above measures may severely impede bargaining at a higher level. In any event, the Committee, recalling that meaningful collective bargaining is based on the premise that all represented parties are bound by voluntarily agreed provisions, urges the Government to ensure, as indicated in its reply, the statutory enforceability of every collective agreement among those represented by the contracting parties. The Committee underlines that the elaboration of procedures systematically favouring decentralized bargaining of exclusionary provisions that are less favourable than the provisions at a higher level can lead to a global destabilization of the collective bargaining machinery and of workers’ and employers’ organizations and constitutes in this regard a weakening of freedom of association and collective bargaining contrary to the principles of Conventions Nos 87 and 98.27

Likewise, the development in Greece and the 2012 reform in Spain meant a radical shift in policy. Before 2012 the defence of a multi-level bargaining system in which sectoral collective agreements monitor the process of decentralisation was a strategy shared by the trade unions and employers’ organisations to deal with the risks posed by decentralisation. However, the 2012 reform not only enhances the regulatory capacity of company-level agreements, but also passes more regulatory power to employers while reducing the regulatory capacity of sectoral agreements.28 In the case of Italy and Portugal the decentralisation of collective bargaining is also strongly encouraged, but there are still some restrictions and control for the parties in the sectoral collective agreement if a local agreement is made in which the favourability principle is not respected.29 As part of the process of decentralisation in connection with the abolition of the favourability principle there is also a trend clearly evident in Greece, Portugal and Spain towards facilitating the conditions for non-union employee representatives to conclude collective agreements, in particular in small and non-unionised companies.30 It is therefore important to note that the CFA has pointed out that the Workers’ Representatives Convention 135 (1971) and the Collective   CFA, Report No 365, November 2012, Case No 2820 (Greece) para 997.   O Molina and F Miguelez, ‘From negotiation to imposition: Social dialogue in austerity times in Spain. Governance and Tripartism Department’ ILO Working Paper 2013/51. 29   See ibid. 30   See Schulten and Müller, above (n 16) 198. 27 28



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Bargaining Convention 154 (1981) in particular, contain explicit provisions guaranteeing that, where there exist in the same undertaking both trade union representatives and elected representatives, appropriate measures are to be taken to ensure that the existence of elected representatives is not used to undermine the position of the trade unions concerned.31

The starting point for the CFA and for the ILO instruments regulating collective bargaining has clearly been that collective bargaining and the conclusion of collective agreements must remain the exclusive prerogative of trade unions, and that workers’ representatives duly elected by employees and authorised by them engage in collective bargaining with the employer and conclude collective agreements only if there are no trade unions present at the enterprise. iv  The So-Called ‘After-Effect’ Abolished or Reduced by Law It has been a general feature in the crisis policy of the Troika that the so-called ‘after-effect’ of collective agreements should be limited. Traditionally the ‘aftereffect’ has been an essential part of the collective bargaining systems in most European countries. Such a rule normally prescribes that the terms and conditions in the collective agreement should apply also after expiry until the entering into force of a new agreement. The purpose of such a regulatory regime has been, on the one hand, to avoid disputes and individual claims during a period of negotiation on the new agreement and on the other to protect, in the framework of fair and bona fide collective negotiations, the standards of pay and conditions of work included in the previous collective agreement (the so-called ‘grace’ period). Traditionally, the discussion during such a period has been about how much wages should increase. In the context of the economic crisis this legal regime has been regarded as an obstacle to wage decreases, which explains why the Troika has targeted legislation providing for the ‘after-effect’ of collective agreements. The result of this was that in Greece the prescribed length of the ‘after-effect’ was shortened from six to three months, in Spain the maximum period of such an ‘after-effect’ was reduced to one year and in Portugal the MoU contains a clause requiring the shortening of the ‘aftereffect’. In the CFA case on Greece (Case No 2820) the Committee was also asked to address the shortening of the ‘after-effect’ of the collective agreement. The CFA did not as such consider this to be a ‘violation of the principle of free collective bargaining’, but it did observe that it comes in an overall context in which imposed decentralisation and weakening of the broader framework of collective bargaining are likely to leave workers with no minimum safety net for their terms and conditions of work, even beyond the wages issue.32  CFA, Digest, above (n 13) para 946.   CFA, Report No 365, November 2012, Case No 2820 (Greece) para 996.

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254  Niklas Bruun v  Restrictions on Existing Extension-Mechanisms (Erga Omnes) In several countries measures have been taken to intervene in existing law-based collective agreement extension (erga omnes) mechanisms. Such mechanisms are common in many European countries and they typically extend the effect of collective agreements to non-organised employers in the sector concerned in order to achieve full coverage of collective agreements. This has been a tool for the legislator to promote the collective bargaining system and link a minimum sectoral wage level to collective bargaining. The extension system can in many cases function as a means of setting minimum wages and can thereby reduce the need for other mechanisms in this regard. By introducing restrictions to extension, the coverage and impact of collective bargaining can be seriously affected. In fact, the Troika has in several cases requested restrictions on the criteria applied for extending collective agreements. Greece has suspended extension procedures through which agreements concluded between one or more employer organisations and trade unions was made binding for an entire sector or region. In Portugal, for example, until recently almost all important industry-level collective agreements were extended to the whole industry on a quasi-automatic basis. Under pressure from the Troika, Portugal has now raised the barriers to extension, so that in future only a very small number of collective agreements are likely to be extended. Initially, Portugal’s extension procedures were suspended, but later the government introduced a reform according to which signing parties must represent at least 50 per cent of the workers in the sector to justify an extension procedure. Similar changes were introduced in Romania and Hungary.33 In the ILO system there is no detailed Convention that addresses the issue of extension. The ILO Conventions define the general principles regarding the freedom of association and collective bargaining and also give a framework in which the operation of extension of collective bargaining must operate. Extension of collective agreements beyond the members of the organisations of employers and trade unions that are parties to the agreements aims to secure the widespread application of collectively determined wages, hours and working conditions. It means that employers not belonging to an employers’ association that has signed a collective agreement have to apply the minimum standards prescribed by that agreement. Such an obligation necessarily implies some level of interference with the employers’ negative freedom of association since the effects of the agreement are extended to the non-organised employer. On the other hand, an extension mechanism might encourage and promote the full development and utilisation of collective bargaining between employers or employers’ organisations and workers’ organisations as prescribed in Article 4 of ILO Convention 98, although this Article explicitly mentions voluntary negotiations. 33  See C Hermann, ‘Crisis, structural reform and the dismantling of the European Social Model(s)’ Working Paper, Institute for International Political Economy Berlin 2013/26, available at: Econstror. hdl.handle.net/10419/83958.



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In the ILO surveillance bodies the extension has in principle been accepted since it is justified by overriding public interests and also does not – at least when it functions properly – interfere in the substance of freedom of association. It is rather comparable to a situation in which the legislator sets certain minimum standards in law in order to protect workers. The CFA has, however, drawn up certain limits to such a system. It has stressed that the extension of an agreement to an entire sector contrary to the views of the organisation representing most of the workers in the category covered by the extended agreement is liable to limit the right to free collective bargaining by that majority organisation.34 It has also stressed that any extension of collective agreements should take place subject to tripartite analysis of the consequences it would have on the sector to which it is applied.35 ILO Convention 144 also clearly defines the term ‘representative organisations’ as ‘the most representative organisations of employers and workers enjoying the right of freedom of association’ (Article 1). The ILO Collective Agreements Recommendation (1951) contains in Article 5 certain provisions on the extension of collective agreements: 5. (1) Where appropriate, having regard to established collective bargaining practice, measures to be determined by national laws or regulations and suited to the conditions of each country, should be taken to extend the application of all or certain stipulations of a collective agreement to all the employers and workers included within the industrial and territorial scope of the agreement. (2) National laws or regulations may make the extension of a collective agreement subject to the following, among other, conditions:

(a) that the collective agreement already covers a number of the employers and workers concerned which is, in the opinion of the competent authority, sufficiently representative; (b) that, as a general rule, the request for extension of the agreement shall be made by one or more organisations of workers or employers who are parties to the agreement; (c) that, prior to the extension of the agreement, the employers and workers to whom the agreement would be made applicable by its extension should be given an opportunity to submit their observations.

These criteria are only options and the recommendation emphasises that an extension procedure is compatible with the principles of freedom of association, but also that the state can prescribe certain conditions for this kind of procedure without going beyond acceptable state intervention in the labour market. The recommendation, however, does not impose any limits as such on national extension procedures. Certain limits can, however, be derived from Conventions 87, 98 and 144, as explained above.   See CFA, Digest, above (n 13) para 1053.   ibid, para 1050.

34 35

256  Niklas Bruun In accordance with its earlier practice the CFA only noted in Greece (case 2820) that, regarding the suspension of the extension authority of collective agreements, while there is no duty to extend agreements from the perspective of freedom of association principles, any extension that might take place should be subject to tripartite analysis of the consequences it would have on the sector to which it is applied. The Committee therefore only expressed its expectations that in the overall discussions of the most appropriate measures to be taken under the current circumstances in respect of the broader framework for collective bargaining, the government and the social partners will fully consider the various impacts on social and economic policy that may be brought about by extension.36 There is, however, clear evidence from at least Portugal and Spain that the restrictions on extension have in fact had a dramatic impact on the coverage on collective agreements. The number of workers covered by collective agreements in 2012 was only 327,662: 26.5 per cent of the number covered in 2011. This was the result not only of the decrease in collective agreements, but also of the government’s suspension of agreement extensions in 2012. This dramatic decline in 2012 reflected the employers’ reluctance to negotiate, particularly at sectoral level. The suspension by the State of collective agreement extension in 2011 and in 2012 played a key role in the refusal of employer associations to sign agreements. Earlier organised employers could rely on the expectation that non-organised employer would have to apply the agreement after the extension of its scope of application. Now employers’ associations at the branch level may have feared that the non-extension of agreements would create more favourable business conditions for employers not bound by any collective agreement and so increase competition in the respective sectors. In Portugal, the extension of collective agreements has played a major role in giving a majority of workers the benefit of collective agreement regulations. In 2012, only 12 extension ordinances were published, compared with 2008 when 137 were adopted.37 The strong evidence that the restrictions on the extension system of collective agreements in Portugal actually are undermining the whole collective bargaining system – and also voluntary bargaining – also means that there is an obligation for Portugal under Article 4 of ILO Convention 98 to address this issue in order to restore and further develop a well-functioning bargaining system. More generally, the conclusion here is that the restrictions on the extension of collective agreements in the context of other measures undertaking to weaken collective bargaining might be a violation of Convention 98.

  CFA, Report No 365, November 2012, Case No 2820 (Greece) para 999.   See ‘Dramatic decline in collective agreements and worker coverage’ 23 April 2013, Eironline, available at: www.eurofound.europa.eu/eiro/2013/02 aeticles/pt1302029i.htm. 36 37



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vi  Institutional Permanent Intervention in the Structural Framework for Collective Bargaining The most serious violations of the freedom of association are when fundamental structures or institutions for collective bargaining are demolished or disturbed. We find several examples of such measures affecting the structure and heart of collective bargaining. These measures are having an impact on the institutional framework of collective bargaining and social dialogue which a pay freeze or wage reduction do not normally have; they also constitute grave violations of the principles of freedom of association. It is not possible here to try to comprehensively map the different measures which can be labelled structural intervention in collective bargaining. We will only discuss a few examples, some of them clearly designed to get rid of multiemployer bargaining institutions. In its CFA Greece Case No 2820 the Greek General Confederation of Labour argued that the state party had interfered with and obstructed the work and authority of the independent arbitrator by additionally restricting the scope of rulings to disputes on basic wage terms and, in particular, by actually forbidding arbitrators, retrospectively from the beginning of 2010, to grant any wage increase for 2010 and the first half of 2011. For the period between 1 July 2011 and 31 December 2012, the scope of arbitration awards allowed only increases limited to the base annual rate of European inflation and the law stipulated that failing to do so would render the arbitration award invalid and without any legal effect, while the same obligation is imposed on mediators. Additionally, the reform of the labour arbitration body, the Organisation for Mediation and Arbitration (OMED), included the ipso jure expiry of its current body of mediators’/arbitrators’ mandate on 30 March 2011 at which date they were all to be replaced, regardless of the pending cases under their responsibility. The GSEE further maintained that a new radical change was introduced in the procedures and in the content of mediation and arbitration services provided by OMED which drastically curtailed workers’ rights of access to an effective and fair resolution process for collective disputes when negotiating collective agreements. Together with a far-reaching weakening of the mediation process, the right of workers – and employers – to independent recourse to arbitration for the resolution of collective disputes related to collective agreements was abolished. Requests for arbitration were consequently allowed ‘only if both parties consent’. The scope of the arbitration award was restricted only to the basic monthly/ daily wage by an explicit prohibition to that effect imposed on arbitrators while ‘economic and financial considerations must be taken into account alongside legal considerations’, excluding social criteria. The Act went beyond the measures in the Memoranda, as it further stipulated: (a) that the arbitrator – when and if a case is taken to arbitration – is obliged to adapt his/her decision to the need to reduce unit labour costs by about 15 per cent during the programme period, as well as the competitiveness gap; (b) the arbitrator was not allowed to include in

258  Niklas Bruun the arbitration award the ‘retainability clause’ of the other issues of the preceding collective agreement; and (c) all the cases pending at the arbitration stage at the time Law 4046/2012 was published (14 February 2012) were compulsorily closed/ archived, in sharp contrast with previous legislation which covered the entire procedure and recognised the right of both parties to have independent recourse to arbitration in case one of the parties opposed the procedure of mediation. All arbitration awards delivered during 2011 by the independent arbitrators of the new elected OMED’s arbitrators body had included the ‘retainability clause’ justifying this decision with reference to the Greek Constitution. At the same time: (i) the obligation of bona fide attendance in the previous stage of mediation had already been lifted with Law 3899/2010 by suppressing the obligation to accept the mediator’s proposal before resorting to arbitration; and (ii) employers will have no interest in seeking mediation or arbitration since the new legal provisions eased the renunciation of the collective agreement which was hitherto binding. Employers’ bona fide participation in a new round of collective bargaining was discouraged as they could opt to stall negotiations until the expiry of the three-month ‘grace period’ of the binding force of the collective agreement, with a view to capitalising on the depletion of wages and the elimination of workers’ rights by law. The CFA dealt with these arguments and took note of the numerous allegations related to the modifications to the functioning and constitution of OMED. As regards the amendments to the law that now only permits recourse to binding arbitration when both parties agree, the Committee recognised that this measure was taken in an effort to align the law and practice with its principles relating to compulsory arbitration and did not consider this measure to be in violation of freedom of association principles. As regards the additional restrictions on the arbitrator’s mandate, the Committee considered as a general rule that arbitrators should be free to make a determination on voluntarily requested arbitration without government interference. Furthermore, the CFA argued: Observing that these restrictions were introduced within the framework of the proposed stabilization programme, the Committee expects that these restrictions will be regularly reviewed by the social partners with a view to ensuring their elimination at the earliest possible moment. Moreover, the Committee requests the Government, in consultation with the workers’ and employers’ organizations to review without delay the impact on basic minimum standards other than wages of the elimination of the arbitrator’s authority to uphold retainability clauses in collective agreements so that these elements may further inform the review of the overall labour relations system.

The changes made in Greece regarding the arbitration system have also weakened the enforcement of freedom of association and workers’ right to collective bargaining.38 The elimination of the unilateral resort to arbitration for the trade 38  See European Parliament, Directorate-General for Internal Policies, Policy Department A, Employment and Social Affairs, S Kaltsouni, ‘Country Report: Greece’ in E Canetta, S Kaltsouni and N Busby, Enforcement of Fundamental Workers’ Rights (September 2012) 103.



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unions means ‘that even if one party refuses, in bad faith, to negotiate collectively, the other party cannot resort to arbitration unilaterally’, which renders the right ineffective. This is the case although Article 23 of the Constitution clearly provides for the possibility of using the services of arbitrators in case of an impasse in negotiations. It is thus argued that the goal of this new mechanism is to weaken the collective bargaining process and the role of collective agreements so that the conclusion of individual employment contracts prevails.39 Another GSEE accusation that the CFA dealt with concerned closing down two autonomous organisations crucial to trade union social work, funding, and workers’ housing the Workers’ Housing Organization (OEK) and the Workers’ Social Fund (OEE–Ergatiki Estia). According to the relevant Troika MoU they fall into the category of ‘non-priority social expenditures’ and ‘small earmarked funds’, which should be closed down by ‘legislation enacted with a transition period not to exceed six months’. According to the GSEE, this requirement had caused indignation as both bodies provided an indispensable social function and did not burden the state budget. The OEK and the OEE were autonomous organisations funded by workers’ and employers’ contributions. Their mandate was directly linked to vital aspects of living, such as housing, family welfare and cultural and recreational activities for workers. Their activities had a highly developmental impact as they concerned important sectors of the real economy, such as tourism and construction. Both organisations were governed transparently by an administrative board in which workers and employers were equally represented and were supervised by the Ministry of Labour and Social Security, which also appointed the chair of the board. The OEE–Ergatiki Estia had, since 1937, provided vital social services to workers and their families, including childcare, summer camps for children, recreational and cultural services, sports and libraries. The operation of the OEE, through the implementation of its statutory objective to support collective organisation and action, also ensured minimum finance for trade unions from OEE resources – determined by objective and fixed criteria – which were allocated to support minimum trade union operating needs. The OEE was also the main source of OMED financing, enabling the organisation to preserve its autonomy vis-a-vis the state in providing independent mediation and arbitration services for the resolution of collective disputes. According to the GSEE, the abolition of the OEE would have a disastrous impact on trade unions as the ‘indispensable’ staff they employed would face dismissal. The GSEE further refers to the important social services – such as nurseries and recreational programmes – which would close as a result. Similarly, the OEK had catered for workers’ housing needs and provided affordable first homes, favourable loan terms, repairs to old housing units, as well as first home rent subsidies for low-income workers since 1954. The  ibid.

39

260  Niklas Bruun GSEE expressed its indignation at the fact that in a period in which the welfare state was being demolished and nearly 30 per cent of the population had fallen below the poverty line, the services of two crucial organisations were abolished through their ‘downgrading’ by the Memoranda as ‘non-priority social expenditure’. The contribution rate to these two organisations set by free collective bargaining constituted according to GSEE a core element of the NGCA and had never been questioned by any of the contracting parties. The abolition of the two organisations thus constituted blatant interference by the state. The CFA took a very clear position on this intervention in the institutional framework of social dialogue. Regarding the closure of the OEK and the OEE, the CFA noted the complainants’ allegation that these bodies were crucial to trade union social work, funding and workers’ housing and that they provided an indispensable social function and did not burden the state budget. The Committee further noted with concern that one of the functions of the OEE was to secure minimum financing for trade unions in order to support their operating needs and that it had been the main source of OMED financing, enabling it to preserve its autonomy vis-a-vis the state to provide independent mediation and arbitration services for the resolution of collective labour disputes. The CFA asked the government to provide detailed observations on this matter, including indications of measures taken to ensure that the closing of the OEE in particular had not led to grave interference in the functioning of the GSEE or of OMED. In Ireland, the Competition Authority had restricted the effects of certain collective agreements. The Committee of Experts had examined a decision by the Competition Authority that the provisions of the Competition Act 2002 overruled the provisions of the Industrial Relations Act.40 This Authority had declared unlawful a collective agreement between Equity/SITP and the Institute of Advertising Practitioners that fixes rates of pay and conditions of employment for workers in radio, television, cinema and the visual arts. The Irish Congress of Trade Unions (ICTU) argued that this constituted a violation of Convention 98. The Committee of Experts had noted the government’s indication that, during the course of the social partnership talks in 2008, it had committed itself to introducing legislation amending section 4 of the Competition Act to the effect that certain categories of vulnerable workers – formerly or currently covered by collective agreements – when engaging in collective bargaining would be excluded from the section 4 prohibition. According to the government, this commitment took into account that there would be a negligible negative impact on the economy or on the level of competition and gave consideration to the specific attributes and nature of the work involved, subject to consistency with 40   Observation (CEACR) – adopted 2012, published 102nd ILC session (2013), Right to Organise and Collective Bargaining Convention, 1949 (No 98) on Ireland.



Legal and Judicial Avenues: The ILO  261

EU competition rules. Three categories of workers were proposed to be covered by the exclusion: freelance journalists, session musicians and voice-over actors. The government indicated that since the social partnership talks had taken place, the Programme of Financial Support for Ireland has been agreed with the Troika and the authorities had committed themselves to ensuring that no further exemptions to the competition law framework would be granted unless they were entirely consistent with the goals of the EU/IMF Programme and the needs of the economy. The government indicated that this commitment required further consideration in the context of the EU/IMF Programme. The Committee of Experts asked the government to pursue its review of the Act with the social partners in accordance with its previous commitment and to provide information on progress made in this regard. In Hungary, the main forum for tripartite social dialogue at national level – the National Council for the Reconciliation of Interests (OET) was established in 1988 in the context of the historical negotiated transition to democracy in Hungary, in which both the ‘old’ and ‘new’ trade union movements participated.41 This Council has played a sometimes contested but important role in the adoption of labour laws in Hungary. In May 2011, the government announced that a new Act on social dialogue would abolish the OET and a new forum – the National Economic and Social Council (NGTT) – was established. Social partners, NGOs, churches and academics are members of this new, purely consultative body.42 IV PROCEDURE

There are primarily two ways in which the ILO exercises its surveillance over its member states regarding their obligations on collective labour rights. The ordinary surveillance procedure involves regular reporting, in which state parties report to the ILO on how they have implemented the Conventions they have ratified.43 The tripartite structure of the ILO is reflected in this process by allowing national trade union and employer organisations to submit their observations regarding the state reports. The evaluation of these reports is made with the help of the Committee of Experts on the Application of Conventions and Recommendations (CEACR or Committee of Experts) within the ILO. This Committee assists the ILO Governing Body and the ILO Conference by preparing an extensive evaluation of the implementation of single Conventions

41   M Keune, ‘Unions and Democracy in Europe: Background, Challenges and Agenda’ DISC Working Paper Series 2008/5, available at: www.disc-ceu.org. 42   See A Kun, ‘Country Report: Hungary’ in E Canetta, S Kaltsouni and N Busby Enforcement of Fundamental Workers’ Rights, above (n 38) 147. 43   See Articles 22–23 of the ILO Constitution, which define the member states’ obligation to make an annual report to the ILO.

262  Niklas Bruun by different state parties.44 Its members include independent academic experts as well as former or current judges from all over the world. In addition to this ordinary procedure there are several special procedures available after complaints from member states and trade unions/employers organisations. Any complaints concerning collective labour rights that are directed against single states can be handled by the CFA45, which is a tripartite body under the Governing Body46 or introduced by Delegates of the ILO Conference and through the Inquiry procedure (Article 26 of the Constitution of the ILO).47 Representations under Articles 24 and 25 of the ILO Constitution dealing with freedom of association are normally entrusted to the CFA. Such representations entail that a member state has failed to secure in any respect the effective observation within its jurisdiction of any Convention to which it is a party. Complaints regarding non-compliance with the freedom of association Conventions must be made by organisations of workers or employers or by governments. Allegations are receivable only if submitted by a national organisation directly interested in the matter, by international organisations of employers or workers having consultative status within the ILO or by other international organisations of employers or workers where the allegations relate to matters directly affecting their affiliated organisations. Such complaints may be presented whether or not the country concerned has ratified the freedom of association Conventions. The CFA has full freedom to decide whether an organisation may be deemed to be an employers’ or workers’ organisation, within the meaning of the ILO Constitution, and it does not consider as inadmissible complaints emanating from trade union organisations in exile or from organisations that have been dissolved. There are very limited thresholds for filing a complaint to the CFA. It can be done by any national organisation (both sectoral and local); there is no requirement concerning exhaustion of domestic remedies; and the complainant does not have to be represented by legal counsel. Complaints must, however, be presented in writing and duly signed by a representative of a body entitled to present them. Although the formal requirements are fairly liberal, for a successful complaint it is of course crucial to use professional help, if possible, and to establish the facts of the case at national level in 44   The tripartite Conference Committee on the Application of Standards examines the report by the Committee of Experts before adoption. 45  See the outline for ‘Special procedures for the examination in the International Labour Organization of complaints alleging violations of freedom of association, Annex 1’, available at: www.ilo.org/dyn/normlex/en/f?p =NORMLEXPUB:62:7172555657087711::NO:62:P62_LIST_ ENTRIE_ID:2565060:NO. 46   The CFA was established in 1951 as a tripartite body comprising members of the Governing Body and has been chaired since 1978 by an independent. The CFA examines complaints containing allegations of violations of the Conventions on freedom of association regardless of whether the countries concerned have ratified those instruments. The Committee on the Freedom of Association systematically examines the substance of the cases submitted to it and presents consensus conclusions to the Governing Body, recommending, where appropriate, that it draws the attention of the government concerned to any violations that have taken place and to recommendations made with a view to settling the difficulties raised in the complaint. 47   Complaints made under Art 26 of the Constitution of the ILO.



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a comprehensive way before resorting to the ILO. Since the handling of cases within the CFA is exclusively based on written material and no witnesses can be heard, the relevance and reliability of the submissions made are of utmost importance for the final outcomes. Under these procedures a fairly comprehensive practice soon encompassing more than 3000 cases has developed regarding the interpretation of Conventions 87 and 98 in particular, but also regarding Conventions 151 and 154.48 This case law has formed the primary source of this chapter. V CONCLUSIONS

During the years of the crisis, a radical and fundamental paradigm shift has taken place with regard to EU labour market policy. Since the Second World War, the EU has supported and promoted collective bargaining in the spirit of social justice and peace. The EU has helped to build national institutions for social dialogue and collective bargaining in countries emerging from right-wing dictatorships, such as Greece, Portugal and Spain, as well as in the central and eastern European states that have developed democracy in the aftermath of the fall of the Berlin Wall and the Soviet Union. Collective bargaining was also generally regarded as an important tool in building the welfare state and in fighting political extremism. At national level since the 1970s the state has, in many respects, taken an active role in enhancing the dynamics of collective labour relations. The (western) European states have adopted a promotional role, and have in many ways supported collective bargaining or cooperation between the social partners at various levels.49 Also at the EU level the approach to collective bargaining was, at least until the enlargement of 2004, marked by respect for collective bargaining at national level, as well as by efforts to promote social dialogue at EU level. The new austerity policy in the context of the financial crisis has implemented a u-turn or complete shift in policy. Collective bargaining is now seen as an obstacle to a restrictive wage policy and the general prevailing policy aim is to dismantle collective bargaining and to weaken trade unions. The results of the austerity policy so far, however, are anything but convincing. The leading IMF economists are also fairly critical of the policy conducted and clearly admit that the effects of various restrictions on collective bargaining are very ambiguous and the cross-country evidence fairly mixed.50 48   See ILO, International Labour Conference, 101st Session, 2012, ‘General Survey on the fundamental Conventions concerning rights at work in light of the ILO Declaration on Social Justice for a Fair Globalization 2008’ Report III (Part 1B) (Geneva, ILO, 2012); Digest, above (n 13). 49   See Bruun, above (n 2) 5. 50   See O Blanchard, F Jaumotte and P Loungani, Labour Market Policies and IMF Advice in Advanced Economies during the Great Recession. IMF discussion note, March 2013, SDN/13/02, 11–12.

264  Niklas Bruun There are no reasons for declaring collective bargaining and freedom of association obsolete; rather we believe the opposite: institutions that can promote social justice and inclusion of marginalised groups into society will be urgently needed in the years to come. The autonomy of the social partners, and the outcome of collective bargaining, should be fully respected by all EU and national institutions.51 One important means of retaining respect for the fundamental principles of freedom of association is to actively use the easily accessible and user-friendly supervisory mechanisms of the ILO in a more active way than has been the case to date. It is also clear that the European Commission and European Parliament cannot continue to act as if they have no responsibility for the effects of their policies. In the context of EU responsibilities, the global standards laid down by the ILO are highly relevant and therefore should also be reinforced at national level in all member states.

51   See also N Countouris, and M Freedland, ‘Resocialising Europe – Looking Back and Thinking Forward’ in N Countouris, and M Freedland (eds), Resocialising Europe in a Time of Crisis (Cambridge, Cambridge University Press, 2013) 300.

10 Legal and Judicial International Avenues: The (Revised) European Social Charter KLAUS LÖRCHER1

INTRODUCTION

T

HE (REVISED) EUROPEAN Social Charter offers the most wideranging protection of fundamental social rights in Europe. Elaborated as a complement to the European Convention on Human Rights2 within the framework of the Council of Europe, its first version – the European Social Charter (ESC or the 1961 Charter) – was adopted in 1961.3 More than one generation later this version was updated in 1996 to become the Revised European Social Charter (RESC or the 1996 Charter),4 including all the rights of the 1961 Charter and of the Additional Protocol of 1988,5 as well as an important set of new rights.6 These two instruments now cover 43 of the 47 member states of this international organisation.7

  The views and opinions expressed in this chapter are those of the author.   See, for more details, Keith Ewing and John Hendy in this volume.   European Social Charter, 18 October 1961, CETS No 35; see L Samuel, ‘The Long Way Towards More Social Rights in Europe’ in W Däubler and R Zimmer (eds), Arbeitsvölkerrecht. FS für Klaus Lörcher (Baden-Baden, Nomos, 2013) 137 ff. 4   European Social Charter (revised) 3 May 1996, CETS No 163. The abbreviations ‘ESC’ or ‘1961 Charter’ and ‘RESC’ or ‘1996 Charter’ are used if there is a specific reference to one of the two instruments. Whenever the word ‘Charter’ is used the respective content applies to both Charters. 5   Additional Protocol of 1988 extending the social and economic rights of the 1961 Charter, 5 May 1988, CETS No 128. 6   See below (n 31) for more details on Art 24 RESC onwards. 7   Albania, Andorra, Armenia, Austria, Azerbaijan, Belgium, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, the Czech Republic, Denmark, Estonia, Finland, France, Georgia, Germany, Greece, Hungary, Iceland, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Republic of Moldova, Montenegro, the Netherlands, Norway, Poland, Portugal, Romania, Russian Federation, Serbia, Slovak Republic, Slovenia, Spain, Sweden, ‘the former Yugoslav Republic of Macedonia’, Turkey, Ukraine and the United Kingdom. Thus, the remaining European states that have not ratified the Charter are the four Council of Europe member states (Liechtenstein, Monaco, San Marino and Switzerland) and Belarus, a non-member state of the Council of Europe. 1 2 3

266  Klaus Lörcher In a procedural perspective, in addition to the reporting system supervising implementation of the respective provisions, a new system for ‘collective complaints’ was introduced in 1995 by the Collective Complaints Procedure Protocol (CCPP),8 ratified by 15 of the Contracting Parties9, among other things granting the right to the European Trade Union Confederation (ETUC),10 but also to national representative trade unions to file collective complaints against given countries. These two elements offer an exemplary opportunity for trade unions to protect social rights, in particular in times of crisis. Starting from the austerity measures that have reduced collective rights, as substantive background, and based on the relevant jurisprudence of the competent European Committee of Social Rights (ECSR) this chapter examines the legal framework and the existing case law on the relevant provisions, followed by a summary presentation of the related procedural issues. The ultimate purpose of this contribution is to allow the trade unions concerned to discern the extent to which a collective complaint could be successful. I  THE AUSTERITY MEASURES AS SUBSTANTIVE BACKGROUND

The ‘Memoranda of Understanding’ negotiated by, on the one hand, the so-called ‘Troika’ (consisting of representatives from the European Commission and the European Central Bank (ECB) [both EU institutions according to Article 13(1) of the Treaty on European Union (TEU)], as well as the International Monetary Fund (IMF)) and, on the other, the state concerned are the most striking examples of obligations to contract – sometimes drastically – the social acquis, as well as fundamental social rights. However, there are also other means, in particular within the framework of budgetary discipline, by which countries are being forced to go in the same direction of social reduction, if not outright dismantling. Many elements of social rights are being interfered with by the austerity measures. Within the framework of this chapter it is not possible to deal with all social rights.11 Therefore, it is important to look as closely as possible at the col8  Additional Protocol to the European Social Charter Providing for a System of Collective Complaints, Strasbourg, 9 November 1995, CETS No 158. 9  Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Finland, France, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Slovenia and Sweden. 10   The ETUC’s privileged role within the framework of the Charter is further characterised by its status of regular third party in the collective complaints procedure (in writing by submitting observations and orally by its presence in hearings in accordance with Art 7(2) and (4) CCPP, see above (n 8), and in the normal supervisory procedure as observer in the Governmental Committee, in accordance with Art 27(2) of the 1961 Charter, referred to in Article C of the 1996 Charter). 11   See, more generally, S Clauwaert and I Schömann, ‘The Protection of Fundamental Social Rights in Times of Crisis – A Trade Union Battlefield’ in W Däubler and R Zimmer (eds), Arbeitsvölkerrecht. FS für Klaus Lörcher (Baden-Baden, Nomos, 2013) 239 ff; see also M Schlachter, ‘The European Social Charter: Could it Contribute to a More Social Europe?’ in N Countouris and



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lective rights affected by the austerity measures.12 In particular the following changes have been made to industrial relations and collective bargaining systems:13 • A  bolition of/diminution of role of social dialogue institutions (see below III.A). • Decentralisation of collective bargaining to company level (see below III.B.ii). • D  eviation in pejus to higher level collective bargaining/statutory rules (see below III.B.iii). • Shifting trade union prerogatives to works councils or to workers’ representatives (see below III.B.iv). Before dealing with these measures in more detail (section III) it is important to clarify the substantive legal framework within which these measures have to be examined (section II). II  THE LEGAL FRAMEWORK

First, we must analyse the interpretative rules. They define the approach on the basis of which the legal situation has to be assessed (see II.A). Second, the relationship of EU law to the Charter has to be addressed because the problems arising from austerity measures are directly related to EU (or even international) law in the sense that the (majority of the) Troika (or even more concretely the Council of the EU in its respective decisions), is mainly responsible for defining the conditions of the Memoranda of Understanding to be concluded with the respective government (see II.B). Finally, we shall analyse whether crisis measures require a specific approach in the interpretation or application of the Charter (see II.C). A  Interpretative Framework Although the question of interpretation of the Charter constitutes more of a work in progress than a completed framework, certain elements have been defined and form a sound basis. However, other elements are still missing and should have a more substantial impact on the ECSR’s practice.

M Freedland (eds), Resocialising Europe in a Time of Crisis (Cambridge, Cambridge University Press) 105 ff. 12   See, eg, ILO, Report on the High Level Mission to Greece (Athens, 19–23 September 2011) paras 306 and 307. 13   S Clauwaert and I Schömann, ‘The crisis and national labour law reforms: A mapping exercise’ ETUI Working Paper 2012/04, 13, 14.

268  Klaus Lörcher i  Interpretation in Harmony with its Context, Object and Purpose: The Charter as a Human Rights Instrument First and foremost, the ECSR has stated that ‘the Charter must be interpreted so as to give life and meaning to fundamental social rights’, referring, among other things, to its well-known counterpart, the European Convention on Human Rights (ECHR or the Convention): 27. The Charter was envisaged as a human rights instrument to complement the European Convention on Human Rights. It is a living instrument dedicated to certain values which inspired it: dignity, autonomy, equality and solidarity. The rights guaranteed are not ends in themselves but they complete the rights enshrined in the European Convention o[n] Human Rights. 28. Indeed, according to the Vienna Declaration of 1993, all human rights are ‘universal, indivisible and interdependent and interrelated’ (para. 5). The Committee is therefore mindful of the complex interaction between both sets of rights. 29. Thus, the Charter must be interpreted so as to give life and meaning to fundamental social rights. It follows inter alia that restrictions on rights are to be read restrictively, ie understood in such a manner as to preserve intact the essence of the right and to achieve the overall purpose of the Charter. 14

More specifically, the Committee has stressed the ‘human rights’ character of the social rights enshrined in the Charter: 34. The Committee recalls that the Charter was envisaged as a human rights instrument to complement the European Convention on Human Rights. It is a living instrument dedicated to certain values which inspired it: dignity, autonomy, equality, solidarity (FIDH v France, Complaint No 14/2003, decision on the merits of 8 September 2004, § 27) and other generally recognised values. It must be interpreted so as to give life and meaning to fundamental social rights (FIDH v France, Complaint No 14/2003, decision on the merits of 8 September 2004, § 29) (author’s emphasis).15

On the basis of Article 31, § 1 of the Vienna Convention on the Law of Treaties (VCLT) (‘in the light of its object and purpose’), it has furthermore recognised the ‘teleological approach’ as an important interpretative tool: 36. The Committee considers that a teleological approach should be adopted when interpreting the Charter, ie it is necessary to seek the interpretation of the treaty that is the most appropriate in order to realise the aim and achieve the object of the treaty, not that which would restrict to the greatest possible degree the obligations undertaken by the Parties (OMCT v Ireland, Complaint No 18/2003, decision on the merits of 7 December 2004, § 60). It follows inter alia that restrictions on rights are to be read 14   Decision on the Merits, 8 September 2004, International Federation of Human Rights Leagues (FIDH) v France, Complaint No 14/2003. On the basis of this argument, the Committee has extended the personal scope of the Charter (para 1 of the Appendix to the Charter) beyond its (narrow) wording. This can probably be considered as expressing in the most significant way the application of these principles. 15   Decision on the Merits, 20 October 2009, Defence for Children International (DCI) v The Netherlands, Complaint No 47/2008, § 34.



The (Revised) European Social Charter  269 restrictively, ie understood in such a manner as to preserve intact the essence of the right and to achieve the overall purpose of the Charter (FIDH v France, Complaint No 14/2003, decision on the merits of 8 September 2004, §§ 27–29) (author’s emphasis). 16

Although these principles have been developed with regard to a number of different rights (especially the right to social protection,17 the right of children for protection and schooling and so on) it is against this background and in this spirit that all rights at work guaranteed by the Charter – in particular the ‘hard core’ trade union rights enshrined in Articles 5 and 6 of the Charter – have to be interpreted. ii  Interpretation in Harmony with Other Rules of International Law The relationship to international (social) standards is of the utmost importance for the interpretation process. a  General Principles of International (Human Rights) Law Generally speaking, Article 31, §3(c) VCLT requires an interpretation in harmony with other rules of international law. The Committee has explicitly recognised that it interprets the Charter in the light of the rules set out in the Vienna Convention on the Law of Treaties of 23 May 1969, among which its Article 31§3(c), which indicates that account is to be taken of ‘any relevant rules of international law applicable in the relations between the parties’. Indeed, the Charter cannot be interpreted in a vacuum. The Charter should so far as possible be interpreted in harmony with other rules of international law of which it forms part.18

It thus follows the line of interpretation developed by the European Court of Human Rights (ECtHR) and reconfirmed more recently by the ECtHR’s Grand Chamber: In interpreting and applying this provision, account must also be taken of any relevant rules and principles of international law applicable in relations between the Contracting Parties and the Convention should so far as possible be interpreted in harmony with other rules of international law of which it forms part (see Al-Adsani v the United Kingdom [GC], no 35763/97, § 55, ECHR 2001-XI; Demir and Baykara v Turkey [GC], no 34503/97, § 67, ECHR 2008; Saadi v the United Kingdom [GC], no 13229/03, § 62, ECHR 2008; Rantsev v Cyprus and Russia, no 25965/04, §§ 273–274, ECHR 2010 (extracts) (authors’ emphasis).19   ibid, § 36.   FIDH v France, above (n 14) § 32 (denial of ‘entitlement to medical assistance to foreign nationals, within the territory of a State Party, even if they are there illegally, is contrary to the Charter’). 18   DCI v The Netherlands, above (n 15) § 35. 19   ECtHR (GC) 19 October 2012, App nos 43370/04, 8252/05 and 18454/06, Catan and others v Moldova and Russia, § 136. 16 17

270  Klaus Lörcher In several Conclusions the ECSR has referred to International Labour Organization (ILO) case law.20 In accordance with this approach, in its most recent ‘Laval’ decision on the rights to collective bargaining and collective action the Committee emphasises the importance of international (human rights) and European standards: [T]he Committee notes that the right to collective bargaining and action receives constitutional recognition at national level in the vast majority of the Council of Europe’s member states, as well as in a significant number of binding legal instruments at the United Nations and EU level. In this respect, reference is made inter alia to Article 8 of the International Covenant on Economic, Social and Cultural Rights (see paragraph 37 above), the relevant provisions of the ILO Conventions Nos 87, 98 and 154 (see paragraph 38 above) as well as the EU Charter of Fundamental Rights, Directive 2006/123/ EC on services in the internal market (cf Article 1§7) and the Directive 2008/104/EC on temporary agency work – recital 19 (see paragraph 36 above) (author’s emphasis). 21

These references are all the more important because they appear to alter the somewhat hesitant approach to the collective rights of workers and trade unions. Further systematic implementation of this approach in the Committee’s case law would be desirable. It is for this reason that the two main sources which are of interest in respect of human rights and social rights will be analysed in more detail. b  The European Convention on Human Rights and the Case Law of the European Court of Human Rights At European level, the two human rights instruments (the ECHR and the Charter) exist in a close relationship. It will be recalled that the ECtHR has interpreted the human right of freedom of association (Article 11 ECHR)22 consistently by referring in particular to Articles 5 and 6 of the Charter.23 The complementary and mutually reinforcing relationship between the ECHR and the Charter24 has been 20   Conclusions XV-1 vol 2, Art 6, § 2 (Spain) concerning the CFA: ‘The Committee shares the concern of the ILO Committee’. 21   ECSR Decision 3 July 2013, Complaint No 85/2012, LO and TCO v Sweden, para 110 (hereinafter the ‘Laval’ decision). 22  See for the evaluation of austerity measures against the background of Art 11 ECHR; KD Ewing, ‘Austerity and the Importance of ILO and the ECHR for the Progressive Development of European Labour Law: A Case Study from Greece’ in W Däubler and R Zimmer (eds), Arbeitsvölkerrecht. FS für Klaus Lörcher (Baden-Baden, Nomos, 2013) 366. 23   In ECtHR (GC), 12 November 2008, App no 34503/97 Demir and Baykara, eg, § 45 (Art 5 of the Charter); § 49 (Art 6 of the Charter); § 77 (reference to ECSR case law); § 103 (Art 5 of the Charter in the reasoning); § 149 (reference to Art 6, § 2 of the Charter in the reasoning); in ECtHR, Enerji Yapi-Yol Sen v Turkey, App no 68959/01 (21 April 2009) § 24 (reference to the right to strike guaranteed in the Charter). 24   See for the references of the ECtHR to the Charters, eg, ECtHR (Research Division). The use of Council of Europe Treaties in the case law of the European Court of Human Rights (‘The European Social Charter of 1961, revised in 1996, is the treaty that has been the most referred to’, 1; see the specific references in nos 035 (ESC), 14 ff, and 163 (RESC) 35 ff).



The (Revised) European Social Charter  271

expressed by the Committee several times.25 Obviously, this specific relationship even leads the Committee to refer often to ECtHR judgments.26 c  ILO Standards and the Case Law of the Supervisory Bodies There is a specific and close link also to the ILO and its standards.27 It is expressed in various ways by the Charter itself and by the case law of the ECSR. By incorporating the ILO in the supervisory procedure of the Charter28 the latter recognises this relationship.29 Moreover, it should be recalled that many (if not most) of the provisions of the 196130 and 199631 Charters are based on or at least ‘inspired’ by ILO instruments in force at that time. Finally, the Committee has adopted the same approach as ILO supervisory bodies such as the Committee on Freedom of Association (CFA): The Committee considers, like the ILO Freedom of Association Committee, that the extension of collective agreements should take place subject to tripartite analysis of the consequences it would have on the sector to which it is applied (author’s emphasis).32

Whereas the relationship to the ECHR is linked mainly to the human rights character, the relationship to ILO standards strengthens also the social aspect.33   See in particular section II.A.i.   See, eg, DCI v The Netherlands, above (n 15) § 73 (‘As the Court has repeatedly stressed when interpreting Article 14 of the Convention, the Committee has held that the principle of equality, which is reflected in the prohibition of discrimination, means treating equals equally and unequals unequally (Autism-Europe v France, Complaint No 13/2002, decision on the merits of 4 November 2003, § 52). Thus, as acknowledged above, States Parties may treat persons lawfully or unlawfully present on their territories differently. However, in so doing, human dignity, which is a recognised fundamental value at the core of positive European human rights law, must be respected’). 27  See S Evju, ‘The European Social Charter and the International Labour Organisation – Interlinks Past and Present in W Däubler and R Zimmer (eds), Arbeitsvölkerrecht. FS für Klaus Lörcher (Baden-Baden, Nomos, 2013) 146. 28   See Art 26 of the 1961 Charter (Participation of the ILO), referred to in Art C of the RESC. 29   Expressed also by the obligation to notify the ILO Director General of any ratification, declaration and so on (see Arts 34–37 of the 1961 Charter and Article O of the 1996 Charter). 30   See H Wiebringhaus, ‘The European Social Charter and international labour standards’ (1961) 84 International Labour Review 354 and the 1958 ILO Tripartite Conference that led to the adoption of the text. 31   The clear references to ILO Conventions are included directly in the Explanatory Report (references in brackets refer to this report) as the source of ‘inspiration’: Article 8 – The right of employed women to protection of maternity (new) § 4a – ILO Convention 171 (§ 49); Article 24 – The right to protection in cases of termination of employment – ILO Convention No 158 (§ 84); Article 25 – The right of workers to the protection of their claims in the event of the insolvency of their employer – ILO Convention No 173 (§§ 91 and 95); Article 27 – The right of workers with family responsibilities to equal opportunities and equal treatment – ILO Convention No 156 (§§ 102 and 105); Article 28 – The right of workers’ representatives to protection in undertaking and facilities to be accorded to them – ILO Convention No 136 (§§ 106 and 108); Article 29 – The right to information and consultation in collective redundancy procedures (again) ILO Convention No 158 (§ 109). See also F Vandamme, ‘The Revision of the European Social Charter’ (1994) (5–6) 133 International Labour Review 635. 32   Digest of the Freedom of Association Committee of the Governing Body of the ILO, 5th (rev edn) 2006, para 1051. Interpretative statement on Art 6, § 2 (Conclusions XIX-3 and 2010). 33   For more details on ILO Conventions in respect of austerity measures see the chapter by Niklas Bruun in this volume. 25 26

272  Klaus Lörcher d  Further Pertinent International Material It is interesting to note that in practice the Committee not only refers to further international (law) instruments of the UN34 or of the World Health Organization (WHO),35 but also takes into account other relevant international documents issued by, for example, national human rights bodies. It appears to follow in this respect the approach used by the ECtHR, which often refers to material of nonbinding character (particularly coming from Council of Europe’s institutions such as Recommendations of the Committee of Ministers or the Parliamentary Assembly). An important further example is the Greek National Commission for Human Rights.36 e  Interim Conclusion Given the wide range of social human rights guaranteed by the Charter it is not surprising that many of them are seen in the context of other international standards. This is particularly true for ILO Conventions, on the one hand, and the ECHR, on the other. As already outlined, the Charter is to be interpreted in line with those international standards, as well as the respective case law of the competent bodies, thus providing a minimum level of protection.37 Therefore, nothing should and, indeed, nothing does prevent the Committee from going beyond this minimum level.38 Indeed, European standards should in principle be 34   See, eg, the several references to UN instruments and documents in the Decision on the merits, 28 June 2011, Centre on Housing Rights and Evictions (COHRE) v France, Complaint No 63/2010, §§ 16–18 (Art 2 of the United Nations Convention on the Elimination of all forms of Racial Discrimination of 21 December 1965; Art 11 of the United Nations International Covenant on Economic, Social and Cultural Rights of 16 December 1966, United Nations Committee on Economic, Social and Cultural Rights comments as to adequate housing and forced evictions). It is interesting to note, however, that the Committee was not satisfied with references to international obligations for demonstrating compliance with the Charter’s standards (see, eg: Conclusions XVII-2, Netherlands; Antilles, Art 20 RESC (Art 1 Protocol No 1): ‘In particular, it considered that the direct application of Article 14 of the European Convention on Human Rights and Article 26 of the International Covenant on Civil and Political Rights constituted an insufficient legal basis and that employment discrimination must be the subject of a more precise legal prohibition . . . wording of Article 7 of the Covenant differs too much from the Charter (Article 4, § 3 – right to equal pay for work of equal value) to be considered adequate for the purposes of Article 1 of the Protocol’). 35   eg, ‘World Health Organization’s Guidelines for drinking-water quality’ in Decision on the merits, 23 January 2013, International Federation of Human Rights Leagues (FIDH) v Greece, Complaint No 72/2011, §§ 42 and 143, for the purpose of interpreting Art 11 of the Charter. 36   See, as a recent example, the reference to the ‘NCHR [Greek National Commission for Human Rights] Recommendation: On the imperative need to reverse the sharp decline in civil liberties and social rights’ (8 December 2011) in the Decision on the Merits, 7 December 2012, Federation of Employed Pensioners of Greece (IKA–ETAM) v Greece, Complaint No 76/2012, §38. 37   Expressly recognised, eg, in Art 12, § 2 ESC (‘at least equal to that required for the ratification of International Labour Convention (No 102)’) and in particular in combination with § 3 (‘raise progressively’). This principle is even confirmed by the new Art 12, § 3 RESC referring to the higher standard of the European Code of Social Security. 38   See ‘the most favourable clause’ in Art 32 of the 1961 Charter and Article H of the 1996 Charter (Relations between the Charter and domestic law or international agreements).



The (Revised) European Social Charter  273

considered to guarantee a higher level of protection than international standards, which have to take into account different levels of development.39 iii  Interpretation in Harmony with Principles Specifically Related to the Charter According to Article 5 VCLT,40 the Council of Europe as an international organisation can develop and apply its own rules. Based on the Charter at least the following principles should additionally be applied. The Preamble refers to the aim of the Council of Europe to facilitate ‘economic and social progress, in particular by the maintenance and further realisation of human rights and fundamental freedoms’ (1st Recital). Moreover, the governments declare themselves ‘resolved to make every effort in common to improve the standard of living and to promote the social well-being of both their urban and rural populations by means of appropriate institutions and action’ (4th Recital). This general framework may be summarised as a principle obliging them to ‘social progress’. This principle of ‘social progress’ should directly imply the general prohibition of reducing existing rights. Therefore, the principle of non-regression should be acknowledged as a second Charter-related element. Moreover, particular attention is required in respect of the ‘effective exercise’ of the Charter’s rights at stake.41 Therefore the full implementation ‘in law and practice’ has to be ensured. B  Relationship to EU Law The austerity measures called for either in the Council’s Decisions or in the Memoranda of Understanding based on the requirements stemming mainly from the Commission and the ECB (and the IMF, outside the EU institutions) ask for clarification of the relationship between EU obligations and the Charter.42

  See, eg, Art 19(3) ILO Constitution (‘imperfect development of industrial organization’).   Art 5 – Treaties constituting international organisations and treaties adopted within an international organization: ‘The present Convention applies to any treaty which is the constituent instrument of an international organization and to any treaty adopted within an international organization without prejudice to any relevant rules of the organization’. 41   See the introductory words in nearly every Art of the Charter, in particular the two main Arts (6 and 19) at stake in this complaint (‘With the view to ensuring the effective exercise of the right’). In this respect, reference should also be made to Art A, § 4 of the Charter requiring a ‘system of labour inspection’, thus aimed at strengthening practical application. 42   See the extensive study by P Stangos, ‘Les rapports entre la Charte sociale européenne et le droit de l’Union européenne – Le rôle singulier du Comité Européen des Droits Sociaux et de sa jurisprudence’ (2013) 2 Cahiers droit européen 319 ff. 39 40

274  Klaus Lörcher i  Charter in Relation to EU Law In several decisions the Committee has had to deal with the relationship between the two systems. Indeed, in its ‘Introductory Observation on the Relationship between European Union Law and the European Social Charter’43 the Committee has stressed the autonomy of the Charter in relation to EU obligations in different respects and has rejected the idea of an – even rebuttable – presumption of conformity44 with the Charter merely on the ground of being in compliance with EU law.45 This approach was even strengthened in the Laval decision by the ECSR twofold. The Committee explicitly extended its competence to examine national situations even if they were directly based on judgments of the Court of Justice of the European Union (CJEU): The Committee considers that the same principle is applicable – mutatis mutandis – to national provisions based on preliminary rulings given by the CJEU on the basis of Article 267 of the Treaty on the functioning of the European Union, as that given with respect to the Laval case.46

Moreover the Committee confirms that it will carefully follow developments resulting from the gradual implementation of the reform of the functioning of the EU following the entry into force of the Treaty of Lisbon, including the Charter of Fundamental Rights.47

The very limited exemption to this general statement could, if ever, be envisaged only in the case of full recognition of the Charter’s rights in EU law.48 However, they have obviously not materialised. This is already clear in respect of the Laval judgment itself. Although the CJEU had mentioned (Article 6 of) the 1961 Charter in justifying the recognition of the right to strike as such, it had not taken it into account concerning the criteria of permissible restrictions nor had referred to any case law of the Committee. This situation has not changed even after the entry into force of the Lisbon Treaty (1 December 2009), including the various references to the Charters (see below II.B.ii). Although recognising the right to collective bargaining by referring, among other things,

43  Decision on the merits, 23 June 2010, Confédération générale du travail (CGT) v France, Complaint No 55/2009. 44  See for the ‘implicit’ reference to the Bosphorus judgment by the ECtHR (30 June 2005, Bosphorus Hava Yollari Tutizm ve Ticaret Anoniom Sirketi v Ireland, ECHR, 2005-VI); Stangos, above (n 42) 367, 370. 45   CGT v France, above (n 43) §§ 34, 35. 46   Laval decision, above (n 21) para 73. 47   ibid, para 74. 48   CGT v France, above (n 43) § 37 (‘It will review its assessment on a possible presumption of conformity as soon as it considers that factors which the Court has identified when pronouncing on such a presumption in respect of the Convention and which are currently missing insofar as the European Social Charter is concerned have materialised’), referred to in ECSR Laval decision, above (n 21) para 74; reference was also made to the Interpretative statement on Art 19, § 6 – Conclusions 2011, as well as to the Decision of 12 October 2004, Complaint No 16/2003, CGC v France, para 30.



The (Revised) European Social Charter  275

to the 1961 Charter49 it would appear that the CJEU has rarely made reference50 to the Charters.51 If at all, the Charter has been referred to in a very sporadic, incomplete and incoherent way and even less taken into account. There is nearly no realisation of the Charter’s rights in EU law. Summing up, the Committee is of the view that whenever it has to assess situations where states take into account or are bound by legal texts of the European Union, the Committee will examine on a case-by-case basis whether respect for the rights guaranteed by the Charter is ensured in domestic law.52

ii  EU Law in Relation to the Charter The EU (primary) legislative framework is substantially based on the Charter. This relationship is twofold. On the one hand, the references to the ESC are explicitly enshrined in primary law53 and in certain respects also in secondary law, such as social directives.54 On the other hand, there is a strong fundamental rights foundation. Indeed, because it is legally binding, interpretation of the EU Charter of Fundamental Rights (CFREU)55 has to be based on the respective Charters’ provisions. This is clearly expressed in the Preamble, which refers to the ‘Charters of the Council of Europe’. Moreover, the Explanations to the respective CFREU Articles ‘shall be interpreted in accordance with the general provisions in Title VII of the Charter governing its interpretation and application and with due regard to the explanations’ (Article 6(1)(3) TEU). This 49   CJEU Case C‑271/08 Commission v Germany (15 July 2010) § 37: ‘In that regard, it should be noted, first, that the right to bargain collectively . . . is recognised both by the provisions of various international instruments which the member states have cooperated in or signed, such as Article 6 of the European Social Charter, signed at Turin on 18 October 1961 and revised at Strasbourg on 3 May 1996’. 50   It would appear that there is only one further (see for the other, above (n 49)) reference to the Charter: ‘Moreover, the first paragraph of Article 136 EC, which defines the objectives with a view to which the Council may, in respect of the matters covered by Article 137 EC, implement, in accordance with Article 139(2) EC, agreements concluded between social partners at European Union level, refers to the European Social Charter signed in Turin on 18 October 1961, which includes at point 4 of Part I the right for all workers to a “fair remuneration sufficient for a decent standard of living for themselves and their families” among the objectives which the contracting parties have undertaken to achieve, in accordance with Article 20 in Part III of the Charter (Impact, paragraph 113)’. CJEU, Cases C-395/08 and C-396/08 Pettini ea (10 June 2010) § 31. 51  Advocates General have referred more extensively to the Charter; see as the last example: Opinion of Advocate General Trstenjak on 8 September 2011 in Case C-282/10 Dominguez, § 104 (the reference in § 102 is a quotation of an extract of the 5th Recital of the Preamble of the Charter of Fundamental Rights of the European Union) but the CJEU (24 January 2012) did not refer to those references. 52   CGT v France, above (n 43) § 38. 53  See 5th Recital of the TEU (‘Confirming their attachment to fundamental social rights as defined in the European Social Charter signed at Turin on 18 October 1961 and in the 1989 Community Charter of the Fundamental Social Rights of Workers’); Article 151(1) TFEU (‘having in mind fundamental social rights such as those set out in the European Social Charter signed at Turin on 18 October 1961 and in the 1989 Community Charter of the Fundamental Social Rights of Workers’). 54   See Stangos, above (n 42) 346. 55   Art 6(1)(1) TEU ‘shall have the same legal value as the Treaties’.

276  Klaus Lörcher statement has two consequences. As regards, first, the concrete provision of Article 28 CFREU the Explanations explicitly refer to Article 6 ESC.56 Second, the general interpretative approach in Article 53 CFREU contains a definition of the ‘level of protection’,57 which includes the minimum standard guaranteed by the ESC and the RESC (at least in respect of the provisions of the ESC) because all EU member states have ratified either the former or the latter. Moreover, it should be recalled that the EU Treaties refer to the Community Charter of Fundamental Rights of Workers (CCFRW) proclaimed in 1989 in the same way as the European Social Charter of 1961 in the Preamble of the TEU and in Article 151(1) of the Treaty on the Functioning of the European Union (TFEU).58 All these provisions require an interpretation of EU law in full conformity with the Charter.59 C  Specific Questions Arising in Relation to the Crisis Combating the crisis and its effects by reducing fundamental social rights appears to have been very common for a number of years now. However, this policy approach (demanded largely by the Troika) is coming more and more under the scrutiny of international supervisory bodies. Besides the ILO,60 the Charter and its Committee are in particular being confronted with an increasing number of problems.61 i  General Approach: The Crisis is not a Justification in itself for Reducing Social Rights For the Committee this is not a completely new challenge.62 Indeed, the ECSR has already concluded63 and reaffirmed it in its recent decision GENOP-DEI and ADEDY64 that 56  ‘This Article is based on Article 6 of the European Social Charter and’ (OJ C303/26, 14 December 2007). Stangos enumerates the nine references in the Explanations to Charter provisions, above (n 42) 343. 57   ‘Nothing in this Charter shall be interpreted as restricting or adversely affecting human rights and fundamental freedoms as recognised, in their respective fields of application, by Union law and international law and by international agreements to which the Union or all the mare party, including the European Convention for the Protection of Human Rights and Fundamental Freedoms, and by the member States’ constitutions’. 58   See above (n 53). 59   However, in order to incorporate the Charter as an indisputable part of EU law, the EU should adhere to it; see the references in Stangos, above (n 42) 341 ff. 60   See the chapter by Niklas Bruun in this volume. 61   See Clauwaert and Schömann, ‘The Protection of Fundamental Social Rights’, above (n 11). 62   See the references to previous case law in L Samuel, Fundamental Social Rights – Case Law of the European Social Charter, 2nd edn (Strasbourg, Council of Europe Publishing, 2002) 141–44 (‘Intervention of the state in collective bargaining’). 63   See, eg, Comment on the application of the Charter in the context of the global economic crisis, ECSR, General Introduction, Conclusions 2009, 12–13. 64   ECSR, Decision on the merits, 23 May 2012, GENOP-DEI and ADEDY v Greece, Complaint No 65/2011; see for an in-depth analysis of the two decisions (in this respect see also below, n 130)



The (Revised) European Social Charter  277 the economic crisis should not have as a consequence the reduction of the protection of the rights recognised by the Charter. Hence, the governments are bound to take all necessary steps to ensure that the rights of the Charter are effectively guaranteed at a period of time when beneficiaries need the protection most.65 In addition, doing away with such guarantees would not only force employees to shoulder an excessively large share of the consequences of the crisis but also accept pro-cyclical effects liable to make the crisis worse and to increase the burden on welfare systems, particularly social assistance, unless it was decided at the same time to stop fulfilling the obligations of the Charter in the area of social protection.66 These general principles . . . are taken into account in the assessments made by the Committee in the part concerning the alleged violation of the articles of the 1961 Charter.67

Besides this general approach it is important to note that there is a specific legal framework that requires, on a more concrete basis, an in-depth justification and examination of all restrictions in relation to social rights. In respect of social rights there is usually a distinction in the terminology between ‘restriction’ of a right and ‘regression’ or of a ‘fall-back’ to an already achieved level of a socalled dynamic (or progressive) right.68 As argued below, while there might be a difference in the terminology, there should not be difference in the substance. Thus, reduction of social rights with reference to the economic crisis must meet the test of specific justification regarding human rights restrictions. ii  Non-Regression Clause: Specific Justification Required The Charter is an instrument for social development. It is therefore a fundamental question to what extent it permits social regression.69 Article G, § 1 RESC (corresponding to Article 31,§ 1 ESC) requires specific justification of restrictions with regard to all rights guaranteed by the Charter. However, the Committee holds the view that this provision has no legal value on its own. It justifies this assessment by a reference to the ECHR.70 This Article would correspond to the second paragraph of Articles 8 to 11 of the European Convention C Deliyanni-Dimitrakou, ‘La Charte sociale européenne et les mesures d’austérité grecques: à propos décisions nos 65 et 66/2012 du Comité européen des droits sociaux fondamentaux’ (2013) 7–8 Revue du Droit du Travail 457. In its most recent ‘General Introduction’ to Conclusions 2013 and XX-2 the ECSR again refers to this case law. 65   ‘General Introduction’ to Conclusions XIX-2 (2009), above (n 64) para 16. 66   ibid, para 18. 67   ibid, para 19. 68   The first three paras in Art 6 of the Charter all refer to the obligation to ‘promote’, which characterises its dynamic nature; Schlachter, ‘The European Social Charter’ above (n 11), ‘The ECS’s dynamic dimension’ 111 ff. 69   See J Marguénaud and J Mouly, ‘Le Comité européen des droits sociaux face au principe de non-régression en temps de crise économique’ (2013) 4 Droit social 339ff. 70   IKA–ETAM v Greece, above (n 36) § 48: ‘However, the Committee recalls that Article 31 of the Charter cannot be directly invoked as such, but only provides a reference for the interpretation of the substantive rights provisions of the Charter, which are at stake in a given complaint (see also the decision on the admissibility of 23 May 2012 in the current complaint, §§ 6–7)’.

278  Klaus Lörcher on Human Rights. It therefore could not lead to a violation of the Charter as such.71 But this assumption does not sufficiently take account the wording of this provision. Comparing the wording of Article G, § 1 ESC with paragraphs 2 of Articles 8 to 11 ECHR demonstrates an important difference related to the mentioning of ‘effective’ realisation or exercise in Article 31, § 1 ESC (‘when effectively realised’, ‘effective exercise’)72 which does not appear in the aforementioned ECHR provisions. It means that whenever a right guaranteed by the Charter has once been ‘effectively realised’ (that is, also in cases where the national situation goes beyond the minimum standard required by the specific right at stake) any reduction needs specific justifications to show that this provision is satisfied. In any event, the austerity measures have to be justified against the background of the requirements of Article G, § 1 RESC. Without direct reference to, but in clear accordance with ECtHR jurisprudence on permissible restrictions, the Digest 2008 describes the conditions in general terms: (i) prescribed by law, . . . means by statutory law or any other text or case-law provided that the text is sufficiently clear, ie that satisfy the requirements of precision and foreseeability implied by the concept of ‘prescribed by law’; (ii) pursue a legitimate purpose, ie the protection of the rights and freedoms of others, of public interest, national security, public health or morals; and (iii) necessary in a democratic society for the pursuance of these purposes, ie the restriction has to be proportionate to the legitimate aim pursued: there must be a reasonable relationship of proportionality between the restriction on the right and the legitimate aim(s) pursued.73

This list contains strict conditions requiring, each time, an in-depth examination of permissible restrictions. This applies in particular when they were introduced in order to combat economic crisis. However, looking at the Committee’s assessments in its Conclusions it is rare that it analyses all three elements accurately. For example, it deals with some elements of the substance, such as ‘necessary in a democratic society’ (referring also to a ‘Government’s margin of appreciation’),74 71  Decision on the merits, 15 June 2005, Syndicat des Agrégés de l’Enseignement Supérieur (SAGES) v France, Complaint No 26/2004, § 31. 72   In English: ‘The rights and principles set forth in Part I when effectively realised, and their effective exercise as provided for in Part II, shall not be subject to any restrictions or limitations not specified in those parts, except such as are prescribed by law and are necessary in a democratic society for the protection of the rights and freedoms of others or for the protection of public interest, national security, public health, or morals’. In French: ‘Les droits et principes énoncés dans la partie I, lorsqu’ils seront effectivement mis en œuvre, et l’exercice effectif de ces droits et principes, tel qu’il est prévu dans la partie II, ne pourront faire l’objet de restrictions ou limitations non spécifiées dans les parties I et II, à l’exception de celles prescrites par la loi et qui sont nécessaires, dans une société démocratique, pour garantir le respect des droits et des libertés d’autrui ou pour protéger l’ordre public, la sécurité nationale, la santé publique ou les bonnes mœurs’. 73   Council of Europe (ed), Digest of the Case Law of the European Committee of Social Rights (1 September 2008) http://www.coe.int/t/dghl/monitoring/socialcharter/Digest/DigestSept2008_ en.pdf (Digest 2008), 177. 74   Conclusions XV-1, Iceland, Art 6, § 2.



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or it refers in a general way to the ‘limits set out in Article 31’75 of the 1961 Charter, or it requests that governments should justify the measures taken.76 Still lacking clear guidance77 it appears necessary to develop some of the conditions in more detail. a  Prescribed by Law? The requirements of precision and foreseeability will, in many cases, pose no problems. It is the very aim of most austerity measures that they be included in legislation in the clearest terms possible in order to allow the controlling bodies (such as the Troika) to easily assess whether their conditions have been fully met. Although still the first (important) step in the evaluation of the conformity of austerity measures the result in many cases will probably be that the measures have been ‘prescribed by law’. However, the two further conditions pose substantial problems and therefore have to be evaluated more in detail. b  Legitimate Aim? Economic recovery programmes often have two aims: first, a financial adjustment, in other words redressing the imbalances in public finances and reducing the external debt; and second, restoring competitiveness.78 Against this background, it has to be evaluated whether these aims are in conformity with Article G, § 1 RESC which defines the legitimate aims as follows: ‘for the protection of the rights and freedoms of others or for the protection of public interest, national security, public health, or morals’. At first, this list of these five grounds is exhaustive. Second, economic or financial aims are not mentioned in this list and can therefore not be considered as legitimate. Nevertheless, two aims mentioned in the list might be advanced for justifying restrictions. The first is the ‘public interest’. However, it does not appear possible to include economic or financial reasons in this. This is confirmed by the French version, which uses the term ‘l’ordre public’. The Committee is not very clear on this issue. Concerning the same country (Iceland), it has been fairly flexible in recognising state intervention in collective bargaining in a very summary manner, as justified under Article 31,§ 1 ESC (= Article G,§ 1 RESC) by referring, 75   Conclusions XIII-3, Norway, Art 6, § 2; Conclusions XIII-3, Portugal, Art 6, § 2; Conclusions XIII-1, Denmark, Art 6, § 2: ‘could not be of a kind authorised by Article 31 of the Charter’. 76   Conclusions XIII-3, Ireland, Art 6, § 2 ; Conclusions XIII-2, Malta, Art 6, § 2. 77   Also concerning the principle of strict interpretation of exceptions (see eg, Conclusions 2008, Azerbaijan, Art 20: ‘Such exceptions are however subject to strict interpretation’; Conclusions 2005 and XVII-2, Statement of interpretation on Art 11, § 5: ‘that any restrictions on this right must not be interpreted in such a way as to impede the effective exercise by these groups of the right to’). 78   See, eg, Memorandum of Understanding – Greece, Appendix III, paras II and III, particularly no 7.

280  Klaus Lörcher among other things, to ‘public interest’.79 On the other hand, it was very strict in rejecting the government’s argument based on ‘public interest’ in order to justify the restriction on the right not to join a trade union.80 In any event, measures taken for economic reasons cannot be considered to have been based on a legit­ imate aim. The second is the ‘protection of rights and freedoms of others’. It cannot be considered as justifying austerity measures by the state concerned. Indeed, neither ‘financial adjustments’ nor ‘restoring competitiveness’ can amount to fulfilling this condition because they are not rights or freedoms in the sense of the Charter (nor of the Convention). c  Necessary in a Democratic Society? If, nevertheless, the ECSR would recognise a ‘legitimate aim’, further examination requires an in-depth analysis of the justifications brought forward by the respective government concerning appropriateness and necessity. It is not possible to assess, within the framework of this chapter, all the possible arguments put forward by governments. However, it should be recalled that, at the level of individuals, the Committee has expressly excluded ‘losses sustained by individual employers’ as justifying restrictions to the right to strike81 or that restrictions aimed at protecting financial interests of third parties – such as consumers or clients – could be imposed in exceptional cases only.82 In general, it should be borne in mind that measures cannot be considered ‘necessary’ if alternatives are available. For example, it would have to be examined in great detail whether measures such as eliminating waste, inefficiency and fraud were available. If they had not been sufficiently taken into account and put into practice before reducing social rights in general or social benefits in particular, this situation would amount to a violation of the respective Article. Moreover, it is important to note that the ECSR introduced procedural requirements by criticising the fact that the government: 79   Conclusions XV-1, Iceland, Art 6, § 2: ‘For the reasons set out in detail in the Committee’s conclusion under Article 6 para 4, it considers that the intervention in collective bargaining resulting from the passing of the Seamen’s Wages and Terms Act, No 10/1998 on 27 March 1998 was not in breach of Article 6 para 2 taking into account Article 31 of the Charter. The Committee considers that the intervention falls within the Icelandic Government’s margin of appreciation when it comes to deciding what measures were necessary in the specific context in a democratic society for the protection of the rights and freedoms of others and for the protection of public interest’. The description of the facts is more extensive under Art 6, § 4, but the assessment, using exactly the same words as just quoted, does not contain any further legal argument. 80   Conclusions XV-1, Iceland, Art 5: ‘Providing these general conditions are met, an individual maybe obliged to become a member of an association in the public interest. The travaux preparatoires state specifically that this is a general term covering the items listed in Article 11 para 2 of the European Convention on Human Rights. The Committee underlines that the only restrictions to the right to organise, whether in its positive or negative aspects, authorised by the Charter are those provided for in Article 31’. 81   Conclusions XIV-1, Netherlands, Art 6, § 4, 554–58. 82   Conclusions XIII-1, Netherlands, Art 6, § 4, 157–58.



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• H  ad not conducted the minimum level of research and analysis into the effects of such far-reaching measures that is necessary to assess their full impact on vulnerable groups in society in a meaningful manner. • H  ad not discussed the available studies with the organisations concerned, despite the fact that they represent the interests of many of the groups most affected by the measures at issue.83 III  SPECIFIC COLLECTIVE LABOUR LAW PROVISIONS

One might assume that practically all rights enshrined in the Charter are concerned when austerity measures are introduced. Even though this might be true in many cases, the following analysis will concentrate on the most important of those rights, in particular those that have already been dealt with by the ECSR.84 In any event, it should be taken into account that not all states that have ratified either of the Charters are also bound by all provisions. In fact, the Charter offers the possibility of acceptance ‘à la carte’.85 For example, Greece has not accepted the relevant Articles 5 and 6.86 For trade unions, Articles 5 and 6 of the Charter – which contain the most important collective social rights – are crucial. Whereas Article 5 sets out the principles for freedom of association, Article 6 contains the main trade union (activity) rights: Article 6 – The right to bargain collectively With a view to ensuring the effective exercise of the right to bargain collectively, the Parties undertake: 1. to promote joint consultation between workers and employers; 2. to promote, where necessary and appropriate, machinery for voluntary negotiations between employers or employers’ organisations and workers’ organisations, with a view to the regulation of terms and conditions of employment by means of collective agreements; 3. to promote the establishment and use of appropriate machinery for conciliation and voluntary arbitration for the settlement of labour disputes; and recognise: 4. the right of workers and employers to collective action in cases of conflicts of interest, including the right to strike, subject to obligations that might arise out of collective agreements previously entered into.   IKA –ETAM v Greece, above (n 36) § 79.   See, more generally, the most recent study by M Schlachter, ‘Der Schutz der Vereinigungsfreiheit durch die Europäische Sozialcharta’ (2013) 3 Soziales Recht 77. 85   Art 20 ESC, Art A RESC. 86   Out of the 43 Council of Europe member states (ratification by the following four member states is still missing: Liechtenstein, Monaco, San Marino and Switzerland), the following have not accepted: Arts 5 and 6 (in total): Greece and Turkey; Art 6 (in total): Andorra; Art 6, § 4: Austria, Luxembourg and Poland. All other Contracting Parties to the Charter have thus accepted those two articles; concerning further relevant articles see IV.A.i, and in general: www.coe.int/t/dghl/ monitoring/socialcharter/Presentation/ProvisionsIndex_en.asp. 83 84

282  Klaus Lörcher In particular in times of crisis these guarantees are the basis that must be observed in order to allow trade unions to strive for the interests of their members and the whole workforce in general and even going beyond the employment relationship by including pensioners in particular. The latter group is one of the hardest hit by austerity measures. The problem of consultation and its link to freedom of association has also been dealt with by the ECSR. A  Right to Joint Consultation (Article 6, § 1 of the Charter) The role of social dialogue institutions has been increasingly curtailed in recent years. According to the mapping exercise described in Clauwaert and Schömann,87 a number of countries – for example, Hungary – have abolished or at least diminished the role of certain (tripartite) social dialogue institutions, and in some instances the government has even withdrawn from such bodies (for example, in Romania). Such a government approach faces problems with the right to joint consultation enshrined in Article 6, § 1 of the Charter. The Committee has stated that the required consultation can take place within tripartite bodies, provided that the social partners are represented on an equal footing.88 If no adequate joint consultation is in place, the state must take positive steps to encourage it.89 In the same decision on the merits and referring to previous Conclusions the Committee expressed its view more generally that a State should establish permanent bodies and arrangements in which unions and employers’ organisations are equally and jointly represented . . . These bodies and arrangements must allow the social partners to discuss and submit their views on all issues of mutual concern. In the case of officials bound by regulations laid down by the public authorities, such consultation will particularly concern the drafting and implementation of these regulations.90

Against this background, countries – for example, Hungary – that have abolished or at least reduced the role of certain (tripartite) social dialogue institutions – with the government withdrawing from such bodies (for example, Romania)91 – have problems complying with the requirements of Article 6, § 1. This is all the more true given the requirement that any reductions in a situation in which the right to be consulted had previously been effectively realised must satisfy Article G, § 1 RESC (see above II.C.ii). With regard to crisis measures related to limitations on collective bargaining, the Committee has, in previous Conclusions, stressed the necessity for prior   Clauwaert and Schömann, ‘The crisis and national labour law reforms’, above (n 13) 13.   Conclusions V, Statement of Interpretation on Art 6, § 1, 41. 89   Conclusions XVI-2, Hungary, 408–09. 90   Decision on the merits, 9 May 2005, Centrale générale des services publics (CGSP) v Belgium, Complaint No 25/2004, § 41; for the last sentence see Conclusions III, 33. 91   See Clauwaert and Schömann, ‘The crisis and national labour law reforms’, above (n 13) 13. 87 88



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‘extensive’ consultation. Indeed, ‘such restrictions should be imposed only after extensive consultation of all the parties concerned, notably trade unions and employers’ associations’.92 In respect of austerity measures concerning collective bargaining it has also been argued (against the Committee’s majority)93 that the right to consultation is guaranteed by Article 3, § 1 of the 1988 Additional Protocol to the ESC (=Article 22 RESC) ‘that collective bargaining comes within the scope of Article 3§1a of the 1988 Protocol’.94 This is important for countries which have not accepted Article 6, § 295. B  Right to Collective Bargaining (Article 6, § 2 of the Charter) Looking at collective rights within the framework of austerity measures, it is the right to bargain collectively (and increasingly also the right to strike) which is the most affected. It is often attacked from different angles. Before dealing with these different aspects a description of the Committee’s general approach is required. i  The (Committee’s) General Approach In general terms, the Committee has stated that domestic law must recognise that employers’ and workers’ organisations may regulate their relations by collective agreement. If necessary and useful – that is, in particular if the spontaneous development of collective bargaining is not sufficient – positive measures should be taken to facilitate and encourage the conclusion of collective agreements. Whatever the procedures put in place, collective bargaining should remain free and voluntary.96 In several cases the Committee had to assess whether restrictions imposed on the right to collective bargaining by states were in conformity with Article 6, § 2. In doing so it referred to the conditions under Article 31, § 1 ESC and Article G, § 1 RESC,97 as well as to ILO documents,98 in particular the case law of both the   Conclusions XIV-1 vol 2, Sweden, Article 6, § 2, referring to Conclusions IX-1, 52–53.   GENOP-DEI and ADEDY v Greece, above (n 64) para 39.   Dissenting opinion P Stangos, GENOP-DEI and ADEDY v Greece, above (n 64), Appendix, 12. 95   As in the Greek situation, see above (n 64) para 40. 96  See Digest 2008, above (n 73) 54, referring to Conclusions I, Statement of Interpretation on Art 6, § 2, 35. 97   Conclusions XV-1, Spain, Art 6, § 2: ‘but where a general agreement has been concluded and duly adopted by the authorities – as in the given case – any unilateral interventions into its terms could only be justified with reference to Article 31’; concerning compulsory arbitration Conclusions XIII-3 in respect of Ireland, Norway and Portugal, see concerning Iceland, above (n 79); Conclusions XII-1, Denmark, Art 6, § 2: ‘the 1988 Act, which not only interfered with existing collective agreements, but also limited the scope of future agreements, constituted such a restriction of the exercise of the right to free collective bargaining as could not be justified under Article 31 of the Charter’. 98   In Conclusions XIX-3/2010 the Committee generally starts its examination by describing the state of play in respect of ratification of the relevant ILO Conventions. 92 93 94

284  Klaus Lörcher CFA99 and the Committee of Experts on the Application of Conventions and Recommendations (CEACR).100 Moreover, a dispute arose within the Committee on how to interpret Article 6, § 2 of the Charter. Whereas the majority did not stress the promotional character of the provision, a minority based its divergent view on this very wording of the provision.101 Concerning permissible limitations on the right to collective bargaining the Committee pointed out that ‘such restrictions . . . should be of an exceptional kind and limited duration. Furthermore, they should not be imposed unless it has been proved that no other measures can produce the same effects without recourse to such government intervention’.102 Against this background as well as the legal framework set out above (see II) the following specific problems will be dealt with. ii  Decentralisation of Collective Bargaining to Company Level In the ‘mapping exercise’ (Clauwaert and Schömann) a clear policy and/or ambition was identified in many countries to decentralise collective bargaining, shifting from national/sectoral level to company level.103 This might lead to a formal ‘increase’ in the number of collective agreements. Nevertheless, the total percentage of the workforce covered by collective agreements might decrease and therefore pose specific problems.104 The professed aim is to give businesses more flexibility and help them adjust to labour market conditions. Examples were found in Italy, Greece, Portugal 99   Even in the Interpretative Statement in its Conclusions XIX-3/2010: ‘The Committee considers, like the ILO Freedom of Association Committee, that the extension of collective agreements should take place subject to tripartite analysis of the consequences it would have on the sector to which it is applied’; (Digest of the Freedom of Association Committee of the Governing Body of the ILO, 5th (rev edn), 2006, para 1051). 100   Conclusions 2010, Albania, Art 6, § 2: ‘ILO Freedom of Association Committee [meaning the CEACR], Observation on Albania, CEACR 2007/78th Session’. 101   Conclusions XVII-1, Netherlands, Art 6, § 2, Dissenting opinion of J-M Belorgey, joined by N Aliprantis and P Konˇcar: ‘By using the term “promote” and specifying that this approach is followed only “where necessary”, the Charter implicitly but necessarily suggests that the action required of the parties cannot merely consist in approving the results of spontaneous collective bargaining, but must seek to encourage the development of a harmonious system of collective negotiations and agreements’. 102   Conclusions XIV-1 vol 2, Sweden, Art 6, § 2, referring to Conclusions IX-1, 52–53. 103   For more detail see the chapter by Antoine Jacobs in this volume. 104   In this respect the Committee has not only asked Contracting Parties on several occasions about the number of collective agreements concluded during the reference period (see, eg: Conclusions XIX-3, Croatia; Conclusions XIX-3, Poland; Conclusions XIX-3, Latvia; Conclusions 2010, Armenia; Conclusions 2010, Bulgaria; Conclusions 2010, Georgia; Conclusions 2010, Moldova; Conclusions 2010, Ukraine; Conclusions XVI-1, Germany; Conclusions XV-1, Denmark). It has also concluded that coverage of only 20 per cent of the workforce by collective agreements was not in conformity with Art 6, § 2 of the Charter (‘Meanwhile, it however notes from statistics from the European industrial relations observatory (ERIO) and the European trade union institute (ETUI) that it is estimated that approximately 20% of the workforce is covered by collective agreements. The Committee considers this coverage to be too weak and thus not in conformity with Article 6 § 2 of the Revised Charter’ (Conclusions XIX-3, Latvia, Art 6, § 2).



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and Spain. In Romania, the annual national collective agreement has been abolished in favour of sectoral collective agreements. In Finland, the decentralisation of bargaining has not proved effective and employers have been encouraged to join the national collective agreement.105 Looking at the relevant case law, the Committee did not deal extensively with the decentralisation of collective bargaining as such.106 In the case of Italy (after two cycles of clarification requests) the Committee was of the opinion that in the sphere of decentralised agreements, the ARAN plays an advisory role when requested to do so by the parties, given that, under Section 40 of Legislative Decree No 165/2001, decentralised collective bargaining must be confined to the subject areas and the limits established by national collective agreements between the parties concerned and according to the negotiating procedures described therein.

The Committee found this situation to be ‘in conformity with Article 6§2 of the Revised Charter’.107 This statement of conformity, however, appears to be based mainly on the collective agreement (and not legislative) framework. Thus, it does not offer a justification for legislation imposing decentralisation. Comparing it with the situation in question it would appear clearly to contradict the ‘voluntary’ character and promotional approach on which Article 6, § 2 of the Charter is based. Trade unions (and employers) must find and follow the way which best suits their interests. It is not for the state to interfere in the structure of collective bargaining. On the contrary, it stems from the very wording of Article 6, § 2 of the Charter that the state is required to ‘promote’ the ‘voluntary’ character of the negotiation machinery that is supposed to lead to collective agreements. Moreover, taking into account the interpretative framework in general (see above II.A) and the references to ILO case law in particular108 the violation of Article 6, § 2 would appear even more obvious. iii Deviate In Pejus to Higher Level Collective Bargaining/Statutory Rules The ‘mapping exercise’, again, showed that apart from shifting negotiations to other levels, there is often the (additional) problem of allowing lower level   Clauwaert and Schömann, ‘The crisis and national labour law reforms’, above (n 13) 13.   The further references to decentralisation of collective bargaining mainly describe the factual situation: Conclusions XV-1, Denmark, Art 6, § 2: ‘The most important level of collective bargaining is the level of national trade unions and branch-oriented employers’ organisations, which in Denmark is known as the decentralised level as opposed to centralised collective bargaining between the national confederations of trade unions and employers (LO and DA, respectively) which was dominant until the 1980s’; Conclusions XIV-1, Netherlands, Art 6, § 2: ‘Public sector – The Committee had previously asked to be informed about the results of the decentralisation of negotiations for certain sectors of the civil service. The report states that within each sector, the social partners have the opportunity to negotiate the terms of employment relevant to that sector.’ Conclusions XIII-3, Sweden, Art 6, § 2: ‘the pay-bargaining system was decentralised’). 107   Conclusions 2010, Italy, Art 6, § 2 (see more extensively Conclusions 2006). 108   See above for the references to ILO case law in the interpretative framework under section ‘ILO standards and Case Law of the Supervisory Bodies’ and to the substantive references in Niklas Bruun’s chapter in this volume. 105 106

286  Klaus Lörcher bargaining outcomes to deviate unfavourably from the protection provided by higher level collective agreements or statutory legislation. Such collective agreements in pejus deal, for instance, with working time and wages.109 In its case law the Committee law had not dealt extensively with this problem. Nevertheless, some examples can be found. In France, the Committee did not see a problem concerning legislation permitting derogation on specific grounds for new agreements which were in the end only rarely used.110 It stated reservations concerning legislation allowing ‘adaptation of collective agreements to the economic circumstances of individual companies’.111 However, and asked – as in other cases – for more information,112 it mentioned legislation prohibiting derogations in peius as positive examples.113 As to the hierarchy of collective agreements, the Committee has asked questions in a case in which less favourable conditions derived from a collective agreement at a lower level than those provided for at the higher level.114 In the   Clauwaert and Schömann, ‘The crisis and national labour law reforms, above (n 13) 13.  Conclusions 2010, Art 6, § 2: ‘None of the services of the départements’ Directorates of Labour, Employment and Vocational Training (DDTEFP) responsible for checking whether these agreements departed from higher level agreements reported any instances thereof’. 111   Conclusions XIV-1, Spain, Art 6, § 2: ‘The adaptation of collective agreements to the economic circumstances of individual companies is facilitated by the new text of s 82(3) of the Workers’ Statute which provides that wages clauses may be suspended if they would pose a threat to the company and to employment stability. Determining the circumstances in which this provision may apply is left to the parties themselves. The Committee takes the view that this provision could lead to the undermining of the mandatory nature of collective agreements, if no procedural safeguards are provided for. It therefore asks that the next report indicate how often wages clauses are suspended in practice and state what procedural safeguards exist to guard against abuse’. 112   Conclusions 2010, Slovenia, Art 6, § 2: ‘More generally, it also asks whether and to which extent it is possible to deviate from sector level agreements in collective agreements concluded at enterprise level to the detriment of employees as far as their rights guaranteed under the Revised Charter are concerned’. Conclusions XVIII-1, Netherlands, Art 6, § 2: ‘The Committee asks the next report to provide further information on what are the criteria for refusal of an exemption in this respect [from the general extension of sectoral collective agreements, among other things, by company agreements]’. 113   Conclusions 2010, Armenia, Art 6, § 2: ‘The Committee notes that collective agreements cannot contain conditions, which are less favourable to workers than those rights stipulated by labour legislation. If collective agreements contain such provisions, they are deemed invalid (Article 6 of the Labour Code)’. Conclusions 2006, Albania, Art 6, § 2: ‘Any terms of collective agreements that are less favourable to employees than those prescribed by law are invalid’. Conclusions 2004, Bulgaria, Art 6, § 2: ‘These [it is not clear what this refers to] may not include any provisions that are less favourable to employees than any legal stipulations or provisions of collective agreements binding on employers (Section 50.2)’; Conclusions 2004, Estonia, Art 6, § 2: ‘Any terms of collective agreements that are less favourable to employees than those prescribed by law are invalid (Section 4)’. 114   Conclusions 2010, Slovenia, Art 6, § 2: ‘the ZKolP [new Collective Agreements Act] introduces an exemption to the general principle that a collective agreement at the narrower level must lay down more favourable rights for workers than a collective agreement at a broader level. Article 5 paragraph 2 of the Act provides that: “the rights and working conditions which are different or less favourable to employees may be determined by collective agreement at a narrower level under conditions determined by a collective agreement at a broader level”. The Committee asks whether issues such as minimum wages, job classifications, collective guarantees on supplementary social insurance and the pooling of funds earmarked for vocational training are excluded from the scope of the exemptions allowed or not. More generally, it also asks whether and to which extent it is possible to deviate from sector level agreements in collective agreements concluded at enterprise level to the detriment of employees as far as their rights guaranteed under the Revised Charter are concerned’. 109 110



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case of the extension of collective agreements it saw no problem if employers have the right to request an exemption under certain conditions.115 Even the last statement of conformity does not allow the assumption that the Committee would permit legislation that completely changes the usual hierarchy of collective agreements in favour of the lower level with less protective content (in the non-extended core area of the – higher – collective agreement). The normal hierarchy of collective agreements116 is a core element of collective bargaining. Any collective agreement concluded at a lower level with less favourable conditions is a clear sign that the power of the workers concerned was not sufficient to achieve better protection. This situation is only avoided by continuing to recognise the superior force of a higher level collective agreement, where the prohibition of any departure from it is unfavourable to the workers (in peius). Linked closely to the decentralisation analysed in more detail above117 and again taking into account the general interpretative framework (see above II.A) and the references to ILO case law in particular,118 the violation of Article 6, § 2 would appear even more obvious. iv  Shifting Trade Union Prerogatives to Works Councils or to Workers’ Representatives Another austerity measure identified by the ‘mapping exercise’ is the trend of extending what used to be trade union prerogatives to other bodies of workers’ representation (often at company level) (for example, Greece, Portugal and the Slovak Republic).119 There is no case law directly assessing the conformity with Article 6, § 2 of the Charter. In this respect the Committee has noted as a sort of improvement the fact that legislation ‘allowing works councils to conclude agreements with employers in the absence of trade unions was abolished’.120 On the other hand, 115   Conclusions XVII-1, Netherlands, Art 6, § 2: ‘Having a clearer picture of the system of extension and exemptions, the Committee considers that the mechanism of employer’s request for exemption may not be a ground for non-conformity. Bearing in mind the specificities of Dutch law, ie the free negotiation, there are no representativity criteria and there is no hierarchy in collective agreements, the Committee considers that where parties have voluntarily bargained and concluded a collective agreement, it is in conformity with Article 6 § 2 of the Charter to permit that agreement to take precedence for those parties over one applicable by virtue of extension. Such practice upholds the right to collective bargaining of employers as well as unions that have not partaken in the negotiation of the sector agreement’. 116   See also the GNCHR, above (n 36), which ‘[e]xpresses even deeper concern at: the reversal of the hierarchy and the weakening of collective labour agreements which set out protective minimum standards of wages and working conditions for all workers’. 117   See Antoine Jacobs in this volume for the details. 118   See above for the references to ILO case law in the interpretative framework in section ‘ILO Standards and Case Law of the Supervisory Bodies’ and to the substantive references in Niklas Bruun’s chapter in this volume. 119   Clauwaert and Schömann, ‘The crisis and national labour law reforms’, above (n 13) 13. 120   Conclusions XVII-2, Hungary, Art 6, § 2.

288  Klaus Lörcher it has not noted problems ‘[i]f there is no union representation within an enterprise and this responsibility has not been delegated to a representative union at sectoral level, collective agreements may be concluded between employers and works councils’.121Although these statements do not give a clear picture of the Committee’s view of the relationship between trade union freedoms and prerogatives, on one side, and works councils on the other, it is however hardly conceivable that it could permit legislation that deprives collective agreements of their very nature. C  Right to Collective Action: In Particular, the Right to Strike (Article 6, § 4 of the Charter) Until now most of the strike action against austerity measures has not targeted employers but rather governments or the legislator that introduced them, under either direct or indirect pressure from the EU institutions (COM and ECB) and/ or the IMF. Interference with the right to strike, however, was not based primarily on new legislation but more on administrative acts.122 This raises the problem whether protest strikes against the (anti-)social policy of a government is protected by Article 6, § 4 of the Charter. At first glance it might appear that the ECSR does not favour any such action because it has stated from the very beginning of its case law that ‘Political strikes are not covered by Article 6, which is designed to protect “the right to bargain collectively”, such strikes being obviously quite outside the purview of collective bargaining’.123 However, two developments should be noted: first, regarding a strike aimed at criticising the government’s policy on social security, the highest domestic court had held that it was not violating Article 6, § 4 of the Charter;124 second, after having previously held that a strike of civil servants against reducing the budgetary means for staff at community level,125 the ECSR asked further questions in the subsequent supervision cycles.126 On the basis of its case law that strikes must not be called (only) for the conclusion of collective agreements, these developments could indicate that the ECSR might be more inclined to accept several further strike activities. This broader approach would be further strengthened by taking into account the interpretative framework (see above II.A) and the references to ILO case law in particular.127 More specifically, the   Conclusions 2004, Lithuania, Art 6, § 2.   For more details see Filip Dorssemont in this publication. 123   Conclusions II, Statement of Interpretation, 27–28. 124   Conclusions XIV-1 (1998, Netherlands) 555–665 (in relation to the judgment of the Hooge Raad 11 November 1994); Conclusions XV-1 Addendum (2000, Netherlands), 92. 125   Conclusions XIII-5 (1997, Finland), 62 (referring to Conclusions XIII-4, 361). 126   Conclusions XVI-1 (2002, Finland), 209; Conclusions 2006 (Finland), 169. 127   See above for the references to ILO case law in the interpretative framework in ‘ILO Standards and Case Law of the Supervisory Bodies’ and to the substantive references in Niklas Bruun’s chapter in this volume. 121 122



The (Revised) European Social Charter  289

ECSR would have to reconsider its restrictive approach for the cases in which trade unions call for a strike against (austerity) measures conflicting with the right to collective bargaining. A further dimension of restricting the right to strike is the indirect consequence of the restrictions imposed on collective bargaining (see above III.B). Indeed, the three restrictions on the right to collective bargaining – at least in most cases – have the direct consequence that collective action started by a trade union to make one or more improvements which are not permitted will be considered illegal. If these restrictions are not already compatible with Article 6, § 2 of the Charter, they cannot be permitted under Article 6, § 4 of the Charter. D  Further Provisions The ECSR has already had an opportunity to examine several provisions of the Charter in relation to austerity measures in Greece,128 in particular in the first two decisions dealing with a range of different provisions. In the first case,129 the ECSR was of the opinion that Greek legislation violated Article 4, § 4 of the 1961 Charter because it had made no provision for notice periods or severance pay in cases where an employment contract, which qualified as ‘permanent’ under the said law, was terminated during the probationary period, set at one year by the same law. More importantly, in the second case130 it found violations again of a further provision of Article 4 (§ 1 right to a fair remuneration), of Article 7, § 7 (the right of children and young persons to protection), two provisions of Article 10 (§§ 2 and 3 of the right to vocational training) and 12, § 3 (right to social security) of the European Social Charter. In relation to the last provision the Committee in its next five decisions considered that, even if some restrictions to the benefits do not conflict with the Charter – at least the cumulative effect of restrictions introduced as ‘austerity measures’ and the procedures adopted to put them in place – certain regulations introduced by the government of Greece from May 2010 onwards, modifying both public and private pension schemes, constituted a violation of Article 12, § 3 (right to social security) of the 1961 Charter.131

  Since Greece has not accepted Arts 5 and 6 of the Charter, see above (n 86).   See above (n 64). 130   GENOP-DEI and ADEDY v Greece, above (n 64). 131   IKA–ETAM v Greece, above (n 36); Panhellenic Federation of Public Service Pensioners (POPS) v Greece, Complaint No 77/2012; Pensioners’ Union of the Athens-Piraeus Electric Railways (ISAP) v Greece, Complaint No 78/2012; Panhellenic Federation of Pensioners of the Public Electricity Corporation (POS-DEI) v Greece, Complaint No 79/2012; Pensioner’s Union of the Agricultural Bank of Greece (ATE) v Greece, Complaint No 80/2012. 128 129

290  Klaus Lörcher E  Interim Conclusions Against the background of previous ECSR case law, as well as its interpretative framework, it has been demonstrated that interference in collective rights by austerity measures is not in conformity with several provisions of Article 6 of the Charter; in particular, the restrictions to the right to collective bargaining violate Article 6, § 2 of the Charter. IV PROCEDURE

A right is real only if it can be enforced. This fundamental principle faces important limitations at international level. This is all the more true regarding social rights. Against this background, important developments can be noted. Indeed, the supervision of the Charter shows a slow but real development from a reporting to a quasi-judicial procedure. As a starting point it should therefore be recalled that the ‘normal’ supervision of the implementation of the Charter is exercised by a reporting system within which the contracting parties have to report regularly on specific Articles which they have accepted in (at present) a four-year system, separating the respective Articles into four groups,132 one for each year in a supervision cycle. Governments are obliged to transmit their reports to the national representative trade union organisations that have the right to make observations. It is within this supervision that the ECSR avails itself of the possibility of making certain statements of interpretation on the basis of a comparative examination of all contracting parties on the same provision at the same time. This reporting procedure is all the more crucial for trade unions in states that have not yet ratified the CCPP. Because of its periodicity, the reporting system lacks timely impact of supervision. In order to increase efficiency the elaboration of a system of ‘collective complaints’ based on experiences coming from already existing ILO procedures (Committee on Freedom of Association and representations under Articles 24 and 25 of the ILO Constitution) was a very important development. The CCPP has now been ratified by 15 contracting states to the Charter,133 thus offering – among other things – the ETUC and national representative trade unions direct access to the examination of problems in relation to conformity with the Charter.

132   Group 1: Employment, training and equal opportunities; Group 2: Health, social security and social protection; Group 3: Labour rights (including Art 5 and 6 of the Charter) on which a report was due by 31 October 2013 – the ECSR will publish its Conclusions by the end of 2014; Group 4: Children, families, migrants. 133   See above (n 9).



The (Revised) European Social Charter  291

A  Filing a Complaint with the ECSR Although the admissibility criteria for a collective complaint are – compared with other international human rights instruments – fairly low, some basic requirements must be met. i  Requirements in Relation to Ratification and Acceptance The country against which a compliant may be filed must have ratified the CCPP134 and accepted the relevant provisions of the Charter that the government is alleged to have violated. Of those countries that are either directly affected by the Troika or indirectly by severe austerity measures, the following table shows the state of play in respect of ratification and acceptance. ii  Requirements in Relation to the Complainant Organisations The term ‘collective complaint’ expresses the character of the procedure, access to which is not permitted for individuals. The ‘collective’ organisations that may file complaints for groups at different levels are admitted to this procedure:135 Table 1: Ratification of the CCPP and acceptance of the relevant Charter’s provisions by Contracting Parties concerned by austerity measures Country

Ratified the CCPP

Has accepted (inter alia) the following provisions Right to work (Art 1)

Social Working Freedom Security conditions of (Art 2) association (Art 12) (Arts 5 and 6)

Unfair dismissal (Art 24)

Cyprus*

+

+

+ (not para 3)

+

+

+

Greece

+

+

+

–

+

–

Ireland*

+

+

+

+

+

+

Italy*

+

+

+

+

+

+

Portugal*

+

+

+

+

+

+

Note: * has ratified the RESC 134   The 15 contracting parties to the (R)ESC have ratified the CCPP: Belgium, Bulgaria, Croatia, Cyprus, the Czech Republic, Finland, France, Greece, Ireland, Italy, the Netherlands, Norway, Portugal, Slovenia and Sweden. 135   All documents concerning collective complaints are available at: www.coe.int/t/dghl/monitoring/ socialcharter/Complaints/Complaints_en.asp.

292  Klaus Lörcher on one side, employers’ and trade union organisations, and on the other, NGOs (at European and national level). However, significant restrictions exist for most of these organisations. a  Trade Union Organisations According to Article 1(a)136 CCPP the ETUC is permitted to file collective complaints directly against countries that have ratified the CCPP. The ETUC has made use of this opportunity by filing two collective complaints together with the respective national affiliates concerning restrictions on the right to strike.137 Concerning national trade unions (confederations) the CCPP requires that a complaint is filed by a ‘representative’ national trade union organisation (Article 1(c) CCPP).138 In the meantime, the Committee follows a low threshold for the criterion ‘representative’. More and more ‘normal’ trade unions are being accepted for admissibility purposes.139 b  Non-Governmental Organisations Besides Finland, which is the only country to have accepted the possibility of (certain) national NGOs filing complaints,140 all countries that have ratified the CCPP may be sued by particular international NGOs which are defined by the Governmental Committee of the European Social Charter (Article 1(b) CCPP).141 iii  Further Admissibility Requirements Besides the general requirement that the complaint should not deal only with an individual case but be collective in nature (deriving from its character as a ‘collective’ complaint) there are a number of other (more technical) requirements. However, the most restrictive admissibility criteria which normally exist at 136  ‘International organisations of employers and trade unions referred to in paragraph 2 of Article 27 of the Charter’. 137   Case 59/2009 European Trade Union Confederation (ETUC)/Centrale Générale des Syndicats Libéraux de Belgique (CGSLB)/Confédération des Syndicats chrétiens de Belgique (CSC)/Fédération Générale du Travail de Belgique (FGTB) v Belgium; Case 32/2005 European Trade Union Confederation (ETUC), Confederation of Independent Trade Unions in Bulgaria (CITUB), Confederation of Labour ‘Podkrepa’ (CL ‘Podkrepa’) v Bulgaria. 138   ‘Representative national organisations of employers and trade unions within the jurisdiction of the Contracting Party against which they have lodged a complaint’. 139  See, as one of the more recent examples, Decision on admissibility, 23 May 2012, Fellesforbundet for Sjøfolk (FFFS) v Norway, Complaint No 74/2011. 140   Art 2, § 1 CCPP: ‘Any Contracting State may also, when it expresses its consent to be bound by this Protocol, in accordance with the provisions of Article 13, or at any moment thereafter, declare that it recognises the right of any other representative national non-governmental organisation within its jurisdiction which has particular competence in the matters governed by the Charter, to lodge complaints against it’. 141   ‘Other international non-governmental organisations which have consultative status with the Council of Europe and have been put on a list established for this purpose by the Governmental Committee’.



The (Revised) European Social Charter  293

international level – that is, the exhaustion of domestic remedies and a time limit in relation to the last domestic decision – have not been introduced. This offers a good prospect for quick, very flexible and fairly easy access to this procedure. However, irrespective of its legal argumentation it should be noted that the ECSR considers itself bound by what the complainant organisation has submitted in terms of facts and legal argumentation.142 B  Following the Procedure of the Complaint Whereas the ECSR used to examine the admissibility and merits of a complaint separately (as provided for in the CCPP) it has now, in certain cases,143 started to join these two steps in order to accelerate the procedure. In the same way as the employers’ organisations (Business Europe, International Organisation of Employers (IOE)) the ETUC is admitted to submit observations on the merits if they have not filed the complaint themselves.144 This role can be considered to be institutionalised as a sort of ‘amicus curiae’. Having made extensive use of this opportunity the ETUC has contributed also by submissions in complaint procedures against austerity measures, the latest examples of which are the observations on the five Greek cases on pension reductions.145 C  Follow-Up of a Decision of the ECSR Looking at the results of the supervision by the Committee of Ministers146 only one (individual) Recommendation was addressed to the contracting party concerned.147 In all other cases, the Committee of Ministers has waited for a statement from the country concerned that appeared to be satisfactory (at least to some extent), thus allowing the Committee of Ministers to take note of this statement in a simple decision. The example of the (now seven) Greek cases demonstrates this approach clearly. The Committee of Ministers was satisfied with the acknowledgment of the violations as expressed by the ECSR and a general demonstration of a will   Stangos, above (n 42) 384.   See example of the Laval decision, above (n 21), ‘Decision on Admissibility and the Merits’. 144   Art 7, § 2 CCPP: ‘If the complaint has been lodged by a national organisation of employers or a national trade union or by another national or international non-governmental organisation, the Committee of Independent Experts shall notify the international organisations of employers or trade unions referred to in paragraph 2 of Article 27 of the Charter, through the Secretary General, and invite them to submit observations within such time-limit as it shall prescribe’. 145  See Cases 76–80/2011, above (n 131); the ETUC observations in Case 85/2012 have been reported in the Laval decision, above (n 21) paras 24–33 to a larger extent than in many previous decisions. 146   Art 9 CCPP. 147   Committee of Ministers adopted Recommendation RecChS (2001) 1 on 30 January 2001 (concerning Syndicat national des professions du tourisme v France, Complaint No 6/1999). 142 143

294  Klaus Lörcher to rectify the situation. However, this approach does not conform to the requirement to fulfil the obligations deriving from the Charter as defined by the ECSR. Indeed, without a clear indication by the Greek Government of a deadline for full compliance the question remains whether there is a real will to rectify the situation as criticised by the ECSR quickly and effectively. Even though this political supervision is not really effective, a legal assessment of a given situation by the Committee that shows that the Charter has been violated, offers a good opportunity for putting pressure on the government concerned. CONCLUSIONS

Given the wide range of fundamental social rights that are protected by the Charter – in particular, the rights related to ‘freedom of association’, including collective bargaining and the right to strike – this instrument offers a good framework for challenging austerity measures. This is all the more obvious for countries that have ratified the CCPP, thereby offering trade unions in particular a quick and easily accessible system of complaint. The first decisions by the Committee in seven cases against Greece are important. If other, more effective legal procedures are not available this opportunity could and indeed should be used more often.

11 International Litigation Possibilities in European Collective Labour Law: ECHR KEITH EWING1 AND JOHN HENDY QC2

I  NEOLIBERALISM: THE DOMINANT ECONOMIC IDEOLOGY3

G

IVEN THE DOMINANCE today of neoliberalism and its drive to an unregulated free market in labour it might be thought curious that international legal standards still remain in its way. Neoliberalism gives a central role to industrial relations and the labour market and how it is to be structured (or, rather, unstructured).4 Neoliberalism regards trade unions and collective bargaining as impediments to the free labour market. This is not new, of course; a similar view dominated courts and legislatures during the eighteenth and nineteenth centuries – and much of the twentieth century too. But neoliberalism in its modern form was born in 1948 and aimed to roll back a relatively brief phase in the 400 years or so of capitalism when a statedominated, vaguely egalitarian post-war economic settlement took hold across western and northern Europe, as well as Australia, New Zealand and Canada. Neoliberalism aimed to destroy that post-war settlement and to replace it with a return to fully free markets and inequality on a massive scale.5 In this enterprise neoliberalism has been astonishingly successful. It is the dominant ideology across most of the globe – even after the crash of 2008 and the stagnation and 1   Professor of Public Law, King’s College, London; President, Institute of Employment rights; Vice-President International Centre for Trade Union Rights. Contact: [email protected]. 2   Barrister; Chair of the Institute of Employment Rights; President of the International Centre for Trade Union Rights; Visiting Professor at King’s College, London and at University College, London. Contact: [email protected]. 3   The views and opinions expressed in this chapter are those of the authors. 4   Neoliberalism focuses on the role of trade unions and regulation of them; it would also abolish other labour laws. 5   D Harvey, A Brief History of Neoliberalism (Oxford, Oxford University Press, 2007); K Birch and V Mykhnenko, The Rise and Fall of Neo-Liberalism: The Collapse of an Economic Order (London, Zed Books, 2010).

296  Keith Ewing and John Hendy QC slump since. Its hideous defects are masked by the propaganda that ‘there is no other way’ and ‘things will get better’. Meanwhile, so adaptable is it that it has used the recession it caused as justification to push its objectives of privatisation, deregulation and attacks on trade unionism yet further. However, one of the achievements of those few years of post-war liberation was the creation of a series of international human rights treaties. Significantly, those treaties contain within them protection for trade unionism and, in particular, collective bargaining. No doubt this was partly the product of pressure from progressive governments elected on the back of resistance movements in which trade union activists had played a significant part. No doubt, too, it was partly to assuage left-leaning working class populations who might have looked sympathetically eastwards towards the Soviet Union after its contribution to the defeat of Nazism. But it was also founded on the widespread recognition by governments and big employers (as well as trade unions) of the success of industry-wide collective bargaining in helping economic recovery from the depression in the 1930s in Europe, North America and Australia, which founded support for constitutionalising trade union rights and the right to collective bargaining as fundamental human rights in international law.6 It is a central tenet of neoliberalism, as noted above, that trade unions and collective bargaining must be destroyed or emasculated because they act as restrictions on a free market in labour. However, Hayek’s justificatory argument that free trade unions create unemployment, inequality and poverty7 has been conclusively demonstrated to be false. Indeed, on the contrary, in the United Kingdom the legal restrictions on trade union freedom have played a large part in permitting the growth of unemployment, inequality and poverty. Unions in the United Kingdom have been so tied down with legal impediments to the freedom to organise and take industrial action that they have been unable to protect the living conditions of the working class from the onslaught of the neoliberal governments of the past 30 years, especially the current Con–Dem government (probably the most reactionary government for 200 years).8 The tension between neoliberalism and fundamental labour rights (particularly the rights to strike and to collective bargaining) is starkly obvious. While the struggle between capital and labour has been the hallmark of the history of labour law, in international labour law there has been a new phase in the conflict over the past five years. 6   See KD Ewing and J Hendy, ‘Reconstruction after the crisis: as manifesto for collective bargaining’ (Liverpool, Institute of Employment Rights/CLASS, 2013). 7   See F Hayek, The Constitution of Liberty (Chicago, University of Chicago Press, 1959) ch 18. His chief complaint against trade unions seems to be not so much their function of using industrial power for wage bargaining but their ‘coercion’ of workers to achieve ‘complete unionisation’. Now coercion and complete unionisation are rarely a feature of modern trade unionism, Hayek’s dis­ ciples focus on trade union wage bargaining as the distorting feature of the labour market that must be eradicated. 8   Ironically, it was the removal of restrictions on the freedoms of capital that triggered the current crisis by permitting the creation of mountains of toxic debt and unsustainable derivatives.



International Litigation: ECtHR  297

We have seen the battle played out in the courts: the Viking quintet,9 now a sextet when Alemo-Herron v Parkwood Leisure Ltd is added,10 in the Court of Justice of the European Union (CJEU); RMT v UK11 in the European Court of Human Rights (ECtHR); in the United Kingdom, Metrobus v UNITE12; in Ireland, McGowan v The Labour Court13 and in Canada, Ontario (AG) v Fraser14 (and now see Saskatchewan v Saskatchewan Fed of Labour).15 Likewise it is seen in the austerity measures imposed by the EU ‘Troika’, particularly on the weaker EU states, in Ireland, Greece and Spain, where sectoral collective bargaining has been undermined.16 The fight is being carried on at the International Labour Organization (ILO) where the employers’ group walked out of an important committee in 2012 in protest at the ILO’s recognition (for over 50 years) of the right to strike.17 Given the dominance of neoliberalism and acceptance of the necessity of the free market in everything, including labour, it might be thought surprising that international labour law ever protected and still protects the right to strike and to collective bargaining. But it does and these instruments remain available in appropriate cases to protect these fundamental rights against the tide of neoliberalism. II  INTERNATIONAL TRADE UNION RIGHTS

The international instruments are well known: ILO Convention 87 on the right to strike (as interpreted by the Committee of Experts and the Committee on Freedom of Association since 1952); ILO Convention 98 on collective bargaining; Article 8(1)(d) of the International Covenant on Economic, Social and Cultural Rights 1966 which protects the right to strike.18 In business Europe, the European Union (27 member states) declared the right to strike and to collective bargaining in Article 28 of the EU Charter of 9  Case C-341/05 Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet [2007] ECR I-11767; Case C-438/05 International Transport Workers’ Federation and another v Viking Line ABP [2008] ICR 741; Case C-346/06 Rüffert v Land Niedersachsen [2008] ECR I-1989; Case C-319/06 Commission v Luxembourg [2008] ECR I-4323; and Case C-271/08 Commission v Germany [2011] All ER (EC) 912 . 10   Case C-426/11 Alemo-Herron v Parkwood Leisure Ltd [2013] ICR 1116; [2013] IRLR 744, see below. 11   RMT v UK, Application No 31045/10, 8 April 2014. 12   Metrobus v UNITE [2010] ICR 173. 13   McGowan v The Labour Court [2013] IESC 21. 14   Ontario (AG) v Fraser 2011 SCC 20. 15   Saskatchewan v Saskatchewan Fed of Labour 2013 SKCA 43. 16   See the summary in KD Ewing and J Hendy, Reconstruction after the Crisis: A Manifesto for Collective Bargaining (Liverpool, Institute of Employment Rights/CLASS, 2013) 34–39. 17   See the description by the ILO Committee of Experts on the Application of Conventions and Recommendations, General Survey on the fundamental Conventions concerning rights at work in light of the ILO Declaration on Social Justice for a Fair Globalization, 2008, Report III (part 1B) of the Report of the CEACR to the International Labour Conference, 2012, 46–50, available at: www. ilo.org/public/libdoc/ilo/P/09661/09661%282012-101-1B%29.pdf. 18   But not explicitly the right to collective bargaining.

298  Keith Ewing and John Hendy QC Fundamental Rights of 7 December 2000 (with ‘the same legal value as the Treaties’ by Article 6 of the Treaty on the Functioning of the European Union (TFEU)).19 The Viking quintet obviously represents a different strand of philosophy, now magnified by Alemo-Herron where one so-called fundamental right, to conduct a business (Article 16), was used to defeat the fundamental right to collective bargaining (Article 28) which, according to Demir and Baykara, is an essential element of the right to be a member of a trade union (protected by Charter Article 12). In the other Europe, the Council of Europe (47 contracting states) protects trade union freedom by Article 5, and the right to strike and collective bargaining by Article 6, of the European Social Charter (ESC) of 1961 (revised version 1996). The judgment of the European Committee on Social Rights in Swedish Trade Union Confederation (LO) and Swedish Confederation of Professional Employees (TCO) v Sweden (Complaint 85/2012, 3 July 2013) strikes a solid blow at Laval and hence at the whole Viking sextet. The Council of Europe’s European Convention on Human Rights and Fundamental Freedoms (ECHR), by Article 11, protects freedom of assembly and freedom of association and, in particular, the right to join a union for the protection of the worker’s interests. To this we now turn. III  THE ECHR

A  Relevant Articles of the ECHR The subject matter of potential violations in the field of trade union rights principally derives from Article 11 of the ECHR, though other Articles are, of course, relevant. Article 14 against discrimination may be engaged in cases where union members have suffered detriment because of union membership or activity.20 Articles 6 and 8 may be relevant to prejudice against the right to a profession and some aspects of working life by reason of trade union activity or membership.21 Article 10 may be relevant to trade union leafleting and picketing.22 19   Art 53(3) of the Charter of Fundamental Rights of the EU provides that the meaning and scope of the fundamental rights there enshrined shall be the same as those laid down in the European Convention. 20  eg, Danilenkov & Others v Russia, App no 67336/01 (10 December 2009). 21   Le Compte, Van Leuven and de Meyere v Belgium [1982] 4 EHRR 1; Werner v Poland (15 November 2001) (paras 12, 22, 31 and 33); Pfeifer v Austria (2009) 48 EHRR 8 (paras 34–35); Niemitz v Germany (1993) 16 EHRR 97 (para 37); Sidabaras v Lithuania [2006] 42 EHRR 6 (paras 29, 47 and 48), though none of these involved trade union membership or activity – but the principles could be relevant. 22   In relation to union publications see the duo of recent cases: Palomo Sánchez v Spain, App no 28955/06 etc, (12 September 2011); Vellutini and Michel v France, App no 32820/09 (6 October 2011). In relation to picketing, though there is no ECtHR case in point, there is no reason why the latter should not follow the reasoning of the the Canadian Supreme Court in Pepsi-Cola Canada Beverages (West) Ltd RWDSU v Local 558 2002 SCC 8, where it was held that there was nothing illegal or unlawful about picketing (indeed, secondary picketing in that case) and that to find other-



International Litigation: ECtHR  299

Article 11 is, of course, in two parts, protecting both freedom of assembly and freedom of association. The latter freedom contains within it the express freedom to be a member of a trade union for the protection of one’s interests. Picketing is an aspect of freedom of assembly, a provision which is obviously relevant to aspects of trade union action.23 The right to freedom of assembly does not have attached to it the rider of being ‘for the protection of one’s interests’, as does freedom of association.24 The cases show, unsurprisingly, that demonstrations, marches, picketing (and industrial action to take part in them) are all regarded as protected by Article 11(1).25 B  Living Instrument The European Court of Human Rights’ (ECtHR) interpretation of the ECHR and, in particular, Article 11 has evolved. This has been achieved by regarding the ECHR as a ‘living instrument’.26 Thus, for example, in the landmark case of wise would have been contrary to freedom of expression guaranteed by the Canadian Charter. In a recent case, United Food and Commercial Workers, Local 401 v Alberta (Attorney General) 2012 ABCA 130, the Alberta Court of Appeal held that data processing legislation which caused a union to be liable by reason of the threat to publish photos of workers crossing picket lines was unconstitutional since it infringed the union’s freedom of expression. 23   Picketing in a non-industrial context in which workers do not appear to have been called upon to desist from work was protected in Kuznetsov v Russia, App no 10877/04 (23 January 2009). There appears no reason of law or logic why peaceful picketing in an industrial context and with the purpose of peacefully dissuading workers from working should not equally be protected by Art 11 (or Art 10 – see above (n 22) in relation to Canada). Picketing was regarded as an aspect of the right to strike in Trofimchuk v Ukraine, App no 4241/03 (28 January 2011). 24   Interestingly, freedom of association seems to have been used as a proxy for the right to strike to some extent, eg, Karaçay v Turkey, App no 6615/03 (27 June 2007); Çerikçi v Turkey, App no 33322/07 (13 October 2010); Urcan v Turkey, App no 23018/04 etc (17 October 2008); Enerji YapiYol Sen v Turkey, App no 68959/01 (21 April 2009); Saime Özcan v Turkey, App no 22943/04 (15 September 2009); Kaya and Seyhan v Turkey, App no 30946/04 (15 September 2009). 25   Saya and ors v Turkey, App no 4327/02 (7 January 2009), involved a trade union organised May Day march; and Nurettin Aldemir and ors v Turkey, App no 32124/02 etc (2 June 2008) involved a demonstration against a proposed Bill on trade unions. Baczkowski and ors v Poland, Application no 1543/06 (24 September 2007) involved a march to draw attention to discrimination against homosexuals; Alekseyev v Russia, App nos 4916/07, 25924/08 and 14599/09 (21 October 2010) involved an annual Gay Pride march; Patyi v Hungary, App no 5529/05 (7 January 2009) involved a demonstration in front of the Prime Minister’s residence to seek compensation for the creditors of an insolvent private company; Christians against Racism and Fascism v UK (1980) 21 DR 138, para 93 involved a march against fascists. And see D Mead, ‘The right to peaceful protest under the European Convention on Human Rights – A content study of Strasbourg case law’ (2007) 4 European Human Rights Law Review 345. Seeking an order to prevent an assembly or damages or other punishment after the event will both be regarded as restrictions on the exercise of the right of freedom of assembly: Ezelin v France (1992) 14 EHRR 362, para 39. 26   See the discussion of this doctrine in N Bratza, ‘Living Instrument or Dead Letter – the Future of the European Convention on Human rights’, (2014) EHRLR 116. The doctrine has been applied by the ECtHR since Tyrer v UK, 25 April 1978 (1979–80) 2 EHRR 1, para 31. It is to be noted that the ECtHR applies Arts 31–33 of the Vienna Convention on the Law of Treaties of 23 May 1969: Golder v UK, 21 February 1975, 1 EHRR 524, para 29; reaffirmed in Banković v Belgium, 12 December 2001 (2007) 44 EHRR SE 5.

300  Keith Ewing and John Hendy QC Demir and Baykara v Turkey27 it was held that the list of essential elements of freedom of association is subject to evolution depending on particular developments in labour relations. In this connection it is appropriate to remember that the Convention is a living instrument which must be interpreted in the light of present-day conditions, and in accordance with developments in international law, so as to reflect the increasingly high standard being required in the area of the protection of human rights, thus necessitating greater firmness in assessing breaches of the fundamental values of democratic societies.28

In consequence, in Demir the ECtHR ‘reconsidered’ its earlier judgments in Swedish Engine Drivers’ Union v Sweden29 and Schmidt and Dahlström v Sweden,30 effectively reversing the ratio decidendi in those cases that collective bargaining was merely one of a set of optional rights from which member states, within their margin of appreciation, could choose the means by which each would allow unions to be heard on behalf of their members.31 This was ‘so as to take account of the perceptible evolution in such matters, in both inter­ national law and domestic legal systems’ and to maintain ‘a dynamic and evolutive approach’.32 Because of this approach and the willingness of the ECtHR, in appropriate cases, to decline to follow its previous case law, it is necessary to carefully consider the validity of propositions derived from earlier ECtHR judgments (and especially decisions of the now defunct European Commission on Human Rights) in light of more recent decisions.33 C  Article 11(1): Trade Union Rights In its ground-breaking decision in Demir and Baykara the Grand Chamber established that 27   Demir and Baykara v Turkey (2009) 48 EHRR 54, [2009] IRLR 766, App no 34503/97 (12 November 2008). The Grand Chamber unanimously upheld the unanimous judgment of the Second Chamber (see paras 98–101, 147–51). Because there was only one judge in common, it can be said that, in Demir, 23 judges of the ECtHR came to similar conclusions. For the ramifications of that decision see KD Ewing and J Hendy, ‘The Dramatic Implications of Demir and Baykara’ (2010) 39(1) Industrial Law Journal 2. 28   Demir, para 146. 29   Swedish Engine Drivers’ Union v Sweden (1979–80) 1 EHRR 617. 30   Schmidt and Dahlström v Sweden (1976) 1 EHRR 632. 31   For a discussion of the pre-Demir law, see M Forde, ‘The European Convention on Human Rights and Labor Law’ (1983) 31(2) American Journal of Comparative Law 301. 32   Demir, para 154. 33   Furthermore, Klaus Lörcher has pointed out the lack of coherence of the ECtHR jurisprudence after the judgment in Demir: ‘New social dimension in the jurisprudence of the ECtHR – the Demir and Baykara judgment, its method and follow-up’ in F Dorssemont, K Lörcher and I Schömann (eds), The European Convention on Human Rights and the Employment Relation (Oxford, Hart Publishing, 2013).



International Litigation: ECtHR  301 the right to bargain collectively with the employer has, in principle, become one of the essential elements of the ‘right to form and to join trade unions for the protection of [one’s] interests’ set forth in Article 11 of the Convention.34

The Court identified other ‘essential elements’ of the right to join a trade union ‘for the protection of his interests’ in Article 11:35 [T]he right to form and join a trade union (see, as a recent authority, Tüm Haber Sen and Çınar),36 the prohibition of closed-shop agreements (see, for example, Sørensen and Rasmussen)37 and the right for a trade union to seek to persuade the employer to hear what it has to say on behalf of its members (Wilson and Palmer).38

The ECtHR in Demir and Baykara pointed out that the list is not finite,39 though it omitted to mention decisions clearly establishing other essential elements, such as: the right to draw up and enforce union constitutions: Cheall v UK;40 Johansson v Sweden;41 and ASLEF v UK;42 and the negative right to dissociate: Young, James and Webster v UK,43 confirmed in Sigurjonsson v Iceland44 (see also Sibson v UK).45 As to the right to strike46 the ECtHR has recognised it as inherent in Article 11(1).47 In every recent case involving consideration of strikes, the ECtHR has accepted that the impugned restriction on the right to strike is in breach of Article 11(1): OFS v Norway;48 UNISON v UK;49 Wilson, Palmer and ors v UK;50

  ibid, para 154.   Demir, para 144. 36   Tüm Haber Sen and Çınar, App no 28602/95, (2008) 46EHRR 19. 37   Sørensen and Rasmussen, App nos 52562/99, 52620/99, (2008) 46 EHRR 29. 38   Wilson and Palmer (2007) 35 EHRR 20; [2002] IRLR 568. 39   ibid, para 146. 40   Cheall v UK (1985) 42 DR 178, 185. 41   Johansson v Sweden (1990) 65 DR 202, 205. 42   ASLEF v UK (2007) 45 EHRR 34, [2007] IRLR 361. 43   Young, James and Webster v UK [1981] IRLR 408. 44   Sigurjonsson v Iceland (1993) 16 EHRR 462. 45   Sibson v UK (1993) ECHR Series A 258-A. 46   We use the ‘right to strike’ to mean the right to take and/or to organise industrial action (in any form). 47  Discussed in Ewing and Hendy, ‘The Dramatic Implications of Demir and Baykara’, 13–19; KD Ewing and J Hendy, Days of Action: The Legality of Protest Strikes Against Government Cuts (London, Institute of Employment Rights, 2011) 19–20. The proposition is supported by others, notably F Dorssemont in ‘The Right to take Collective Action under Article 11 ECHR’ in F Dorssemont, K Lörcher and I Schömann (eds), The European Convention on Human Rights and the Employment Relation (Oxford, Hart Publishing, 2013) 339. See also F Dorssemont, ‘The Right to Form and to Join Trade Unions for the Protection of His Interests under Article 11 ECHR’ (2010) 2 European Labour Law Journal 185. The scepticism expressed by the English Court of Appeal in Metrobus v UNITE the Union [2009] IRLR 851, para 35, is unwarranted. 48   Federation of Offshore Workers Trade Unions v Norway, App no 381/97, (2002) ECHR 2002VI, 301. 49   UNISON v UK [2002] IRLR 497. 50   Wilson, Palmer and ors v UK (2007) 35 EHRR 20; [2002] IRLR 568 in which the existence of the right to organise (or take) industrial action was crucial to the Art 11 reasoning (see paras 45 and 46), though the case was not about industrial action. 34 35

302  Keith Ewing and John Hendy QC Dilek et al v Turkey;51 Enerji Yapi-Yol Sen v Turkey;52 Danilenkov & Others v Russia;53 Urcan v Turkey;54 Saime Özcan v Turkey;55 Kaya and Seyhan v Turkey;56 Karaçay v Turkey;57 Çerikçi v Turkey.58 In no recent case has the Court held that a restriction on the right to strike was not, prima facie, within the protection of Article 11(1). Most recently, in RMT v UK59 the right to strike, indeed the right to solidarity action (ie industrial action against an employer which is not a direct party to the dispute), was held to be protected by Article 11(1) of the Convention. In that case the RMT union wished to call out on strike its members employed by a main contractor in railway maintenance and renewal, ‘Jarvis’, in support of a strike by a small number of members employed by a smaller contractor, ‘Hydrex’, previously hived-off from Jarvis. The object was to increase the industrial pressure on Hydrex not to cut the terms and conditions on which the members had been transferred from Jarvis to Hydrex. UK law precluded such ‘secondary’ industrial action. The RMT application to the ECtHR challenged that prohibition. The RMT judgment, like that in Demir and Baykara, contains an extensive review of the ILO Committee of Experts’ and CFA materials relevant to the right to strike.60 This enabled the ECtHR to conclude that ‘secondary action is recognised and protected as part of trade union freedom under ILO Convention No. 87 and the European Social Charter.’61 The Court therefore concluded, applying Article 31(3)(c) of the Vienna Convention (discussed below), that: 76.  . . . It would be inconsistent with this method for the Court to adopt in relation to Article 11 an interpretation of the scope of freedom of association of trade unions that is much narrower than that which prevails in international law. In addition, such an understanding of trade union freedom finds further support in the practice of many European States that have long accepted secondary strikes as a lawful form of trade union action. 77.  It may well be that, by its nature, secondary industrial action constitutes an accessory rather than a core aspect of trade union freedom, a point to which the Court will revert in the next stage of its analysis. Nonetheless, the taking of secondary industrial

51   On 17 July 2007 the judgment was under the name of Satlimis¸ v Turkey and the final version was dated 30 January 2008. This was rectified on 28 April 2008 when the name was corrected to Dilek v Turkey, App nos 74611/02, 26876/02 and 27628/02. 52   Enerji Yapi-Yol Sen v Turkey, App no 68959/01, Judgment, 21 April 2009. 53   Danilenkov & Others v Russia, App no 67336/01 (10 December 2009). 54   Urcan v Turkey, App no 23018/04 etc (17 October 2008). 55   Saime Özcan v Turkey, App no 22943/04 (15 September 2009). 56   Kaya and Seyhan v Turkey, App no 30946/04 (15 September 2009). 57   Karaçay v Turkey, App no 6615/03 (27 June 2007). 58   Çerikçi v Turkey, App no 33322/07 (13 October 2010). 59   Application No 31045/10, 8 April 2014. 60   See paras 27–33, likewise the review of the European Committee on Social Rights case law, at paras 34–37. 61   RMT, para 76.



International Litigation: ECtHR  303 action by a trade union, including strike action, against one employer in order to further a dispute in which the union’s members are engaged with another employer must be regarded as part of trade union activity covered by Article 11. 78.  The Court therefore concludes that the applicant’s wish to organise secondary action in support of the [primary employer’s] employees must be seen as a wish to exercise, free of a restriction imposed by national law, its right to freedom of association within the meaning of Article 11 § 1 of the Convention. It follows that the statutory ban on secondary action as it operated in the example relied on by the applicant constitutes an interference with the applicant’s rights under this provision.

Importantly, the ECtHR rejected both the suggestion that ILO Convention 87 did not protect the right to strike and that the Committee of Experts did not have the authority to hold that it did. The Court did not need to reconsider ‘this body’s role as a point of reference and guidance for the interpretation of certain provisions of the Convention’ (including Convention 87), for which proposition it relied on Demir and Baykara.62 As to the right to strike in general, the ECtHR reviewed some of its case law on the right to strike (all included amongst those considered in the text above) and held: More generally, what the above-mentioned cases illustrate is that strike action is clearly protected by Article 11. The Court therefore does not discern any need in the present case to determine whether the taking of industrial action should now be accorded the status of an essential element of the Article 11 guarantee.63

In the RMT case the ban on secondary action was, on the facts of the case, held to be justified under Article 11(2).64 Indeed, in every other recent case in which the Court has held that the strike was not protected by the Article as a whole, it was because the restrictions on the right to strike could be justified by reference to Article 11(2).65   RMT, paras 96–97 at 97, citing paras 65–86 of Demir and Baykara.   RMT at para 84.   RMT at paras 79–105. It is likely that some commentators will conclude that the judgment represents nothing short of an appeasement by the ECtHR of the UK government’s threats to withdraw from European Convention and its repeated attacks on the ECtHR so evident in the UK stance at the 2013 Committee of Ministers’ meeting in Brighton which lead to the Brighton Declaration and the subsequent inclusion of the references to ‘margin of appreciation’ and ‘subsidiarity’ in the Preamble to the Convention. Certainly, parts of the judgment could be seen in that way and there is no doubt that the judges of the ECtHR have been eager to reassure the UK government, British judges and elements of the English media that little or no threat is posed to the autonomy of the British legal system by the ECtHR or the Convention. The official visit by the President and VicePresidents of the ECtHR to the British judges in March 2014 (with the President giving a lecture at University College London on ‘the Margin of Appreciation’) and the recent article by the former President (N Bratza, ‘Living Instrument or Dead Letter – the Future of the European Convention on Human rights’ (2014) EHRLR 116) might be thought to be illustrative of the Court’s concern to reassure. The cynical commentator might say that the judgment is a timely demonstration of that reassurance. Whether the trade union movement in the UK or in Europe will view the Court’s treatment of the right to strike in the case as reassuring is doubtful. 65   OFS, UNISON and Trofimchuk v Ukraine, App no 4241/03 (28 January 2011). 62 63 64

304  Keith Ewing and John Hendy QC The ECtHR has not restricted the right to strike to support for collective bargaining; it plainly regards the right as wider than that.66 Recent cases in the ECtHR are supportive of this thesis.67 The ECtHR has recently accepted that rights to wages and pensions may not be protected by Article 1 of Protocol 1 (right to peaceful enjoyment of possessions) in times of austerity.68 There is nothing (so far) to show that the rights protected by Article 11 could be so downgraded. D  Non-Convention Material The ECtHR in Demir and Baykara stated that in determining the existence of an essential element among the bundle of rights contained in Article 11(1), the Court takes into account the international law background to the legal question before it. Being made up of a set of rules and principles that are accepted by the vast majority of States, the common international or domestic law standards of European States reflect a reality that the Court cannot disregard when it is called upon to clarify the scope of a Convention provision that more conventional means of interpretation have not enabled it to establish with a sufficient degree of certainty.69 The Court, in defining the meaning of terms and notions in the text of the Convention, can and must take into account elements of international law other than the Convention, the interpretation of such elements by competent organs, and the practice of European States reflecting their common values. The consensus emerging from specialised international instruments and from the practice of contracting States may constitute a relevant consideration for the Court when it interprets the provisions of the Convention in specific cases.70

This approach is, to some extent, also supported by Article 60 of the Convention, which states that nothing in the Convention shall be construed as limiting or derogating from any of the human rights and fundamental freedoms which may be ensured by other Treaties to which a contracting state is a party.71   See Ewing and Hendy, Days of Action, above (n 47) 19–21.  eg, Karaçay v Turkey, above (n 24) where the object of a national day of strike action was to defend the purchasing power of public servants; Çerikçi v Turkey, above (n 24) participating in a May Day rally; Kaya and Seyhan v Turkey, above (n 24) where the national day of strike action was to protest against a proposed law on the organisation of the public service then before Parliament. 68   Koufaki and Adedy v Greece, App nos 57665/12 and 57657/12, Decision, 7 May 2013; Mateus and Januário v Portugal, App nos 62235/12, 57725/12, Decision, 8 October 2013; Savickas v Lithuania, App no 66365/09, Decision, 15 October 2013; 69   Demir, para 76. 70   ibid, para 85. 71   Indeed, the Ministerial Conference in Rome on 5 November 1990 called for the recognition of ‘the indivisible nature of all human rights, be they civil, political, social or cultural’. In Ta˘nase v Moldova App no 33401/02, Judgment, 27 April 2010 (GC) para 176, the ECtHR made the point that it was for it to decide which international instruments and reports it considers relevant and how much weight to attribute to them. 66 67



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In Demir and Baykara there was extensive consideration of international labour standards, including relevant provisions of: ILO Conventions;72 the Council of Europe’s Social Charter of 1961;73 the Charter of Fundamental Rights of the European Union of 2000;74 and the International Covenant on Economic, Social and Cultural Rights 1966.75 Not merely did the ECtHR make reference to these instruments, but it relied on the elaboration and application of those standards in the jurisprudence of their supervisory bodies.76 A similar review took place in the RMT case in relation to the right to strike.77 In relation to the ILO, the Grand Chamber in Demir and Baykara did not confine its attention to ILO findings in relation to Turkey specifically, but also extended to its body of principles drawn from earlier decisions of the Committee on Freedom of Association (CFA) and the Committee of Experts on the Application of Conventions and Recommendations (CEACR). These were taken from, respectively, the Digest of Decisions and Principles of the Freedom of Association Committee of the Governing Body of the ILO78 and the General Survey, properly entitled Freedom of Association and Collective Bargaining: General Survey by the Committee of Experts on the Application of Conventions and Recommendations.79 From its publication in 2012, the CEACR’s magisterial General Survey on the Fundamental Conventions concerning rights at work in the light of the ILO Declaration on Social Justice for a Fair Globalization, 200880 will no doubt become an equally essential point of reference in the jurisprudence of the ECtHR. The Grand Chamber in Demir and the Fourth Section in RMT also took into account the jurisprudence of the ESC established by decisions of the European Committee of Social Rights (ECSR)81 and of the Committee of Ministers of the Council of Europe.82 The body of decisions of the ECSR is found in the Annual   Demir, paras 37–39, 42–44, 147–48; and see paras 100–02.  ibid, paras 49–50, 74, 77, 149; and see paras 46, 103–04. 74  ibid, paras 51, 150 (and see para 80). The Charter of Fundamental Rights of the European Union adopted in Nice in 2000 and recognised by Art 6 of the Treaty on European Union. Art 12 of the Charter on trade union rights is referred to in Demir, para 47. 75   Demir, para 41; para 40 refers also to the International Covenant on Civil and Political Rights. 76   Reference to these instruments and their jurisprudence had been made in earlier cases and in particular Sigurjonsson v Sweden (1993) 16 EHRR 462, para 35; Wilson and Palmer (2007) 35 EHRR 20; [2002] IRLR 568, paras 30, 35, 36, 37; ASLEF v UK (2007) 45 EHRR 34, [2007] IRLR 361, paras 22 and 25. Reliance on such jurisprudence can also be seen in Vörd- ur Ólafsson v Iceland, App no 20161/06 (27 July 2010). 77   At paras 27–33. 78   Published by the ILO, latest edn is the 5th (2006). 79   Published by the ILO, the General Survey had not then been updated since 1994. But a new General Survey was published in 2012, see below (n 80). 80   Report III (part 1B) of the Report of the CEACR to the International Labour Conference, 2012, available at: www.ilo.org/public/libdoc/ilo/P/09661/09661%282012-101-1B%29.pdf. 81   Referred to in para 149 of Demir and Baykara and paras 34–37 of RMT. In Wilson and Palmer, the references to the ECSR were also extensive; see paras 30–33 of that judgment. 82   Referred to in para 104 of Demir and Baykara and para 95 of RMT. 72 73

306  Keith Ewing and John Hendy QC ‘Conclusions’ of the ECSR, and is summarised in its Digest of the Case Law of the European Committee of Social Rights.83 The Grand Chamber in Demir and Baykara further held that it was immaterial that the respondent state had not ratified any otherwise apposite international treaty provision: In this context, it is not necessary for the respondent State to have ratified the entire collection of instruments that are applicable in respect of the precise subject matter of the case concerned. It will be sufficient for the Court that the relevant international instruments denote a continuous evolution in the norms and principles applied in international law or in the domestic law of the majority of Member States of the Council of Europe and show, in a precise area, that there is common ground in modern societies.84

The analysis of the ILO and ESC material by the ECtHR in RMT led it to conclude that: The foregoing analysis of the interpretative opinions emitted by the competent bodies set up under the most relevant international instruments mirrors the conclusion reached on the comparative material before the Court, to wit that with its outright ban on secondary industrial action, the respondent State finds itself at the most restrictive end of a spectrum of national regulatory approaches on this point and is out of line with a discernible international trend calling for a less restrictive approach.85

However, (unlike previous cases in which ILO and ESC material had been relied upon by the court) in RMT, the Court held: The specialised international monitoring bodies operating under those procedures have a different standpoint, shown in the more general terms used to analyse the ban on secondary action. In contrast, it is not the Court’s task to review the relevant domestic law in the abstract, but to determine whether the manner in which it actually affected the applicant infringed the latter’s rights under Article 11 of the Convention (see Von Hannover v. Germany (no. 2) [GC], nos. 40660/08 and 60641/08, §116, ECHR 2012; also Kart v. Turkey [GC], no. 8917/05, §§ 85-87, ECHR 2009 (extracts)). 86

In consequence the ‘alleged far-reaching negative effects of the statutory ban’ (which the ILO and ESC jurisprudence identified) in consequence of which   Published by the Council of Europe, the latest edn is 1 September 2008.   Demir, para 86, citing Marckx v Belgium 13 June 1979, Series A, No 31, para 41 (and see also para 20). The ILO has always considered that its fundamental conventions apply to states irrespective of their ratification of them (eg, to the Republic of South Africa in the apartheid era) and the very fact of membership of the ILO carries with it a constitutional obligation to respect the fundamental principles. Indeed, some authors regard the fundamental principles as having arguably become part of customary international law: ILO, The Trade Union Situation in Chile, Report of the Fact-Finding and Conciliation Commission on Freedom of Association, ILO, 1975, para 466; CW Jenks, The International Protection of Trade Union Freedom (London, Stevens & Sons, 1957) 561–62; P O’Higgins, ‘International Standards and British Labour Law’ in R Lewis (ed), Labour Law in Britain (Oxford, Basil Blackwell Ltd, 1986) 577. The logic adopted by the ECtHR in resting on international law standards is consistent with the common law principle of legality explained by Lord Hoffman in R v Secretary of State for the Home Dept, ex p Simms [2000] 2 AC 115, 131; followed by Gleeson CJ in Electrolux etc v Australian Workers Union (2004) 221 CLR 309, 329. 85   RMT, para 98. 86   RMT, para 98. 83 84



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‘trade unions could find themselves severely hampered in the performance of their legit­imate, normal activities in protecting their members’ interests’ simply did not arise on the facts in the RMT case since the members of the RMT employed at Hydrex were not precluded from taking primary strike action.87 This being so, the Court considers that the negative assessments made by the relevant monitoring bodies of the ILO and European Social Charter are not of such persuasive weight for determining whether the operation of the statutory ban on secondary strikes in circumstances such as those complained of in the present case remained within the range of permissible options open to the national authorities under Article 11 of the Convention.88

Nonetheless, the Court held that it had: [N]o competence to assess the respondent State’s compliance with the relevant standards of the ILO or the European Social Charter, the latter containing a more specific and exacting norm regarding industrial action. Nor should the conclusion reached in this case be understood as calling into question the analysis effected on the basis of those standards and their purposes by the ILO Committee of Experts and by the ECSR.

E  Law and Practice of Contracting States In identifying the scope of the Convention right in question, Demir and Baykara also referred to the law and practice of ‘European countries which are like-minded and have a common heritage of political traditions, ideals, freedom and the rule of law’.89 Although there was little discussion of ‘the practice of European States’ in the Court’s judgment,90 it is plain that the ECtHR, being composed of judges from member states, will bring their own knowledge of the law and practice of, at least, their own state to judicial discussions.91 In RMT as noted above, the Court found that ‘with its outright ban on secondary industrial action, the respondent   RMT, para 98.   RMT, para 98.   Demir, paras 165–66; Preamble to the Convention, 4 November 1950. 90   Though see Demir, paras 52, 151 and 165. In Stummer v Austria, App no 37452/02 (7 July 2011) after due consideration it was found that there was a lack of convergence in the law and practice of European states sufficient to hold that prisoners had a right not to be excluded from old age pensions. In Sanchez v Spain, App no 28955/06 etc (12 September 2011) paras 27–32, 75, the Grand Chamber (hearing a case referred by the Applicants from the Court’s Third Section (sub nom: Jimenez v Spain) made reference to comparative law research apparently undertaken (presumably by the ECtHR, though this is not clear) in relation to 35 Council of Europe member states, though no examples were given. The conclusion was shortly stated as demonstrating convergence. The Court held (para 75) that: ‘The homogeneity of European legal systems in this area is a relevant factor in balancing the various rights and interests at stake in the present case’. The case involved the dismissal of union activists for publishing a cartoon derogatory of management and both the Third Section and the Grand Chamber held there was no breach of Arts 10 or 11 (cf Vellutini and Michel v France). In the pre-Demir case of UNISON v UK, above (n 49) the extensive comparative material submitted by counsel for the Applicant and designed to show that the challenged restriction had no parallel elsewhere in Europe was simply ignored by the ECtHR. 91   As will the non-judicial rapporteurs drawn from different member states. 87 88 89

308  Keith Ewing and John Hendy QC State finds itself at the most restrictive end of a spectrum of national regulatory approaches’92 ‘at one end of the comparative spectrum, being one of a small group of European States to adopt such a categorical stance on the matter.’93 In fact the only State which appeared to share an outright ban was Luxembourg, RMT having shown that the other States referred to did not have such a ban. Nonetheless the fact that there was no unanimous consensus did not mean that the UK ‘stepped outside their legitimate margin of appreciation in regulating this aspect of trade union activity.’94 F  Permissible Restrictions, Article 11(2) Article 11(2) qualifies the rights contained in Article 11(1). Other Articles have similar qualifications. It is in relation to Article 11(2) that the forensic battle in trade union cases before the ECtHR is usually fought. Article 11(2) provides that: No restrictions shall be placed on the exercise of these rights other than such as are prescribed by law and are necessary in a democratic society in the interests of national security or public safety, for the prevention of disorder or crime, for the protection of health or morals or for the protection of the rights and freedoms of others. This Article shall not prevent the imposition of lawful restrictions on the exercise of these rights by members of the armed forces, of the police or of the administration of the State.

In Tüm Haber Sen and Çinar v Turkey the ECtHR held that ‘The exceptions set out in Article 11 are to be construed strictly; only convincing and compelling reasons can justify restrictions on such parties’ freedom of association’.95 G  Permissible Restrictions: Prescribed by Law The first condition of Article 11(2) (as in other Articles) is that the restriction be prescribed by (national) law, though fulfilment of that condition is not, of course, determinative of whether the impugned restriction is permissible. But the fact that the law is subsequently held by the domestic courts to be unwarranted or invalid will not mean that the restriction, while it applied, did not fulfil the requirement of being prescribed by law.96   Para 98.   Para 91. 94   Para 91. 95   Tum Haber Sen, App no 28602/95 (21 February 2006); (2008) 46 EHRR 19, para 35. Sunday Times v UK (1977) 28 ECHR B 64, paras 194–95 and Demir and Baykara para 146 are to the same effect (the latter citing Refah Partisi (the Welfare Party) v Turkey (GC), App nos 41340/98, 41342/98, 41343/98 and 41344/98, ECHR 2003‑II; and Selmouni v France (GC), App no 25803/94, ECHR 1999‑V). 96  In Ba˛czkowski and ors v Poland, App no 1543/06 (24 September 2007), a march of some 3000 people took place to draw attention to discrimination against homosexuals in spite of a ban on its 92 93



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The fact that the legal restriction was subsequently held to be invalid in national law may, in some circumstances, be evidence that it was not ‘necessary in a democratic society’. Thus, the retrospective imposition of a penalty imposed by law, even a trivial one, though satisfying the legal prescription requirement may well fail other aspects of Article 11(2).97 Thus, minimal disciplinary warnings to be more attentive to duties as punishment for necessarily unauthorised absence from work while participating in a strike were, as we have seen, held to be in breach of Article 11(1) and could not fulfil the test of necessity in a democratic society.98 H  Permissible Restrictions: Legitimate Aim Legitimacy of objective is not often a difficulty for states seeking to justify restrictions on Article 11 rights by domestic law99 (though challenge to the claimed legitimate aim is certainly possible).100 But even so, it is important for the public authorities to show a certain degree of tolerance towards [in that particular case] peaceful gatherings if the freedom of assembly guaranteed by Article 11 of the Convention is not to be deprived of all substance.101

Even a non-violent sit-in that unlawfully blocked a public road may demand the tolerance of the authorities under Article 11(2).102 But there is a limit to tolerance taking place. The ban was subsequently quashed in domestic proceedings but the fact that there had been a ban was in breach of Art 11: ‘The applicants took a risk in holding [static assemblies of some 3,000 persons] given the official ban in force at that time. The assemblies were held without a presumption of legality, such a presumption constituting a vital aspect of effective and unhindered exercise of freedom of assembly and freedom of expression. The Court observed that the refusals to give authorisation could have had a chilling effect on the applicants and other participants in the assemblies. It could also have discouraged other persons from participating’ (para 67). See also (in relation to much heavier penalties quashed by the domestic courts) Urcan v Turkey, App no 23018/04, etc (17 October 2008); Saime Özcan v Turkey, App no 22943/04 (15 September 2009). 97  In Kuznetsov v Russia, App no 10877/04 (23 October 2008), 10 days’ notice for a picket was required by law and the organisers gave only eight days. That breach of the law led to a fine equivalent to some 35 euros. The restriction was thus prescribed by law (and fulfilled the legitimate aim of preventing disorder and protecting the rights of others). But it failed the ultimate requirement of Art 11(2), necessity in a democratic society, because the ECtHR held that the breach of the legal time limit in this case: ‘was neither relevant nor a sufficient reason for imposing administrative liability on the applicant. In this connection the Court emphasises that the freedom to take part in a peaceful assembly is of such importance that a person cannot be subjected to a sanction – even one at the lower end of the scale of disciplinary penalties – for participation in a demonstration which has not been prohibited, so long as this person does not himself commit any reprehensible act on such an occasion’ (para 43). 98   Karaçay v Turkey, para 37; Çerikçi v Turkey; and Kaya and Seyhan v Turkey, para 30. 99   eg, in RMT the ECtHR held that it was a legitimate aim of the blanket ban to counter the largely unevidenced general threat to third parties said by the government to be posed by secondary action – notwithstanding the absence of any such threat on the facts of the case. 100   eg, in a strike case, Kaya and Seyhan v Turkey, above (n 24), ‘La Cour doute que l’ingérence dans la présente affaire poursuivît un but légitime au sens de l’article 11 § 2 de la Convention’. 101   Kuznetsov v Russia, above (n 97) para 44, citing: Galstyan v Armenia, App no 26986/03 (15 November 2007); Bukta and or v Hungary, App no 25691/04, ECHR 2007-IX (17 October 2007); Oya Ataman v Turkey, App no 74552/01 (5 December 2006). 102   G v Germany (1989) 60 DR 256 (ECommHR).

310  Keith Ewing and John Hendy QC and it has been held to be permissible under Article 11(2) to ban demonstrations to prevent reasonably anticipated disorder,103 excessive noise,104 or excessive disruption to passers-by.105 The proper limit of tolerance to the claimed disruption of third parties alleged to arise from secondary action received no consideration in the RMT case. The mere iteration of such consequences by the government appears to have been sufficient justification, notwithstanding that on the facts of the case, beyond the impact of the intended secondary action (had it occurred) on Jarvis, there was no evidence that anyone else would have been disrupted. I  Permitted Restrictions: Necessity in a Democratic Society The condition that the restriction must be ‘necessary in a democratic society’ may present a formidable difficulty for the state seeking to justify the restriction which it has imposed or permitted on trade union rights. This is because ‘pluralism, tolerance and broadmindedness are the hallmarks of a democratic society’.106 A restriction which is ‘necessary in a democratic society’ must be shown to fulfil a ‘pressing social need’ which is proportionate107 and which relates to one or more of the legitimate aims identified in the text of Article 11(2), based on an acceptable assessment of the relevant facts in the circumstances prevailing in the given country at the time.108 ‘[N]ecessary in this context does not have the flexibility of such expressions as “useful” or “desirable”’.109 ‘[E]xceptions to the rule of freedom of association are to be construed strictly and only convincing and compelling reasons can justify restrictions on that freedom’.110 Necessity must be ‘convincingly established’.111   Christians against Racism and Fascism, above (n 25); Cisse v France (9 April 2002).   S v Austria (13 December 1990).   Friedl v Austria (30 November 1992). In Barraco v France, App no 31684/05 (5 June 2009), a three-lane cortège of lorries driven along a busy motorway on a Monday morning at less than 10 kph (‘opération escargot’) with frequent stops had been tolerated for several hours by the authorities. But they intervened when the road became completely blocked and arrested the drivers who were subsequently convicted and sentenced to a three-month suspended sentence of imprisonment and a fine of 1500 euros. The ECtHR held this was lawful, legitimate and proportionate under Art 11. 106   Young, James and Webster v UK, above (n 43) para 105. 107   The ‘nature and severity of the sanction are factors to be taken into account when assessing the proportionality of the interference’: Jehovah’s Witnesses of Moscow, below (n 109) para 154, citing Refah Partisi (Welfare Party) v Turkey (2003) 37 EHRR 1, para 133. 108   Sunday Times v UK, above (n 95) paras 59 and 62; Olsson v Sweden (1988) 11 EHRR 259; Observer and Guardian v UK (1991) ECHRR (Series A) 216; Lingens v Austria (1986) ECHRR (Series A) 103, para 43; Ezelin v France (1991) ECHRR (Series A) 202, para 51; Oberschlick v Austria (1991) ECHRR (Series A) 204, para 60; Demir, para 164. 109   Young, James and Webster v UK, above (n 43) para 104; Jehovah’s Witnesses of Moscow v Russia (2011) 53 EHRR 4, App no 302/02 (10 June 2010) para 100, citing Gorzelik v Poland (2005) 40 EHRR 633, paras 94 and 95 with further references. 110   Jehovah’s Witnesses of Moscow, above (n 109) para 100. 111   Autronic AG v Switzerland (1990) ECHRR (Series A) 178, para 61; Weber v Switzerland (1990) ECHRR (Series A) 177, para 47; Barthold v Germany (1985) ECHRR (Series A) 90, para 58. 103 104 105



International Litigation: ECtHR  311 Demir and Baykara reiterated established jurisprudence in holding that: In determining in such cases whether a ‘necessity’ – and therefore a ‘pressing social need’ – within the meaning of Article 11 § 2 exists, States have only a limited margin of appreciation, which goes hand in hand with rigorous European supervision embracing both the law and the decisions applying it, including those given by independent courts.112

As to proportionality, the task of the ECtHR is not to substitute its own view for that of the relevant national authorities but rather to review the decisions they delivered in the exercise of their discretion. This does not mean that it has to confine itself to ascertaining whether the respondent State exercised its discretion reasonably, carefully and in good faith; it must look at the interference complained of in the light of the case as a whole and determine whether it was ‘proportionate to the legitimate aim pursued’ and whether the reason adduced by the national authorities to justify it are ‘relevant and sufficient’. In so doing, the Court has to satisfy itself that the national authorities applied standards which were in conformity with the principles embodied in the appropriate provision of the Convention and, moreover, that they based their decisions on an acceptable assessment of the relevant facts.113

In determining the ‘principles’ the non-Convention international legal materials, so decisive in Demir and Baykara, will be vital. Similarly important will be the comparative exercise to ascertain any consensus in the law and practice of contracting states. The suggested (but unproven) fact that one or two other of the 47 States of the Council of Europe also banned secondary action was enough to defeat consensus in the RMT case. The jurisprudence of states outside the Council of Europe may also be prayed in aid. In Jehovah’s Witnesses of Moscow v Russia114 the ECtHR found support for its reasoning not merely from a judgment of the Constitutional Court of Spain115 and one by the UK Court of Appeal,116 it also cited judgments from the Supreme Court of the Tatarstan Republic,117 the Ontario Supreme Court,118 the Court of Appeals of New York,119 the South African Supreme Court,120 the 112   Demir, para 119. The Court referred in that passage to Sidiropoulos v Greece, 10 July 1998, para 40, Reports 1998‑IV. This principle had been stated in Tüm Haber Sen, above (n 36) para 35 and was more recently restated in Patyi v Hungary, App no 5529/05 (7 January 2009) paras 38–39 and Jehovah’s Witnesses of Moscow, above (n 109) para 108. 113   Jehovah’s Witnesses of Moscow, above (n 109) para 108, citing Utd Communist Party of Turkey v Turkey (1998) 26 EHRR 121 T, para 47 and Partidul Comunistilor (Neperceristi) (2007) 44 EHRR 17, para 49. The last sentence is a reiteration of Demir (above (n 27) para 119 which cited Yazar v Turkey, App no 22723/93 etc, ECHR 2002‑II, also recently restated in Patyi v Hungary, above (n 25) para 40. 114   Jehovah’s Witnesses of Moscow v Russia, above (n 109) para 85. 115   ibid, para 88. 116   ibid, paras 86 and 138. 117   ibid, para 84. 118   ibid, para 85. 119   ibid, para 87. 120   ibid, para 88.

312  Keith Ewing and John Hendy QC Supreme Court of Argentina121 and one from the Supreme Court of Japan.122 In Sanchez v Spain123 the Grand Chamber cited an Advisory Opinion of the InterAmerican Court of Human Rights.124 For Demir and Baykara made clear that the relevance of the international material was not confined to identifying the rights protected (in that case) by Article 11(1), it was also relevant to determining the standard of necessity in a democratic society pursuant to Article 11(2).125 Necessity in a democratic society cannot, of itself, justify a restriction of an Article 11(1) right. The restriction must be imposed for one of the very limited reasons identified in Article 11(2); only if it is can necessity in a democratic society sustain the impugned restriction. If the government cannot found upon one of those reasons then the fact that it is arguable that the restriction is necessary in a democratic society will be irrelevant. The Article 11(2) bases for invoking necessity in a democratic society are exhaustive: there is no residual category. Those bases include justification by reference to ‘interests of national security or public safety, for the prevention of disorder or crime, [and] for the protection of health or morals’. One possible justification of necessity in a democratic society is for the ‘protection of the rights and freedoms of others’ (taken together with Article 1 of Protocol 1 which provides the right to peaceful enjoyment of property). Every form of industrial action interferes with the rights and freedoms of others and, in particular, those of the targeted employers. The whole rationale of industrial action is to impact adversely on those against whom it is directed in order to bring pressure to bear to achieve the objective of those taking the action. But if the mere fact of interference with the rights of employers was sufficient in itself to justify restricting the right to strike, there would be no right to strike in Europe so that the express acknowledgement of the right to strike in the European Social Charter (both in the 1961 and 1996 versions), and in other international treaties and in the constitutions and laws of almost every contracting state126 would be inexplicable.  ibid.  ibid.   Sanchez v Spain, App no 28955/06 etc (12 September 2011). 124   OC-5/85, in relation to Art 8 (‘trade union rights’) of the San Salvador Protocol (17 November 1988, effective 16 November 1999) to the American Convention on Human Rights (22 November 1969, effective 18 July 1978). 125   Demir, paras 165–66. 126   Note the list of examples of states having the right to strike in their constitutions referred to by the CEACR General Survey of 2012, above (n 79) 50. They are: Albania, Algeria, Angola, Argentina, Armenia, Azerbaijan, Belarus, Benin, Plurinational State of Bolivia, Bosnia and Herzegovina, Brazil, Bulgaria, Burkina Faso, Burundi, Cambodia, Cameroon, Cape Verde, Central African Republic, Chad, Chile, Colombia, Congo, Czech Republic, Democratic Republic of the Congo, Costa Rica, Côte d’Ivoire, Croatia, Cyprus, Djibouti, Dominican Republic, Ecuador, El Salvador, Estonia, Ethiopia, France, Georgia, Greece, Guatemala, Guinea, Guinea-Bissau, Guyana, Haiti, Honduras, Hungary, Italy, Kazakhstan, Kenya, Republic of Korea, Kyrgyzstan, Latvia, Lithuania, Luxembourg, the former Yugoslav Republic of Macedonia, Madagascar, Republic of the Maldives, Mali, Mauritania, Mexico, Republic of Moldova, Montenegro, Morocco, Mozambique, Nicaragua, Niger, Panama, Paraguay, Peru, Philippines, Poland, Portugal, Romania, Russian Federation, Rwanda, San Marino, Sao Tome and Principe, Senegal, Serbia, Seychelles, Slovakia, 121 122 123



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In RMT it was argued that the economic interests of employers cannot without more trump the human rights of workers and their unions and thus argued127 that the decision in UNISON v UK128 was wrong and inconsistent with the subsequent jurisprudence of the ECtHR.129 There, a statutory restriction on the right to strike was held to be justified by reference to Article 11(2) as necessary in a democratic society for the protection of the economic interests of the current employer against the strike.130 Significantly, the ECSR (after the ECtHR decision), held that the restriction in that case was not compatible with Article 6(4) of the European Social Charter.131 Had the decision of the ECSR preceded that of the ECtHR, the latter might have come to a different conclusion, though on the logic now of RMT it might have been disregarded. In RMT the ECtHR appeared to accept the criticism of the UNISON case, instead distinguishing UNISON by holding that by its nature secondary action may well have much broader ramifications than primary action. It has the potential to impinge upon the rights of persons not party to the industrial dispute, to cause broad disruption within the economy and to affect the delivery of services to the public. Accordingly, the Court is satisfied that in banning secondary action, Parliament pursued the legitimate aim of protecting the rights and freedoms of others, not limited to the employer side in an industrial dispute.132

There was no evidence beyond ministerial assertion that secondary action had caused broad disruption to the economy or affected the delivery of services to the public during the 75 years in which secondary action was permitted.133 It Slovenia, South Africa, Spain, Sweden, Switzerland, Suriname, Timor-Leste, Togo, Turkey, Ukraine, United States, Uruguay and Bolivarian Republic of Venezuela. To this could have been added states where the highest courts have held that the right to strike is implicit in their constitutions, eg, Ireland (Education Co v Fitzpatrick [1961] IR 294, 397). 127  See RMT, para 80. 128   UNISON v UK [2002] IRLR 497. 129   Ewing and Hendy, Days of Action, above (n 47) 26–30. See also J Hendy, ‘Caught in a Fork’ (2000) 29(1) Industrial Law Journal 53. See also B Simpson, ‘Trade Disputes and Industrial Action Ballots in the Twenty-first Century’ (2002) 31(3) Industrial Law Journal 270; T Novitz, International and European Protection of the Right to Strike (Oxford, Oxford University Press, 2003) 231–32. 130   Paras 42–43. The strike was intended to pressure the employer to ensure particular terms and conditions of work after transfer of the business to one of several tenderers. The English Court held that the strike lost statutory protection because the dispute was as to terms and conditions payable by a future employer and because it would benefit not just the existing workforce but workers yet to be employed. 131  See ECSR, Conclusions C XVII-1, 516–19; ECSR, Conclusions XVIII-1, 819–22; and see Conclusions XIX-3. There was no suggestion that the breach of Art 6(4) could be justified under Art 31 of the Social Charter which permits restrictions on Charter rights (including Art 6(4)) similar in terms to those to be found in Art 11(2) of the Convention. 132   RMT, para 82. 133   It was not disputed that: ‘the available statistics did not distinguish between primary and secondary strikes. It was therefore impossible to identify the true extent of secondary action before 1980, and, consequently, impossible to ascertain the impact of the restrictions introduced in 1980 and 1990. In the applicant’s view, secondary action had been relatively rare, the overwhelming majority of strikes at that time had been primary strikes. It referred to official figures (contained in a Government publication, the “Employment Gazette”) indicating that, since the 1960s, the United Kingdom was

314  Keith Ewing and John Hendy QC appeared to be of little relevance to the Court that the secondary action sought on the facts of the case could not have caused broad disruption to the economy or disrupted the delivery of services to the public.134 The ECSR has rejected the proposition that there is any principle of proportionality between the damage caused by, and the object of, industrial action.135 Likewise the ILO, has never included the need to assess the proportionality of interests . . . The Committee has only suggested that, in certain cases, the notion of a negotiated minimum service in order to avoid damages which are irreversible or out of all proportion to third parties, may be considered and if agreement is not possible the issue should be referred to an independent body.136

The ECtHR in RMT made no reference to this consideration of the interests of third parties. It is only if the damage inflicted is intended to ruin the business that the jurisprudence of some contracting states permits that factor to outweigh the right to strike.137 On that basis the decision in OFS v Norway138 is unexceptional because the ECtHR accepted that the consequences to the national economy of a strike in the offshore oil industry would have been so catastrophic that the state was justified in ordering it to cease. The ECtHR in RMT did not refer to this strand of jurisprudence on proportionality. A review of recent cases concerning the right to strike in the ECtHR shows that state governments’ attempts to invoke Article 11(2) to justify restrictions have generally not met with success until the RMT case. This might be suggested to reflect, in many cases, the grossness of the violation in the cases which have been brought139 but analysis of the principles shows that there are formidaconsistently close to the European average for days lost to industrial action. According to this source, the country had been middle-ranking since the end of the 1970s. The only exception was for 1984, on account of the long and widespread strike in the mining industry that year.’ (para 25). 134   Though the Court, without a shred of supportive evidence, appeared to doubt that this was so: RMT, para 102. 135  ECSR, Conclusions XVI-1 (Belgium). 136   2010 Report of the CEACR (see also the Reports for 2012 and 2013) rejecting the UK government’s reliance on Case C-438/05 Viking Line ABP v ITWF [2008] IRLR 14, Judgment of the CJEU, 11 December 2007, and Case C-346/06 Laval un Partneri Ltd v Svenska Byggnadsarbetareföbundet [2008] IRLR 160, Judgment of the CJEU, 18 December 2007, in its decision on an application brought by BALPA. On the BALPA case, see KD Ewing and J Hendy, ‘The CJEU Decisions and Trade Union Freedom: Lessons from the United Kingdom’ in KD Ewing and J Hendy (eds), The New Spectre Haunting Europe – the CJEU, Trade Union Rights, and the British Government (London, Institute of Employment Rights, 2009). 137   See W Warneck, Strike Rules in the EU27 and Beyond. – A Comparative Overview (Brussels, ETUI-REHS, 2007); A Stewart and M Bell (eds), The Right to Strike: A Comparative Perspective; AStudy of National Law in 6 EU States (Institute of Employment Rights, 2008); E Ales and T Novitz (eds), Collective Action and Fundamental Freedoms in Europe – Striking the Balance (Antwerp, Intersentia, 2010). 138   OFS v Norway (2002) ECHR 2002-VI 301. 139   The minimal warning cases of Karaçay, Çerikçi and Kaya and Seyhan, above (n 24) do not fit this thesis.



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ble obstacles for governments to overcome save, perhaps where there is a political will in the ECtHR to permit the State in question to do so.140 Whilst the generalised threat to third parties supplied the ‘legitimate aim’ in the RMT case for the ban on secondary action, disregarding the lack of such threat on the facts of the case itself, it is to be observed that it was precisely an examination of the facts of the case which enabled the Court to conclude that Article 11 rights were not rendered illusory by the blanket ban on secondary action since the union had been able to ‘strive for the protection of their members’ interests’ by taking (ineffectual) primary strike action and (ineffectual) collective bargaining.141 Furthermore, it was precisely the facts of the case which enabled the Court to disregard the jurisprudence of the ILO and ESC by holding that the adverse consequences which that jurisprudence identified as consequential on the ban on secondary action did not apply to the particular facts.142 The ECtHR stressed that Article 11 does not guarantee a right to a collective agreement, ‘nor does the right to strike imply a right to prevail.’143 In fact RMT had never suggested the existence of such rights. As a key feature of freedom of association and the right to trade union membership it sought the right of solidarity action which it considered was likely to have been successful but might well not have been. The notion of ‘solidarity’ inherent in freedom of association and especially in trade union freedom appears to have carried little weight with the ECtHR although the union had ‘adduced cogent arguments of trade union solidarity and efficacy’144 such as that ‘Trade unionism was fundamentally about solidarity among union members and among workers more generally, and the wording of Article 11 of the Convention should be construed in keeping with this. Workers should be able to take industrial action to protect those who may be prevented from doing so, or who, on their own, lack the collective strength to defend their interests at work.’145

Or, as the TUC and ETUC had put it to the Court: The complete ban on secondary action meant that workers in dispute could not in any circumstances call on members of their own union for support, or of any other trade union with which their own was associated at a higher level (e.g. federation or confederation). This diminished the very purpose of joining a trade union, and undermined the purpose of this dimension of Article 11, which reflected the principle that workers should be free to combine for mutual support in times of crisis.146   See n 64, above.   Para 85.   Para 98. 143   Para 85 and see 88. 144   Para 103. 145   Para 56. 146   Para 71. And Liberty added (at para 72): ‘It had been estimated that over 3 million jobs were now outsourced in the British economy, a great many of these from the public sector, where union density had traditionally been highest. This fragmentation of the traditional labour market had implications for labour law generally, and made it increasingly difficult for trade unions to continue to defend the interests of their members, who were increasingly dispersed among different economic 140 141 142

316  Keith Ewing and John Hendy QC J  The Margin of Appreciation The margin of appreciation appeared narrow to the point of non-existence in industrial relations cases such as Kaya and Seyhan v Turkey;147 Karaçay v Turkey;148 and Çerikçi v Turkey 149 where the Turkish government had acted in breach of Article 11 by warning civil servants to be more attentive to their duties in the future for leaving their workplaces without authority in order strike for a day. In contrast, in industrial relations cases it has now widened to the extent of a yawning chasm as revealed in RMT. There the ECtHR sidestepped the ‘limited margin’ accorded to States by Demir and Baykara150and instead followed Sindicatul ‘Pastorul cel Bun’ v Romania 151 in holding that the margin was a wide one152 where the restriction is directed at an accessory rather than core aspect of trade union activity.153 Secondary strike action was only a ‘secondary aspect of trade union activity’.154 Yet this proposition is wholly flawed. Trade union membership is precisely to provide solidarity between members for the protection of their collective interests not their immediate personal interests. In a typical primary strike in support of collective bargaining the members called upon to strike and who vote and participate in the strike may not themselves have an immediate interest in the success of the particular demand. Rather their interest is in the maintaining the strength of their union by their participation with the prospect of forcing concessions themselves in the future, with the support of their fellow members. This core trade union activity undergoes no change when members are called upon to support fellow members employed by a different employer. The notion of primary and secondary industrial action as defined in UK law is a reflection of the legal identity of the employer(s); it does not reflect to any extent primary or secondary aspects of trade union membership. Trade union membership is usually across employers, indeed, often across industries. Furthermore, the collective bargaining which is an essential element of trade union membership rights is, in most European States, a cross-employer mechanism reflecting industry-wide sectoral collective bargaining arrangements. The confinement of industrial action to a single employer may be a legitoperators. In this context, the effect of the ban on secondary strikes was to greatly reduce the value of trade union membership, as it prevented the union from mobilising broadly in solidarity with and so as to protect the interests of members in dispute with their direct employer. The ban made it easy for companies to undercut the influence of trade unions by re‑configuring their organisations. It was clearly established in domestic case-law that the corporate veil could not be lifted in such circumstances. This deprived them of the possibility of taking effective action against those with real decision-making power or control.’ 147   Kaya and Seyhan v Turkey, App no 30946/04 (15 September 2009). 148   Karaçay v Turkey, App no 6615/03 (27 June 2007). 149   Çerikçi v Turkey, App no 33322/07 (13 October 2010). 150   Demir and Baykara, para 119. 151   Sindicatul ‘Pastorul cel Bun’ v Romania [GC], no 2330/09, § 34, 9 July 2013, para 133. 152   RMT, para 86. 153   RMT, para 87. 154   RMT, para 88.



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imate policy option but it cannot be the basis of distinguishing core and secondary aspects of trade union rights. The Court in making this distinction appeared to overlook the fact that in previous cases it had not distinguished between strikes aimed at the immediate employer and strikes for wider, solidarity purposes. Certainly the Court has never sought to confine the right to strike to those whose interest is directly at stake in the demand the strike is intended to advance. The Court held that the wide margin of appreciation it had derived from the fragmentation of core and accessory trade union activities, anyway accorded to the wide margin of appreciation given to States in matters of ‘social and economic strategy of the Respondent State.’155 Indeed ‘in the sphere of social and economic policy, which must be taken to include a country’s industrial relations policy, the court will generally respect the legislature’s policy unless it is “manifestly without reasonable foundation”.’156 Since trade unions, industrial action and collective bargaining are clearly matters of industrial relations policy, the court is discarding any notion of proportionality or even necessity in a democratic society in such cases and instead imposing the almost unsurmountable test of whether the restriction of normal trade union activity is manifestly without reasonable foundation. It is not surprising that the jurisprudence of the ILO and ESC was not of sufficient persuasive weight to displace this defence.157 Nor, in that light, is it surprising that the restrictions on trade union rights on the facts of the case in question were not enough to displace an outright and blanket ban on secondary action.158 Nor is it surprising that the position of the UK at the end of the spectrum of European States in relation to the lawfulness of secondary action did not take it outside the margin of appreciation.159 Finally, given the ‘manifestly without reasonable foundation’ test, it is equally unsurprising that the Court160 rejected any notion that a restriction should go no further than was necessary to prevent the surmised adverse consequences, which a uniform blanket ban must necessarily offend. K  The Importance of the Basic Trade Union Rights Sometimes even trade unions need to be reminded of the importance of collective bargaining buttressed by the right to strike!161 These rights are needed now for the same reasons that they were introduced in the first place. The present recession makes them imperative. And the first right cannot function without   RMT, para 89.   RMT, para 99. 157   RMT, para 99. 158   RMT, para 100–102. 159   RMT, para 91. 160   RMT, para 103. 161   The arguments that follow are further discussed in Ewing and Hendy, Reconstruction after the Crisis, above (n 16). 155 156

318  Keith Ewing and John Hendy QC the second: without the right to strike, collective bargaining is no more than collective begging. This is not just a matter of sectional self-interest. Collective bargaining is vital at sectoral level to prevent undercutting by competitors seeking to reduce labour costs. Employers have to accept (though neoliberalism ignores it) that reducing labour costs and so reducing the market rate for labour of the kind in question may present a short-term advantage for the under-cutter but ultimately results in a reduction in consumption and demand which, in turn, diminishes the sales of the goods and services of all (or nearly all) employers, reduces the yield of taxes, decreases government investment and support and ultimately damages the economy. Collective bargaining is a democratic mechanism for stimulating demand in the economy. Collective bargaining, as a mechanism for preventing competition by undercutting labour costs, encourages competition by investment in research and development. Collective bargaining is also good for productivity. Thus, in an analysis of the way that pay was determined in British workplaces in the 1990s ‘workplaces that abandoned bargaining reported less impressive productivity gains than other workplaces’. Historical statistics show that decline in collective bargaining coverage is mirrored by growth in inequality and vice versa. It is no coincidence that strong and efficient economies, such as in Germany, Sweden, Norway and Denmark, have extensive sectoral collective bargaining coverage underpinned by strong trade union rights. There is a growing literature showing that collective bargaining is the solution to the inequality problem.162 Of course, there are other reasons why collective bargaining is a good thing. Collective bargaining is a means of achieving justice at the workplace between the conflicting interests of the employer and the workers. In the absence of collective bargaining, the outcome of that conflict of interest would otherwise merely reflect the inherent imbalance in power between the worker and the employer. As the ECSR point out in Swedish Trade Union Confederation (LO) and Swedish Confederation of Professional Employees (TCO) v Sweden163 at paragraph 109: From a general point of view, the Committee considers that the exercise of the right to bargain collectively and the right to collective action, guaranteed by Article 6§§2 and 4 of the Charter, represents an essential basis for the fulfilment of other fundamental rights guaranteed by the Charter, including for example those relating to just conditions of work (Article 2), safe and healthy working conditions (Article 3), fair remuneration (Article 4), information and consultation (Article 21), participation in the determination and improvement of the working conditions and working environment (Article 22), protection in cases of termination of employment (Article 24), protection 162   eg, S Hayter and B Weinberg, ‘Mind the Gap: Collective Bargaining and Wage Inequality’ in S Hayter (ed), The Role of Collective Bargaining in the Global Economy (Cheltenham, Edward Elgar and ILO, 2011). 163   Swedish Confederation of Professional Employees (TCO) v Sweden, Complaint No 85/2012 (3 July 2013). See above.



International Litigation: ECtHR  319 of the workers’ claims in the event of the insolvency of their employer (Article 25), dignity at work (Article 26), workers’ representatives protection in the undertaking and facilities to be accorded to them (Article 28), information and consultation in collective redundancy procedures (Article 29).

Even where collective bargaining is insufficient to negate the inherent inequality of bargaining power, it still provides the means by which workers can be heard by those who make the decisions. Collective bargaining is usually the only satisfactory way of achieving any degree of democracy at work – without it workers have no voice in the conditions of their working lives. Given the importance of work as a means of earning a living, and the very large percentage of time that work occupies in most people’s lives, a say in the conditions and benefits of work is of vital importance. Yet even the most paternalistic management is only concerned with the interests of workers to the extent that concessions to those interests advance or impede the profit-earning capacity of the enterprise. Collective bargaining forces employers to hear and consider, and sometimes make concessions to, the interests of their workers. Without collective bargaining, ultimately the worker is at the mercy of management diktat. K  The Use of International Law While the international trade union rights continue in existence and the machinery to utilise them remains available they should be used. Notwithstanding that they are a relic of a time before the hegemony of neoliberalism, they should be used and supported as part of the effort to prevent neoliberalism from destroying them (see the attempts by the UK government to neuter the ECtHR at the Brighton Conference of the Council of Ministers of the Council of Europe in 2012, the consequences of which still persist;164 and the Employers’ Group strategy at the ILO which commenced in 2012 and continues – referred to earlier). The mere existence of the international recognition of these rights and their place in fundamental treaties ratified by so many states provides an independent and authoritative validation of them without which enemies would portray them as claims to disruptive self-interest, contrary to the common good. But the current state of play provides an opportunity to buttress the defence against the ravages of neoliberalism by ‘litigation’ of appropriate cases in the ILO, the ECSR and the ECtHR.165 164   In the form of continued lobbying to restrict access to the Court and restrict its scope: see the Consultation launched on 19 November 2013 to be concluded on 27 January 2014 to result in a Report to the Council of Ministers by 15 April 2014: www.coe.int/t/dghl/standardsetting/cddh/ reformechr/consultation_EN.asp? 165   So, eg, the British union BALPA challenged the effect of Viking and Laval in the ILO CFA in 2009 with some success – see the ILO CEACR Reports for 2010, 2012 and 2013. And the Swedish LO and CTO made a successful Collective Complaint to the ECSR challenging Laval and the Swedish legislation emanating from it, referred to above. Two British unions currently have applications before the ECtHR on aspects of the right to strike and the right to collective bargaining.

320  Keith Ewing and John Hendy QC The selection of an ‘appropriate’ case is a complex calculus in which the widest consultation among unions and those acting for them is necessary; a selection haunted by the fear of an outcome which has the effect of legitimising across Europe the particular unacceptable situation of the country under potential challenge. Yet even losing may not be disastrous. Some ‘lost’ cases have nevertheless helped move the jurisprudence forward to the benefit of workers. For example Palomo Sanchez166 established an important statement of principle about the role of workplace representatives and gave recognition to ILO Recommendation 143; UNISON established the right to strike under Article 11(1). The careful selection must, of course, raise a major question of principle: the ECtHR is a human rights court, not a labour court, and it is a court trying desperately to control its backlist. It is important where possible to prepare the ground carefully by prior use of other international avenues by other sympathetic parties (to avert the risk of the trap of Article 35(2)(b) of the ECHR – application rendered inadmissible because ‘another procedure of international investigation has been utilised).167 The grim reality is that where political reversal of neoliberal legal restriction is not achievable, sometimes legal challenge may be the only option. And simply by using the various legal mechanisms there is reinforcement of the fact that these rights belong to the population as a whole, whereas those who seek to restrict or deny them are a tiny elite out for their own self-interest. IN CONCLUSION

After the RMT case, unions will need to reflect long and hard on the possibility of taking an apparently appropriate case to the ECtHR. Whether the ILO and ESC can withstand the forces of neoliberalism remains to be seen. But in the meantime, while we should always be restrained in victory, we should never be pessimistic in defeat. The political circumstances at the time the RMT application was made were very different from the political circumstances extant at the time of the decision. It is quite possible that commentators will look at the decision and conclude that while RMT won on the law, they lost on the politics. But politics change, and will change again. In the meantime, the RMT case has taken the Art 11 jurisprudence several important steps forward. The right to strike is clearly acknowledged as protected by the ECtHR, including solidarity action, while the Court has continued to acknowledge the role of ILO Conventions and the ESC in the interpretation of Convention rights. Just as importantly, the Court expressly repudiated the views of the International   Palomo Sanchez [2011] IRLR 934; (2012) 54 EHRR 24.   Explained in J Hendy, ‘ECtHR Procedure’ in F Dorssement, K Lörcher and I Schömann (eds), The European Convention on Human Rights and the Employment Relation (Oxford, Hart Publishing, 2013) 65–68. 166 167



International Litigation: ECtHR  321

Organisation of Employers that ILO Convention 87 does not protect the right to strike, and that the Committee of Experts had no authority to conclude that it did. Although the decision in the RMT case is a setback, these are nevertheless significant developments.

Conclusions NIKLAS BRUUN, KLAUS LÖRCHER AND ISABELLE SCHÖMANN

COLLECTIVE LABOUR LAW UNDER ATTACK: THE DRAMATIC CONSEQUENCES OF ANTI-CRISIS MEASURES ON WORKERS’ COLLECTIVE RIGHTS

I

T IS NOT the aim of this book to map all the anti-crisis measures whose results have been – directly or indirectly – to weaken or undermine collective labour law. There is already enough empirical evidence of the systemic attack on trade unions and collective labour law within the framework of European austerity, an attack based on an ideological assumption that such ‘structural reforms’ are necessary to save the euro by securing so-called internal devaluations. The political and social price of the austerity policy has already been huge, but the future costs can hardly be underestimated. As the International Labour Organization (ILO) rightly points out, it is widely acknowledged that labour legislation is vital to the economy of any country and to the achievement of balanced development in terms of both economic efficiency and the well-being of the population as a whole. This is a delicate balance to achieve. In this context labour legislation plays a critically important role in providing a framework for fair and efficient industrial and employment relations that eventually deliver productive and decent employment as well as social peace.

However, in the context of the financial and economic crisis, followed by the crisis of sovereign debt, national labour law – especially in the affected countries – has undergone profound ‘reform’ marked by a blatant explosion of inequalities and insecurity for workers, in many cases heedless of fundamental social rights. Such national ‘reforms’ have been initiated, required or at least supported, by the European Union. Additionally, European institutional responses have led the European Union to amend the Lisbon Treaty architecture to set up the European Stability Mechanism (ESM) and a Treaty on Stability, Coordination and Governance in the Economic and Monetary Union (the so-called Fiscal Treaty).

326  Niklas Bruun, Klaus Lörcher and Isabelle Schömann National labour law reforms and amendments to the Lisbon Treaty – adopted as emergency measures in a crisis context – raise a series of legal issues in terms of competences, scope and possible judicial review, as such amendments have led in many cases to infringements of fundamental social rights anchored at international, European and constitutional levels. Collective labour law has been under severe attack, in particular when it comes to the role of the trade unions, but also in terms of the fundamental principles of collective bargaining as they have been known in continental Europe for almost 100 years and firmly anchored in the Constitution and core Conventions of the ILO and in many national constitutions and national labour law. As demonstrated by the authors of this book, the means and methods used by the European Union in handling the financial and economic crisis resist sound legal assessment, both from the point of view of EU law as well as when assessed in terms of international and regional European human rights instruments. The austerity policy must and will be challenged from political starting points. We argue that it is of the utmost importance that it is also challenged by legal means because the crisis has revealed – especially among the EU institutions – an indifference of high magnitude towards the legal human rights obligations of the European Union and its member states. Internally, EU law must – sooner or later – resolve the crucial issues concerning the legality of the measures taken in light of EU human rights obligations and commitments. Otherwise EU law cannot retain any legitimacy as a legal order based on respect for human rights and the constitutional traditions of the member states. The bold human rights rhetoric it presents, both internally and in international fora, will thus lose all credibility. Mélanie Schmitt shows in her contribution that there are many internal avenues that can be used to challenge the legality of austerity measures and the fact that some of the problems and mechanisms are new should not discourage national judges from referring cases to the Court of Justice of the European Union (CJEU). So far the CJEU has been able to evade some of crucial issues because national courts have had problems defining the requests for preliminary rulings in ways that clearly link them to EU law; many of the austerity measures are formally decided at national level, although the content has been prescribed in the ‘Memoranda of Understanding’. The interaction between national constitutions or basic laws and international instruments is important. In fact, several austerity measures have been found to be unconstitutional: for instance, in Portugal. So far it seems that national constitutional cases have had most success when dealing with individual rights (protection against dismissals or pension rights). It must be recalled that national constitutions should also be interpreted in harmony with the international conventions of the ILO and the European Convention on Human Rights (ECHR), as well as the (Revised) European Social Charter (RESC). In fact, constitutional challenges to austerity law might also raise questions about the relationship between national law and EU law, which might also result in preliminary rulings.



Conclusions  327

We also show in detail that there has been a systemic breach of core ILO Conventions 87 and 98 in the context of austerity policy. In the case of Greece, the Committee of Experts on the Application of Conventions and Recommendations (CEACR) uses very strong language, expressing its fear ‘that the entire foundation of collective bargaining in the country may be vulnerable to collapse under this new framework’.1 Finally the RESC, as the most developed general instrument for social human rights, has also been completely ignored by the Troika, although it also played an important role as the model for the chapter on solidarity in the European Union Charter of Fundamental Rights. What are the most effective legal avenues for challenging the anti-crisis measures related to collective labour law? The authors of this publication have analysed in detail the legal background against which austerity measures could be challenged. The focus has been on international and European standards, as well as the possible legal avenues. These examinations have revealed a variety of frameworks and possible approaches. The following comparative conclusion will not try in detail to evaluate the procedure that might be considered most appropriate for individuals and/or for trade unions to challenge austerity measures. This is because we think that challenges to austerity measures must be highly case specific. On the other hand, we want to highlight some aspects that have to be taken into account when assessing the different options available. This comparison is therefore of indicative value. It is obvious that a decision to use one avenue or another has to bear in mind many factors that are not shown below (general political, substantive legal, and so on) and even those shown below are too vaguely formulated to serve as a sound basis for a decision on its own. In line with the approach on which the whole publication is based, the following table in principle refers only to the collective labour law aspects. The most accessible avenue for trade unions might be the collective complaint under the Collective Complaints Procedure Protocol (CCPP). For representative national trade unions there is direct access and only a few admissibility criteria must be met: in particular, neither the exhaustion of domestic remedies nor deadlines are required. Compared with other procedures it is fairly simple and therefore often faster. The decision is made by at least a quasi-judicial body. But of course any complaint requires the ratification of the respective Protocol and the acceptance of the relevant substantive provision by the state concerned. At international level, the procedure before the ILO Committee on Freedom of Association (CFA) is similarly construed. The proceedings before the European Court of Human Rights (ECtHR) are burdensome: unless the trade union concerned is a ‘victim’ directs access does not 1   See also KD Ewing, ‘Austerity and the Importance of the ILO and the ECHR for the Progressive Development of European Labour Law: A Case Study from Greece’ in W Däubler and R Zimmer (eds), Arbeitsvölkerrecht. Festschrift für Klaus Lörcher (Baden-Baden, Nomos, 2013) 363.

328  Niklas Bruun, Klaus Lörcher and Isabelle Schömann exist – in practical terms – in respect of general austerity measures. Moreover, domestic remedies must have been exhausted and the procedure before the Court often takes a very long time. Also, the first decisions on austerity measures related to wage/pension reductions (concerning the protection of property) were rejected as manifestly ill-founded. Last, but not least, reporting systems (in the context of the ILO and the RESC should be mentioned. Although they cannot be considered ‘(quasi-)judicial’ procedures it might also be helpful to consider this avenue, in particular if the periodicity scheme for government reports on specific ILO Conventions or specific RESC provisions allows for trade union observation. The content of such reports can also be helpful in purely national court proceedings if there are some issues of legal interpretation involved related to the social or collective rights dealt with in the relevant instrument. If the periodicity of a reporting scheme does not allow for a submission of observations by the relevant trade union to the CEACR (or the European Committee of Social Rights (ECSR)) the other available avenues have to be examined. The following table summarises the main aspects of these findings. It is hoped that this publication will contribute to promoting the respect of fundamental social rights in general and collective rights in particular, especially in time of crisis, by using the described legal means.

Procedures

Access for trade unions

Access for individuals



Table 1: Brief Evaluation of Different Legal Avenues to International Bodies Costs

Length of proceedings

Legal effect

International Labour Organization (ILO) CEACR (observations)

All (representative) trade unions

Own cost, no reimbursement

Depends on periodicity of reporting system

Often low

CFA1

All trade unions

Own cost, no reimbursement

Often relatively fast

Often low

Own cost, no reimbursement

Depends on periodicity of reporting system

Often low

Own cost, no reimbursement

Often relatively fast

Decisions in complaints procedures sometimes stronger

Often very long

Fairly strong (binding inter partes)

-

Council of Europe – European Committee of Social Rights (ECSR) Observations

ETUC/ representative national trade unions

Collective complaints

Complaints if CCPP has been ratified

-

Council of Europe – European Court of Human Rights (ECtHR) Individual applications

In principle all; but Own cost, further admissibility reimbursement if criterions the application is successful

European Union – Court of Justice of the European Union (CJEU) Direct action (General Court)

Only under extremely restrictive conditions

Preliminary question procedure

No direct access because the national court must refer the case to the CJEU

Binding (inter

Depends on the result

partes)

Part of the Normally about 17 national procedure months

Binding for referring court

  Representations under Arts 24 and 25 of the ILO Constitution dealing with freedom of association issues are transmitted to the ILO CFA.

1

Conclusions  329

If they are individually concerned (‘victim’)

Annex 1 Possibility for Direct Action to the EU Courts by the ETUC Against Certain Austerity Measures Based on the Violation of the Right to Consultation: TTUR Recommendations Executive Summary 323 Introduction 324 Content 325 Article 263 TFEU as A legal basis 325 Introduction 325 Preliminary Evaluation 326 Article 263(3) TFEU as A basis for the ETUC’s status as a ‘semi-privileged’ applicant 327 The Subject Matter: The Nature of the Act to be Challenged 327 The ETUC’s Own Prerogative: The Right to Consultation 328 The ETUC’s Access to the Court 335 Conclusions 340 EXECUTIVE SUMMARY

The direct access to the EU Courts is very much limited. This is all the more true for the ETUC. However, the note develops one important possibility: The access to Court for the ETUC as so-called semi-privileged applicant (Article 263(3) TFEU). In a direct action for annulment the ETUC could claim the violation of its right to consultation in particular concerning legally binding austerity measures adopted in the framework of ‘excessive imbalance procedures’ (Regulation 1176/2011).

332  Annex 1 This note examines more in detail three main conditions and develops arguments in favour of such an approach: • ‘Recommendations’ based on Article 7(1) sub-paragraph (2) of Regulation 1176/2011 could and indeed should be considered as legally binding acts and therefore be challengeable. • The Articles 12 CFREU, Articles 154 and in particular Article 152 TFEU and above all in their combination provide a sound basis for claiming the right to consultation as own prerogative for the ETUC generally and in respect of acts described in Regulation 1176/2011 in particular. • For ETUC as Social Partner at EU level the access to Court is required by interpreting Article 263(3) TFEU in accordance with the Court’s case law on the procedural rights of the European Parliament in general and Article 152 TFEU as well as Article 47 CFREU so as to recognise its status as semi-­ privileged applicant. Summing up, there are very important arguments in EU primary law for the ETUC to request the status of a ‘semi-privileged applicant’ (Article 263(3) TFEU), ie, the access to court in cases where its right to consultation has been violated. This is particularly valid in the case of acts adopted under Regulation 1176/2011 concerning excessive imbalance procedures requiring full conformity with Article 152 TFEU. INTRODUCTION

1. The economic and financial crisis has led the EU to adopt a series of measures which require from certain member states a series of sometimes drastic cuts in the social acquis as well as attacks on existing structures of industrial relations (austerity measures). 2. Two ways of action were, and indeed still are used to bring about those measures. The first can be called the ‘preventive’ way by requiring these measures in the framework of budgetary discipline (Six-pack, Fiscal Treaty, Two-pack). The second and publically most perceived way is the conditioning of financial aid in the eurozone by those measures (new Article 136(3) TFEU, ESM Treaty) via so-called ‘Memoranda of Understanding’ concluded between the respective member state on the one side and the Troika (composed of the European Commission (Commission) and the European Central Bank (ECB) as EU institutions and the IMF). 3. The aim of this note is to provide the ETUC with information to which extent it would be legally possible to challenge the EU acts (which lead to the austerity measures) in the system of EU judicial architecture. 4. It is obvious that such a step into ‘new waters’ will have to be, in any event, further examined and finally politically decided. It was Brian Bercusson who – more than 15 years ago – had already pleaded for an ETUC action before



Possibility for Direct Action to the EU Court by the ETUC  333 the Court1 and who in 2003 exemplified this approach by an extensive note on challenging the ‘Interinstitutional Agreement’.2 It is on the basis of those two papers that the following note is drafted and adapted and extended to the situation following the entering into force of the Lisbon Treaty. CONTENT

Article 263 TFEU as a Legal Basis Introduction 5. The ‘Action for Annulment’ is the procedure by which acts of the EU can be challenged. Article 263 TFEU defines the three possible approaches which can be described by the applicants as ‘privileged’, ‘partly-privileged’ and ‘non-privileged’. 6. The text of Article 263 TFEU reads as follows: Article 263 (ex Article 230 TEC) [1] The Court of Justice of the European Union shall review the legality of legislative acts, of acts of the Council, of the Commission and of the European Central Bank, other than recommendations and opinions, and of acts of the European Parliament and of the European Council intended to produce legal effects vis-àvis third parties. It shall also review the legality of acts of bodies, offices or agencies of the Union intended to produce legal effects vis-à-vis third parties. [2] It shall for this purpose have jurisdiction in actions brought by a Member State, the European Parliament, the Council or the Commission on grounds of lack of competence, infringement of an essential procedural requirement, infringement of the Treaties or of any rule of law relating to their application, or misuse of powers. [3] The Court shall have jurisdiction under the same conditions in actions brought by the Court of Auditors, by the European Central Bank and by the Committee of the Regions for the purpose of protecting their prerogatives. [4] Any natural or legal person may, under the conditions laid down in the first and second paragraphs, institute proceedings against an act addressed to that person or which is of direct and individual concern to them, and against a regulatory act which is of direct concern to them and does not entail implementing measures. [5] Acts setting up bodies, offices and agencies of the Union may lay down specific conditions and arrangements concerning actions brought by natural or legal persons against acts of these bodies, offices or agencies intended to produce legal effects in relation to them. 1   B Bercusson, ‘Public Interest Litigation in Social Policy’ in H-W Micklitz and N Reich (eds), Public Interest Litigation before European Courts (Baden-Baden, Nomos, 1996). 2  B Bercusson, ‘Interinstitutional Agreement on Better Law-making between the European Parliament, the Council and the Commission’ (9 October 2003); note 24 November 2003.

334  Annex 1 [6] The proceedings provided for in this Article shall be instituted within two months of the publication of the measure, or of its notification to the plaintiff, or, in the absence thereof, of the day on which it came to the knowledge of the latter, as the case may be.

Preliminary Evaluation 7. L  ooking first at the privileged applicants (Article 263(2) TFEU) it would appear that the social partners in general and the ETUC in particular would have great difficulties being compared directly with the Parliament, the Council and the Commission – those institutions which are the most prominent in particular for the legislative procedure. Moreover, the possibility of surveillance of all legal requirements also seems out of systematic coherence (comparing it with the partly-privileged applicants). 8. On the other hand, the non-privileged applicants (Article 263(4) TFEU) have to surmount very high procedural obstacles. It is obvious that ETUC would not fulfil these requirements.3 Even assuming that trade ‘associations’ can in principle challenge (in particular competition) acts if procedural rights have been expressly granted (and further requirements fulfilled) trade unions are normally not considered as ‘negotiators’ in a common market aid measure and therefore not individually concerned.4 9. Finally, in between those two alternatives the semi-privileged applicants (Article 263(3) TFEU) refer to the Court of Auditors, the ECB and (since the Lisbon Treaty) the Committee of the Regions.5 The main restriction is the limitation to their own prerogatives. It would appear that this alternative might offer the best prospects for a direct ETUC action. 10. Summing up, the only alternative for the ETUC could be to claim the status of a semi-privileged applicant (Article 263(3) TFEU). This will be examined below in more detail. Article 263(3) TFEU as the Basis for the ETUC’s Status as a ‘Semi-Privileged’ Applicant 11. In examining the conditions of Article 263(3) TFEU the most serious concern is that neither the Social Partners (SP) at EU level in general nor the ETUC is mentioned as a partly-privileged applicant in Article 263(3) TFEU. Moreover, the required ETUC’s prerogative (the right to consultation) is not 3   It is interesting to note that L Lenaerts, D Arts and I Maselis, Procedural Law of the European Union (London, Sweet & Maxwell, 2006) in para 7-105 at least examine whether (and in the end deny that) trade unions might be individually concerned by a Commission’s decision declaring an aid measure incompatible with the common market. 4   ibid, on associations para7-084. 5   ibid, paras 7-063 and 7-182 concerning the Committee of the Regions (in para 7-183 referring to the possibility of challenging violation of the principle of subsidiarity beyond its own prerogative).



Possibility for Direct Action to the EU Court by the ETUC  335 that clear either, although this problem might be easier to overcome. However, the main problem is to identify the act which might be challenged. It will therefore be examined first.

The Subject Matter: The Nature of the Act to be Challenged 12. As pointed out previously, Article 263(1) 1st sentence defines the subject matter of a direct action for annulment as legislative acts, of acts of the Council, of the Commission and of the European Central Bank, other than recommendations and opinions, and of acts of the European Parliament and of the European Council intended to produce legal effects vis-à-vis third parties

13. On the basis of ‘Regulation (EU) 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances’6 the main instruments used are recommendations. In principle, they appear to be excluded right from the beginning from any direct action (‘other than recommendations’). The question therefore arises whether all recommendations, or only recommendations which do not have any ‘legal effects vis-a-vis third parties’ are excluded. This approach would comply with the principle that the ‘content and not [the] form determines whether the act is binding’.7 At least in the ‘Opening of the excessive imbalance procedure’ described in Article 7(1) sub-paragraph (2) of Regulation 1176/2011 the term of ‘recommendation’ is used in a legally binding way (‘to be followed’): The Council’s recommendation shall set out the nature and implications of the imbalances and shall specify a set of policy recommendations to be followed and a deadline within which the Member State concerned is to submit a corrective action plan. The Council may, as provided for in Article 121(4) TFEU, make its recommendation public.

14. [Of course, this point has to be further developed – we need at least one good example of a decision were the social policy implications are very direct and clear.] 15. Summing up all ‘recommendations’ based on Article 7(1) sub-paragraph (2) of Regulation 1176/2011 could and indeed should be considered as legally binding acts and therefore be challengeable. But any further ‘recommendation’8 or other measure based on this Regulation might also have to   OJ L306, 23 November 2011, 25–32.   Lenaerts, Arts and Maselis, above (n 3) para 7-010 f (heading). 8   eg, already the recommendations in the framework of preventive action as defined in Article 6 of Regulation 1176/2011 (above, n 6) may have to be considered in substance as ‘legally binding acts’. This examination will be all the more relevant as its paragraph 3 explicitly refers again to Article 152 TFEU (‘3. The recommendations of the Council and of the Commission shall fully observe Article 152 TFEU and shall take into account Article 28 of the Charter of Fundamental Rights of the European Union’). 6 7

336  Annex 1 be considered as a legally binding act for the purposes of Article 263(1) TFEU. This will remain to be examined later in more detail. ETUC’s Own Prerogative – The Right to Consultation 16. As a starting point any examination will have to clarify whether the ETUC could claim its own ‘prerogative’. Concerning the austerity measures, the only prerogative could be the right to consultation. There are different possible approaches in EU primary law. Right to Consultation Based on Fundamental Social Rights 17. The first approach could be the fundamental social rights to information and consultation. There are two possible approaches. Article 27 of the Charter of Fundamental Rights of the EU 18. The most obvious approach could be a reference to Article 27 of the Charter of Fundamental Rights of the EU (CFREU) reading as follows: Article 27 – Workers’ right to information and consultation within the undertaking Workers or their representatives must, at the appropriate levels, be guaranteed information and consultation in good time in the cases and under the conditions provided for by Union law and national laws and practices.

19. As it is obvious from the heading as well as from the content, this fundamental social right is only guaranteed in respect of workers ‘within the undertaking’. However, the Explanations also refer to Articles 154 and 155 TFEU9 thus creating a relation (for example to the pertinent legislative or administrative procedure). Therefore, one might even argue that the ETUC could base its consultation rights on this provision. Article 12 of the Charter of Fundamental Rights of the EU 20. In any event, Article 12(1) CFREU in a general way guarantees trade union rights:

9  See also the ‘Explanation on Article 27 — Workers’ right to information and consultation within the undertaking This Article appears in the revised European Social Charter (Article 21) and in the Community Charter on the rights of workers (points 17 and 18). It applies under the conditions laid down by Union law and by national laws. The reference to appropriate levels refers to the levels laid down by Union law or by national laws and practices, which might include the European level when Union legislation so provides. There is a considerable Union acquis in this field: Articles 154 and 155 of the Treaty on the Functioning of the European Union, and Directives 2002/14/EC (general framework for informing and consulting employees in the European Community), 98/59/ EC (collective redundancies), 2001/23/EC (transfers of undertakings) and 94/45/EC (European works councils)’. (OJ C/303, 14 December 2007)



Possibility for Direct Action to the EU Court by the ETUC  337 Article 12 – Freedom of assembly and of association 1. Everyone has the right to freedom of peaceful assembly and to freedom of association at all levels, in particular in political, trade union and civic matters, which implies the right of everyone to form and to join trade unions for the protection of his or her interests.

21. Referring to the Explanations10 the minimum guarantee is based on Article 11 ECHR (in particular according to Article 52(3) CFREU). Although it would appear that there is at least no jurisprudence of the European Court of Human Rights (ECtHR) in favour of such a right.11 However, on the basis of the methodology in the Demir and Baykara judgment it would appear possible to refer (at least to a certain extent) to the European Social

  Explanation on Article 12 — Freedom of assembly and of association: Paragraph 1 of this Article corresponds to Article 11 of the ECHR, which reads as follows: ‘1.  Everyone has the right to freedom of peaceful assembly and to freedom of association with others, including the right to form and to join trade unions for the protection of his interests. 2.  No restrictions shall be placed on the exercise of these rights other than such as are prescribed by law and are necessary in a democratic society in the interests of national security or public safety, for the prevention of disorder or crime, for the protection of health or morals or for the protection of the rights and freedoms of others. This article shall not prevent the imposition of lawful restrictions on the exercise of these rights by members of the armed forces, of the police or of the administration of the State’. The meaning of the provisions of paragraph 1 of this Article 12 is the same as that of the ECHR, but their scope is wider since they apply at all levels including European level. In accordance with Article 52(3) of the Charter, limitations on that right may not exceed those considered legitimate by virtue of Article 11(2) of the ECHR. This right is also based on Article 11 of the Community Charter of the Fundamental Social Rights of Workers. 11   ‘38. The majority of the Commission has expressed the opinion that the essential components of trade union activity, which in its view include the right to be consulted, come within the scope of the provision cited above. The Court notes that while Article 11 para 1 (art 11-1) presents trade union freedom as one form or a special aspect of freedom of association, the Article (art 11) does not guarantee any particular treatment of trade unions, or their members, by the State, such as the right to be consulted by it. Not only is this latter right not mentioned in Article 11 para 1 (art 11-1), but neither can it be said that all the Contracting States in general incorporate it in their national law or practice, or that it is indispensable for the effective enjoyment of trade union freedom. It is thus not an element necessarily inherent in a right guaranteed by the Convention, which distinguishes it from the “right to a court” embodied in Article 6 (art 6) (Golder judgment of 21 February 1975, Series A no 18, p 18, para 36). In addition, trade union matters are dealt with in detail in another convention, also drawn up within the framework of the Council of Europe, namely the Social Charter of 18 October 1961. Article 6 para 1 of the Charter binds the Contracting States “to promote joint consultation between workers and employers”. The prudence of the terms used shows that the Charter does not provide for a real right to consultation. Besides, Article 20 permits a ratifying State not to accept the undertaking in Article 6 para 1. Thus it cannot be supposed that such a right derives by implication from Article 11 para 1 (art 11-1) of the 1950 Convention, which incidentally would amount to admitting that the 1961 Charter took a retrograde step in this domain’. (Court (Plenary) Judgment 27 October 1975 – 4464/70, National Union Of Belgian Police v Belgium, para 38). 10

338  Annex 1 Charter12 and ILO13 case law. This is all the more important as Article 53 CFREU should be considered as the minimum level of protection if all EU Member States have ratified the relevant international instrument. This is the case for the (Revised) European Social Charter and ILO Convention 87. 22. In conclusion, there are arguments in favour of a right to consultation based on Article 12 (possibly in combination with Article 27) CFREU for the ETUC. Right to Consultation Based on Article 154 TFEU 23. The most relevant guarantee for the right to be consulted is Article 154 TFEU. It reads as follows: Article 154 – (ex Article 138 TEC) 1. The Commission shall have the task of promoting the consultation of management and labour at Union level and shall take any relevant measure to facilitate their dialogue by ensuring balanced support for the parties. 12   Conclusions XIX-3 (2010), Slovak Republic, Article 5: ‘The Committee considers that organisations of retired and unemployed workers, irrespective of their status, should have access to consultation procedures open to trade unions in which they are formally consulted on public policies or legislative developments that may affect retired or unemployed workers’. (See also Latvia and Poland in Conclusions XIX-3 (2010) concerning Article 5 as well as the ‘Interpretative statement on Article 5’). Conclusions (2010) Belgium, Article 5: (‘The Committee found that domestic law may under certain conditions restrict participation in various consultation and collective bargaining to representative trade unions alone. One of the conditions is that the criteria used to determine representativeness must be reasonable, clear, predetermined, objective, prescribed by law and open to judicial review (Conclusions XV-1, France)’). ‘37. While collective bargaining is the primary means to protect the economic and social interests of a trade union and its members in the meaning of Article 5, the Committee holds that being or seeking to be represented on public law bodies, whether consultative, judicial or administrative, may be an additional means among many for the pursuit by a trade union of such interest protection. The Committee therefore considers that the issue of trade union participation in such bodies falls within the scope of Article 5 when read in conjunction with Article 6§1 (joint consultation). The information adduced by the Government on the specific mandate and functions of the CNESER and the fact that its membership is not confined to representatives of staff do not lead the Committee to take any other view in the case before it’. ‘38. Nevertheless, the Committee holds that where States Parties establish various consultation bodies that are not directly concerned with the essential trade union prerogatives, such as collective bargaining, they have a wide margin of appreciation in determining the composition of the bodies in question. This applies a fortiori to any modalities, such as elections, which may be used to determine the composition of these bodies as long as said modalities do not arbitrarily benefit certain trade unions at the expense of others or effectively prevent certain trade unions from enjoying the essential trade union prerogatives. In the present case, the Committee notes that trade unions may present lists for election of representatives to the CNESER. The Committee further notes that any individual voter and candidate may challenge the lawfulness of the CNESER elections, although there is no collective remedy in this respect’. (Decision on the merits, 15 June 2005: Syndicat des Agrégés de l’Enseignement Supérieur (SAGES) v France, Collective Complaint No 26/2004). 13   See eg Digest of the Freedom of Association Committee of the Governing Body of the ILO, 5th (rev edn) 2006, paras 595–603.



Possibility for Direct Action to the EU Court by the ETUC  339 2. To this end, before submitting proposals in the social policy field, the Commission shall consult management and labour on the possible direction of Union action. 3. If, after such consultation, the Commission considers Union action advisable, it shall consult management and labour on the content of the envisaged proposal. Management and labour shall forward to the Commission an opinion or, where appropriate, a recommendation. 4. On the occasion of the consultation referred to in paragraphs 2 and 3, management and labour may inform the Commission of their wish to initiate the process provided for in Article 155. The duration of this process shall not exceed nine months, unless the management and labour concerned and the Commission decide jointly to extend it.

Principles of Articles 154 and 155 TFEU14 The Commission’s Communication 24. Soon after the ratification of the Maastricht Treaty the Commission presented to the Council and the European Parliament a Communication concerning the application of the Agreement on social policy 15. 25. On the basis of principles which have so far emerged from the case law on Article 173 (now 263 TFEU) (in particular, the Chernobyl case),16 a number of possible issues could potentially arise: a. Are the ‘prerogatives’ of the social partners under Articles 154 and 155 TFEU ‘one of the elements of the institutional balance created by the Treaties’?17 b. Will the Court insist on its ‘duty to ensure that the provisions of the Treaties concerning the institutional balance are fully applied and to see to it that (the social partners/Parliament’s) prerogatives, like those of the other institutions, cannot be breached without (them/it) having available a legal remedy, among those laid down in the Treaties, which may be exercised in a certain and effective manner’.18 c.  In particular, ‘in accordance with the Treaties, the (social partners’/ Parliament’s) prerogatives include participation in the drafting of legislative measures, in particular participation in the (consultation/cooperation) procedure laid down in the EEC Treaty’19 (now TFEU). Does this cover the right to be consulted in accordance with a provision of the Treaty, so that adoption of an act on a legal basis taken from the TFEU but not providing for such mandatory consultation infringed the (social partners’/Parliament’s) prerogatives. Optional consultation was not sufficient to meet the prerogatives of the (social partners/Parliament).20 14   This part is taken from Bercusson’s paper, above (n 1), under 4.2 but, as far as possible, adapted to the current situation. The headings have also been adapted. 15   COM (93) 600 final, Brussels (14 December 1993). 16   Case C-70/88 European Parliament v Council [1990] ECR I-2041. 17   ibid, para 23. 18   ibid, para 25. 19   ibid, para 28. 20   Case C-316/91 European Parliament v Council [1994] ECR I-625.

340  Annex 1 The Procedure of Consultation 26. In the Communication, the Commission gave its point of view on the application of the provisions laying down these procedures, and hence it limited itself to Articles 154 and 155 TFEU, in which the involve­ment of the social partners is laid down. The procedure which the Commission proposes to follow falls into two distinct phases, indicated from headings in the Communication to be, first, ‘Consultation of the Social Partners’, and, second, ‘From Consultation to Negotiation’. 27.  The first phase incorporates two separate stages, reflecting in the Commission’s view, the two separate consultations envisaged by Article 154(2) and 154(3) TFEU. The first consultation begins on receipt of a letter sent by the Commission to the social partners. This consultation is required by Article 154(2) TFEU before the Commission submits proposals in the social policy field. Its purpose is to ascertain the possible direction of Community action. At this stage, the Commission will be explaining the pro­blem in social policy for which it may seek to find a solution in the form of measures taken at European level. This consultation period, as specified by the Commission ‘should not exceed six weeks’, and it ‘may be by letter or, if the social partners so desire, by the convening of an ad hoc meeting’.21 28. The first stage completed, the Commission, ‘in the light of comments received . . . will decide whether to proceed to the second phase’. The Commission thus maintains its discretion to proceed or not, whatever the view of the social partners consulted. If so, the second consultation stage too ‘will be initiated with the receipt of the second letter sent by the Commission, setting out the content of the planned proposal together with indication of the possible legal basis’.22 The Commission proposes that the social partners should deliver a written opinion, where they wish through an ad hoc meeting, and: ‘Where appropriate, they should deliver a recommendation setting out their joint positions on the draft text’.23 Again, the duration of this second phase is restricted by the Commission to a period not exceeding six weeks. 29. In the course of these stages of consultation, the social partners do not only consider the substantive questions prefigured in the provisions of Article 154(2) and 154(3) TFEU: whether the Community should act; if so, the possible direction of Community action; and the content of the Commission’s envisaged proposal. They must also address the question posed by Article 3(4): whether they wish to initiate the process provided for in Article 155 TFEU – the social dialogue which may lead to contractual relations, including agreements. The possibilities open to the social partners in expressing the opinion or recommendation include:   ibid, para 19.  ibid.  ibid.

21 22 23



Possibility for Direct Action to the EU Court by the ETUC  341 1. The Commission should not undertake any form of EC action. 2. The Commission should undertake one or other forms of EC action, possibly including various legal measures. 3. The Commission’s envisaged proposal is acceptable, and should take the form of various EC actions, possibly including legal measures. 4. The Commission’s envisaged proposal is not acceptable, but, if persisted with, should take the form of various Community actions, possibly including legal measures. 5. The social partners wish to initiate the social dialogue process provided for in Article 155 TFEU.

30. The forms and contents of the responses of the social partners in this consultation phase may be very different. The Commission suggests that, even before the social partners undertake to initiate the social dialogue process provided for in Article 155 TFEU:24 The formal consultation of the social partners provided for in Article 3 of the Agreement [now Article 154 TFEU] may lead to the adoption of opinions, recommendations or agreement-based relations (including agreements) within the social partners’ sphere of competence.

31. The second phase described by the Commission is initiated when the social partners opt for the social dialogue process under Article 155 TFEU: ‘From Consultation to Negotiation’. Article 154(4) TFEU provides that: ‘The duration of the procedure shall not exceed nine months, unless the management and labour concerned and the Commission decide jointly to extend it’. As envisaged by Article 155(1) TFEU, this dialogue ‘may lead to contractual relations, including agreements’, and these ‘shall be implemented’ according to procedures laid down in Article 155(2) TFEU. Subsequent Developments 32. [will have to be developed further] Right to Consultation Based (Additionally) on Article 152 TFEU 33. The Lisbon Treaty has inserted a very important new provision on the promotion of the role of the SPs. Article 152 TFEU reads as follows: The Union recognises and promotes the role of the social partners at its level, taking into account the diversity of national systems. It shall facilitate dialogue between the social partners, respecting their autonomy. The Tripartite Social Summit for Growth and Employment shall contribute to social dialogue.

  ibid, para 28.

24

342  Annex 1 34. In order to assess to which extent this provision is of importance for the problem at hand, several issues have to be discussed and clarified. Article 152 TFEU has a General Scope 35. The first question is whether Article 152 TFEU is limited to social policy issues as defined in Article 153 TFEU only or whether it covers all problems which have an effect in the social field. It would appear clear that the latter alternative is correct. The main arguments may be summarised as follows: • N  o limitation whatsoever can be found in the wording of Article 152 TFEU. The only limitation could derive from the inclusion of this Article in Title X ‘Social Policy’. But such an approach is already in compatible with paragraph 2 of Article 152 TFEU. Indeed, it appears clear that the ‘Summit for Growth and Employment’ is not and cannot be limited to the acts based on Article 153 TFEU. It has obviously a very wide approach. • The new framework of the Lisbon Treaty (in particular Articles 2, 3 and 6 TEU) requires a wider perspective. • The horizontal clauses, in particular the general (Article 7 TFEU) and the social horizontal (Article 9 TFEU) cover all policy areas. At least Article 9 TFEU requires the participation of the SP. • Article 152 TFEU precedes Article 153 TFEU dealing mainly with legislative competences thus expressing a wider approach. Article 152 TFEU Applies Explicitly to the Relevant Secondary Legislation 36. There is at least one piece of secondary legislation referring explicitly to Article 152 TFEU. Indeed, Article 1(3) of Regulation (EU) 1176/2011 of the European Parliament and of the Council of 16 November 2011 on the prevention and correction of macroeconomic imbalances25 provides for the following: Article 1(3): The application of this Regulation shall fully observe Article 152 TFEU, and the recommendations issued under this Regulation shall respect national practices and institutions for wage formation. This Regulation takes into account Article 28 of the Charter of Fundamental Rights of the European Union, and accordingly does not affect the right to negotiate, conclude or enforce collective agreements or to take collective action in accordance with national law and practices (emphasis added).

37. Since the role of the SPs has to be promoted it is excluded that it remains at the level of Article 154 TFEU.

  OJ L306, 23 November 2011, 25–32.

25



Possibility for Direct Action to the EU Court by the ETUC  343 Article 152 TFEU and the Procedure of Consultation to be Followed

38. Which procedure would have to be followed? This would have to be (at least) in line with Article 154 TFEU (see above paragraphs 26 ff). Interim Conclusions 39. Article 12 CFREU, Article 154 and in particular Article 152 TFEU, and above all in their combination, provide a sound basis for claiming the right to consultation as a prerogative for the ETUC generally and in respect of acts described in Regulation 1176/2011 in particular. ETUC’s Access to the Court Principles of Article 263 TFEU26 40. Article 263(2) TFEU distinguishes privileged and non-privileged applicants. Privileged applicants specified in the Rome version were ‘a Member State, the Council or the Commission’.27 In the Comitology case, the European Parliament’s claim to be a privileged applicant to the same extent as the other institutions named had been rejected by the Court.28 However, in the Chernobyl case, the Court had reconsidered its position.29 It acknowledged that the earlier rejection of Parliament’s claim had been justified by pointing out that various legal remedies were available to ensure that the Parliament’s prerogatives were defended. As was observed in that judgment, not only does the Parliament have the right to bring an action for failure to act, but the Treaties provide means for submitting for review by the Court actions of the Council of the Commission adopted in disregard of the Parliament’s prerogatives.30

41. However, the Court now concluded that: 20.  The existence of those various legal remedies is not sufficient to guarantee, with certainty and in all circumstances, that a measure adopted by the Council or the Commission in disregard of Parliament’s prerogatives will be reviewed . . .

26   This part is taken from Bercusson’s paper, above (n 1) under 4.1 but, as far as possible, adapted to the current situation. 27   Note: The Treaty of Nice amended this to include Parliament as a privileged applicant. What follows describes the earlier position, which may reflect that of the ETUC today. 28   Case 302/87 European Parliament v Council [1988] ECR 5615. 29   Case C-70/88 European Parliament v Council [1990] ECR I-2041. 30   ibid, para 15.

344  Annex 1 23.  Those prerogatives are one of the elements of the institutional balance created by the Treaties. The Treaties set up a system for distributing powers among the different Community institutions, assigning to each institution its own role in the institutional structure of the Community and the accomplishment of the tasks entrusted to the Community . . . 25.  It is the Court’s duty to ensure that the provisions of the Treaties concerning the institutional balance are fully applied and to see to it that Parliament’s prerogatives, like those of the other institutions, cannot be breached without it having available a legal remedy, among those laid down in the Treaties, which may be exercised in a certain and effective manner . . . 28.  In accordance with the Treaties, the Parliament’s prerogatives include participation in the drafting of legislative measures, in particular participation in the cooperation procedure laid down in the EEC Treaty.31

42. Accordingly, a complaint by Parliament that the procedure for cooperation had not been respected was held to be admissible under Article 173 EEC Treaty. This ruling was subsequently adopted by the Member States who, by the Treaty on European Union, amended Article 173 EEC Treaty (in the Maastricht version) to include (as new paragraph 3) the provision that: The Court shall have jurisdiction under the same conditions in actions brought by the European Parliament and by the ECB for the purpose of protecting their prerogatives.

43. The renumbered Article 230 TEC (Amsterdam version) included the Court of Auditors: The Court of Justice shall have jurisdiction under the same conditions in actions brought by the European Parliament, by the Court of Auditors and by the ECB for the purpose of protecting their prerogatives.

44. Finally, in the newly numbered Article 263(3) TFEU the Lisbon version extended this jurisdiction to the Committee of the Regions: The Court shall have jurisdiction under the same conditions in actions brought by the Court of Auditors, by the European Central Bank and by the Committee of the Regions for the purpose of protecting their prerogatives.

45. The precise scope of the prerogatives in question is undetermined. However, in European Parliament v Council32 it was held to cover the right to be consulted in accordance with a provision of the Treaty, so that adoption of an act on a legal basis not providing for such mandatory consultation infringed Parliament’s prerogatives. Optional consultation was not sufficient to meet the prerogatives of Parliament. 46. Non-privileged applicants were specified under Article 173(4) EEC Treaty (later 230(4) TEC):   ibid, paras 20, 23, 25, 28.   Case C-316/91 European Parliament v Council [1994] ECR I-625.

31 32



Possibility for Direct Action to the EU Court by the ETUC  345 Any natural or legal person, may, under the same conditions, institute proceedings against a decision addressed to that person or against a decision which, although in the form of a regulation or decision addressed to another person, is of direct and individual concern to the former.

47. Persons other than those to which decisions are addressed, but who are directly and individually concerned, may complain under Article 173 (now 230). The leading decision laying down the test for who are the persons covered by Article 173(4) is Plaumann:33 Persons other than those to whom a decision is addressed may only claim to be individually concerned if that decision affects them by reason of certain attributes which are peculiar to them or by reason of circumstances in which they are differentiated from all other persons and by virtue of these factors distinguishes them individually just as in the case of the person addressed.

48. To date, the relative willingness of the Court to admit claims by non-privileged applicants has been confined to cases in specific substantive areas of EC law: anti-dumping, competition and State aid.34 The question is whether complaints concerned with employment and labour relations will receive liberal treatment regarding admissibility. 49. F  urther, in Parti Ecologiste ‘Les Verts’ v Parliament,35 a case which the Court conceded concerned ‘a situation which has never before come before the Court’, the Court allowed as admissible a complaint where: Because they had representatives in the institution, certain political groupings took part in the adoption of a decision which deals both with their own treatment and with that accorded to rival groupings which were not represented. In view of this, and in view of the fact that the contested measure concerns the allocation of public funds for the purpose of preparing for elections and it is alleged that those funds were allocated unequally, it cannot be considered that only groupings which were represented and which were therefore identifiable at the date of the adoption of the contested measure are individually concerned by it.36

50. In the amended and renumbered Article 263(4) TFEU the Lisbon Treaty has introduced some new elements opening this possibility in particular to regulatory acts: Any natural or legal person may, under the conditions laid down in the first and second paragraphs, institute proceedings against an act addressed to that person or which is of direct and individual concern to them, and against a regulatory act which is of direct concern to them and does not entail implementing measures.

  Case 25/61 Plaumann & Co v Commission [1963] ECR 95.   See P Craig and G de Búrca (eds), Social Rights in Europe (Oxford, Oxford University Press, 2005) 465–70. 35   Case 294/83 Parti Ecologiste ‘Les Verts’ v Parliament [1986] ECR 1339. 36   ibid, para 35. 33 34

346  Annex 1 51. The ‘Greens’ decision is characterised as one concerning the institutional structure of the Community. The question is whether other groups affected by agreements/decisions under Articles 154 and 155 TFEU are considered to be individually concerned in the new institutional structure of decisionmaking on social policy. Additional Support by Article 152 TFEU 52. As an EU institution the CJEU is also bound by the obligation to promote the role of the SPs on the basis of Article 152 TFEU.37 The TTUR Group has expressed this additional argument in its ‘Recommendations’ as follows: 55. Since the ECJ is one of the Union’s institutions addressed in Article 13(1) TEU, it derives from Article 152(1) TFEU that also the Court is obliged in the same way as all the other Union’s institutions to promote the role of the Social partners at the European level. Already this legal argument could be sufficient that the Court should accept the ETUC as privileged applicant. In this context it should be recalled that the Court having initially refused to extend locus standi to European Parliament has reversed this position in Case European Parliament v Council38 allowing the Parliament to challenge the legal basis of a regulation.

Additional Support by Article 47 CFREU 53. The Lisbon Treaty made the CFREU legally binding and provided it with the same legal value as the Treaties (Article 6(1) TEU). Article 47 CFREU provides for the ‘Right to an effective remedy and to a fair trial’ in the following terms: Everyone whose rights and freedoms guaranteed by the law of the Union are violated has the right to an effective remedy before a tribunal in compliance with the conditions laid down in this Article. Everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal previously established by law. Everyone shall have the possibility of being advised, defended and represented. Legal aid shall be made available to those who lack sufficient resources in so far as such aid is necessary to ensure effective access to justice.39   See text above at para 33.   Case C-70/88 European Parliament v Council ECR I-4529, Judgment of the Court of 4 October 1991. 39   See the Explanations: The first paragraph is based on Article 13 of the ECHR: 37 38

Everyone whose rights and freedoms as set forth in this Convention are violated shall have an effective remedy before a national authority notwithstanding that the violation has been committed by persons acting in an official capacity. However, in Union law the protection is more extensive since it guarantees the right to an effective remedy before a court. The Court of Justice enshrined that right in its judgment of 15 May 1986 as a general principle of Union law (Case 222/84 Johnston [1986] ECR 1651; see also judgment of 15 October 1987, Case 222/86 Heylens [1987] ECR 4097 and judgment of 3



Possibility for Direct Action to the EU Court by the ETUC  347

54. The main argument is based on the coherence of substantive and procedural rights by providing for access to Court if ‘rights and freedoms guaranteed by the law of the Union are violated’. As previously described if and in the affirmative to its extent the ETUC’s right to consultation has been violated this provision guarantees a ‘locus standi’. 55. [This would have to be further developed taking into account the CJEU’s case law on this provision.] Possible Counter-Arguments 56. The most important argument against this approach would, of course, be the wording of Article 263(3) TFEU which does not mention the SPs nor in particular the ETUC. In accordance with all the arguments developed above it should be recalled that it was the CJEU which gave the European Parliament access to Court although it was not mentioned in the original version of Article 173 EEC Treaty. Therefore, this argument as such is not convincing. 57. More relevant might appear an argument coming from an institutional balance perspective. Three possible applicants can be compared: • The Committee of the Regions (CoR). • The European Economic and Social Committee (EESC). • The SPs. Only the first committee has explicitly been given access as semi-privileged applicant in the Lisbon Treaty. Against this background, the following December 1992, Case C-97/91 Borelli [1992] ECR I-6313). According to the Court, that general principle of Union law also applies to the Member States when they are implementing Union law. The inclusion of this precedent in the Charter has not been intended to change the system of judicial review laid down by the Treaties, and particularly the rules relating to admissibility for direct actions before the Court of Justice of the European Union. The European Convention has considered the Union’s system of judicial review including the rules on admissibility, and confirmed them while amending them as to certain aspects, as reflected in Articles 251 to 281 of the Treaty on the Functioning of the European Union, and in particular in the fourth paragraph of Article 263. Article 47 applies to the institutions of the Union and of Member States when they are implementing Union law and does so for all rights guaranteed by Union law. The second paragraph corresponds to Article 6(1) of the ECHR which reads as follows: In the determination of his civil rights and obligations or of any criminal charge against him, everyone is entitled to a fair and public hearing within a reasonable time by an independent and impartial tribunal established by law. Judgment shall be pronounced publicly but the press and public may be excluded from all or part of the trial in the interests of morals, public order or national security in a democratic society, where the interests of juveniles or the protection of the private life of the parties so require, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice. In Union law, the right to a fair hearing is not confined to disputes relating to civil law rights and obligations. That is one of the consequences of the fact that the Union is a community based on the rule of law as stated by the Court in Case 294/83 ‘Les Verts’ v European Parliament (judgment of 23 April 1986, [1986] ECR 1339). Nevertheless, in all respects other than their scope, the guarantees afforded by the ECHR apply in a similar way to the Union.

348  Annex 1 question arises: If even the EESC mentioned at the same footing in Article 13(4) TEU as the CoR and accorded with many explicitly recognised consultation rights has not acquired the status of a semi-privileged applicant, what would justify giving this access to the SPs? 58. From a legal point of view, the answer to that question would of course be that the EESC should also be accorded this right of access to the Court in principle for the same arguments developed above for the SPs. However, it has to be admitted that this argument is not the most convincing. Interim Conclusions 59. For the ETUC as Social Partner at EU level the access to Court is required by interpreting Article 263(3) TFEU in accordance with the Court’s case law on the procedural rights of the European Parliament in general and Article 152 TFEU as well as Article 47 CFREU so as to recognise its status as semiprivileged applicant. Conclusions 60. In principle, there are very important arguments in EU primary law for the ETUC to request the status of a ‘semi-privileged applicant’ (Article 263(3) TFEU), ie, the access to Court in cases where its right to consultation has been violated. This is particularly valid in the case of acts adopted under Regulation 1176/2011 concerning excessive imbalance procedures requiring full conformity with Article 152 TFEU.

Annex 2 Manifesto for the Respect and Promotion of Fundamental Social Rights in particular in respect of all crisis-related measures

350  Annex 2

MANIFESTO LABOUR AND SOCIAL LAWYERS FROM ACROSS EUROPE CALL ON THE EUROPEAN UNION TO RESPECT AND PROMOTE FUNDAMENTAL SOCIAL RIGHTS IN PARTICULAR IN RESPECT OF ALL CRISIS-RELATED MEASURES 1) The economic and financial crisis and its anti-social consequences must be viewed in a broader context. Historically and universally, the lessons learned from the experiences of two world wars led the International Labour Organisation to adopt, in 1944, the Declaration of Philadelphia which explicitly stated that • labour is not a commodity; • freedom of expression and of association are essential to sustained progress; • poverty anywhere constitutes a danger to prosperity everywhere. 2) At the European level, since World War II, the terms of this declaration have formed an essential foundation of European labour and social law and, at the same time, the implicit – and frequently explicit – starting point for construction of the EU’s fragile European Social Model. 3) In his address to the European Parliament on 14 September 2011, ILO DirectorGeneral Juan Somavia stated: ‘Respect for fundamental principles and rights at work is non-negotiable: not even in times of crisis when questions of fairness abound. This is particularly important in countries having to adopt austerity measures. We cannot use the crisis as an excuse to disregard internationally agreed labour standards.’ 4) At the G20 meeting of Labour and Employment Ministers on 26–27 September 2011 in Paris, ‘promoting the effective application of social and labour rights and ensuring respect for fundamental principles and rights at work’ constituted one of the key recommendations1 and was endorsed in the Declaration of the G20 Heads of State adopted at the Summit in Cannes on 3–4 November 20112. 5) At the G20 meeting held in Guadalajara, Mexico, on 17-18 May 2012, Labour and Employment Ministers stated in their conclusions ‘we believe that economic growth should be based on quality employment, that is, jobs in the formal sector, with social security, dignified income and full protection of labour rights’. The Ministers reaffirmed ‘the importance of policy coherence between growth and

http://www.ilo.org/global/about-the-ilo/how-the-ilo-works/multilateralsystem/g20/WCMS_164260/lang--fr/index.htm 2 http://www.g20-g8.com/g8-g20/g20/english/for-the-press/news-releases/cannes-summit-finaldeclaration.1557.html 1



Manifesto for Fundamental Social Rights  351 employment, and between macroeconomic and employment policies at the national and international levels.’3 6) Evidence shows, however, that, since the end of 2008, the start of the economic crisis, European and national public authorities and national legislators have taken a range of measures to boost the flexibility of businesses, including amendments to national labour law, • in some cases, general labour law reforms had been initiated, prior to the economic crisis, with the professed aim of ‘modernising’ labour law, • in some countries, a change of government led to the acceleration of drastic changes in labour law, even bypassing participatory consultations with, among others, the social partners, in particular the trade unions, • in other instances, the structural reforms have been required or indeed forced upon member states by the ‘troika’ composed of the International Monetary Fund (IMF) and the two EU institutions, i.e. the European Commission and the European Central Bank (ECB). These measures, far from solving the economic and financial crisis, have deepened it, and are now threatening the viability not just of social Europe but of the wider project of European economic and political integration. •

7) Labour and social lawyers from across Europe who are signatories to this statement express their grave concern about the measures taken and their consequences in respect of recent – and inter-related – legal, economic, and political developments in the EU: • •

•

•

The current financial and economic crisis is putting workers and workers’ rights in many countries under severe pressure; Not only are collective bargaining practices being undermined; a systematic attack on collective bargaining has also been launched, entailing the demolition of institutions, mechanisms and basic principles of collective bargaining (for instance, by the introduction of prohibitions on sectoral bargaining, possibilities for downwards deviation from collectively agreed minimum standards in individual employment contracts, etc); The troika imposes on specific members states a large and sometimes dramatic deregulation of their labour markets and social protection systems, leading to a weakening of trade unions, increasingly precarious employment relationships, insecurity and high unemployment, increased poverty and social unrest; Such drastic austerity measures in the field of labour lead to a rejection of Europe and European values, as well as to the development of xenophobia, in particular against minorities, and endanger peace in Europe.

8) The labour and social lawyers who are the signatories of this statement therefore urge the European Union and its institutions to respect and promote:

3

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352  Annex 2

• the values enshrined in the Lisbon Treaty ‘respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights’ (Article 2 TEU), • its obligation to ‘work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment’ (Article 3 para. 3 TEU), • the fundamental social rights guaranteed in the legally binding EU Charter of Fundamental Rights (Article 51 para. 1 CFREU), in particular the right of collective bargaining and action to be interpreted in line with the respective ILO Conventions ratified by all EU Members States (Article 53 CFREU), protection in the event of unjustified dismissal and social security and social assistance. 9) The signatories urge heads of state and government, in particular in their capacity as members of an EU institution, the ‘European Council’, to guarantee, in a clear and unambiguous manner, the legally binding framework and, especially, the promotion of the fundamental social rights of workers and their representatives. 10) In particular, the fundamental social rights of workers and their representatives should be subordinated neither to internal market freedoms and competition law nor to austerity measures whether these be based on fiscal policy or on financial aid; these fundamental social rights should, on the contrary, be fully recognised as necessary pre-conditions for the sound and sustainable economic and social development and progress of the European Union and its Member States. High labour law and social standards have a crucial role to play in rebalancing economies, supporting incomes, and encouraging investment in capacities. 11) The present European Commission, together with the Troika, is currently failing to respect the basic elements of the European Social Model and the spirit of the Philadelphia declaration. Accordingly, the social model is suffering – in virtual silence – its complete deconstruction, and ultimately, perhaps, its destruction. If the European social model fails, how can the European project as a whole succeed? 12) The signatories of this statement oppose both this attitude and the measures to which it has led. We urge the EU and its institutions to resume full compliance with their legal obligations and political objectives and take responsibility for a sustainable Social Europe January 2013

Index Please see under entries for individual countries/regions for specific topics relating to that country accountability 60–1, 109, 114–15, 140, 142 age discrimination 214, 220, 251 Amsterdam, Treaty of 111–12, 205 annulment actions 52, 231–6 Australia 295–6 Austria 20, 185–6 authoritarian constitutionalism 4, 28–9, 38, 39–54 bank bail-outs 26 Bank of England, quantitative easing by 97 Barroso, José Manuel 39 Belgium 162, 165, 175, 185–6, 191 benchmarking 192 Broad Economic Policy Guidelines (BPEG) 196–7 Brussels I Regulation 166–7 Bruun, Niklas 188, 190 budgets see also Six-pack; Two-pack authorisation of national budget plans 50–2 authoritarian constitutionalism 53 balanced budget rule 15, 96 budgetary and economic partnership programmes, establishment of 17 budgetary discipline 13, 16, 37, 48–9, 99, 111, 127, 266 Budgetary Frameworks Directive 42–3 competencies 75 conditionalities 198 consolidation measures 13 ESM 99, 111 Fiscal Treaty 17, 96, 137–8 legality of measures 50–2, 101, 196, 230 maximum deficit 1 MoUs 78 policies 21, 35, 38, 51, 69, 75–6, 196–7, 207–8, 231 public interest 75–6 stabilisation of budgetary and financial policy 75–6 Stability and Growth Pact 36–41 surveillance and coordination of budgetary policies 51 Canada 295, 297, 311 causes of crisis 4, 86–8, 106 centralisation 6, 116, 172, 175, 186

challenges to measures 8, 11–12, 230–41 annulment actions 52, 231–6 constitutionality of law 230 Council, direct challenges to acts of 231–6 Court of Justice, direct actions in 6, 230, 231–6 direct judicial remedies 231–6 ESM 15, 19, 130 EU legal framework, amendment of 11 European Committee of Social Rights 230 European Court of Human Rights 230, 327–8 European Semester 231 fundamental social rights 326–7 General Court, direct actions in 230 ILO 230 indirect judicial remedies 231, 236–41 judicial remedies 230–41, 326–9 legal nature of acts 230–1 legality of measures 230–41, 326 preliminary rulings 231, 236–41, 326 privileged applicants 231 reporting systems 328 Revised European Social Charter 7, 266, 327 semi-privileged applicants 231–3 social partners 230–1 table of evaluation of different legal avenues 329 trade unions 7, 230–1, 266 Charter of Fundamental Rights of the EU 24, 135–43 annulment actions 232 binding nature 56, 61 citizenship 163 collective action/strikes 122, 153, 167, 169, 214–16, 297–8 collective agreements 221–2 collective bargaining 72, 122, 135, 141, 196, 214–30, 244–5 competencies 4, 56, 143, 209, 210–17 consultation, right to 123, 125 corresponding rights, concept of 224–7 Court of Justice 62, 196, 213–30, 236–8, 240 democratic governance 109, 114, 116, 118–19, 135–43, 147, 149 dismissal, protection from unjustified 119, 136

354  Index Charter of Fundamental Rights of the EU cont effectiveness 136, 142, 146–7, 226 encroachment on rights 72–3 equality and non-discrimination 79, 119, 214–15, 227 ESM 22, 99–100, 149, 157 European Convention on Human Rights 66, 223–30 European Court of Human Rights, case law of 223, 224–30 Explanations 223–5, 228, 275–6 favourability principle 63 forced labour 119 freedom of assembly and association 119, 122, 135, 224–6 freedom of expression 119 general limitation clause 228 general principles of EU law 229 good administration, right to 72, 81 homogeneity, principle of 225 ILO 228–30, 244–5 information and consultation, right to 122 institutions 62–3, 213 interpretation 213–17, 223–30 juridification of Charter 214–17 legality of measures 6, 195–6, 217–30 level of protection clauses 64 Lisbon Treaty 61, 116, 213 macroeconomic imbalances 141 MoUs 61–5, 70–3, 79, 81, 136, 149, 157 new competencies, no 213–14 occupation and engage in work, right to choose an 119 political strikes 163–4 positive obligations 226 preliminary rulings 236–8, 240 primary law, as 213 Pringle case 22, 157 private and family life, right to respect for 119 property, right to 72 proportionality 75, 215–16, 227, 230 Revised European Social Charter 274–6, 327 rule of law 57 secondary legislation 213, 227 Six-pack 5 social partners 109, 123–5, 207, 209 social security and social assistance 136 supremacy of EU law 216 working conditions, fair and just 119, 136 children child labour 56 Convention on the Rights of the Child 1989 63, 65, 72 citizenship 5, 118–21, 163 Clauwaert, Stefan 203, 282, 284 collective action/right to strike 153–70 age discrimination 214

Charter of Fundamental Rights of the EU 122, 153, 169, 214–16, 297–8 collective bargaining 153, 304 economic governance 5, 153–7, 164–6 employers’ organisations 297, 320–1 Euro Plus Pact 165, 169 Fiscal Treaty 169 freedom of assembly and association 5, 161–2, 169, 301–4, 307–10, 312–17, 320–1 freedom of establishment 214–15 freedom of expression 298 freedom to provide services 214–15 fundamental social rights 218 general principles of EU law 215 harmonisation 154 ILO 56, 87, 153, 159–60, 162, 164–5, 169, 297, 302–3, 314, 321 ius resist­endi basis 5, 163–4, 169 legitimacy 153–4, 161–5, 169 pan-European strikes 5, 154, 161, 165–8, 169–70 parties, identity of 158–60 picketing and leafleting 298–9 political strikes 5, 154, 157–65, 167, 169, 288 private international law 5, 154, 165–8, 169–70 protest strikes 154, 159, 164–5, 169–70, 288 Revised European Social Charter 153, 169, 270, 288–9, 292 right to strike 5, 154, 158–60, 288–9, 292, 294 social partners, involvement of 153–7, 168 solidarity/secondary action, right to 302–4, 307–8, 310–11, 313–17, 320–1 trade unions 5, 153–70, 215–16 collective agreements after-effects 183, 253 Charter of Fundamental Rights of the EU 221–2 consultation, right to 249 decentralisation 176–81 derogation from broader agreements by narrower agreements 176–81, 188 equality and non-discrimination 221–2 extension mechanisms, restrictions on existing 7, 94, 133, 177–8, 183–4, 190, 254–6, 287 freedom of association and assembly 315 freedom of contract 220–1 future agreements 249 government intervention 184, 247, 249, 253–6 grace period 253 hierarchy 175, 286–7 ILO Convention No 98 139–40, 247, 249–51, 253 international law 188–91

labour standards and working conditions 171–4, 176–84, 188–91 maximum duration 183 multi-employers 243 opening clauses 177–9, 185, 187 parties to agreements 181–2 personal coverage 250–1 proportionality 222 Revised European Social Charter 286–7 social model 243 suspension 139–40 trade unions 181, 253 workers’ representatives 6, 174, 177, 180–2, 185–7, 204, 248 collective autonomy 5, 109, 117, 122–4, 128, 131, 135, 139–46, 149–50, 264 collective bargaining 5–7, 326 see also collective agreements; decentralisation of collective bargaining authoritarian constitutionalism 54 centralisation 175 Charter of Fundamental Rights of the EU 72, 122, 135, 141, 196, 214–30, 244–5 collective action/strikes 158–9, 161 collective autonomy 222 competencies 209, 210–12 consultation, right to 283 Council of Europe 298 Demir and Baykara v Turkey 7, 299–301, 316 democratic governance 132–4, 139–43, 150, 318–19 European Committee of Social Rights 283–7, 318–19 European Convention on Human Rights 6, 188, 218, 222 European Social Charter 218 extremism 263 favourability principle 93 flexibilisation of labour market 172, 177–8, 187, 219 freedom of assembly and association 7, 221–2, 244, 264, 299–304, 316–19 freedom of expression 220–1 fundamental social rights 217–30, 296 government intervention 6, 243–4 guidance on substance of right 218–22 harmonisation 210–11 hierarchy principle in relationship with law, upsetting of 133–4 higher level collective bargaining, derogation from 7, 267, 285–7 ILO 6, 73, 139–40, 222, 243–5, 247–61, 263 importance 8, 318 labour laws, reform of 244 labour standards and working conditions 175–92 macroeconomic imbalances 45–6

Index  355

MoUs 93–4 neoliberalism 295–7 proportionality 219 redundancies, consultation on collective 210 Revised European Social Charter 72, 267, 270, 274–5, 279–90 social and political systems, as structure of democracy in 132–3 social model 243, 263 social partners 210, 218–21, 264 social policy 89 trade unions 212–13, 243, 263–4 wage policies, obstacle to 263 workers’ representatives 175, 182, 185 Community Charter of Fundamental Rights of Workers (CCFRW) 1989 276 competencies 3–4, 20–1, 209–17 budgets 75 Charter of Fundamental Rights of the EU 4, 56, 143, 209, 213–17 collective bargaining 209, 210–13 democratic governance 116–17, 120, 129–30, 143 division between member states and EU 6, 195, 209–17 freedom of association 211–13 legality of austerity/crisis measures 3, 6, 195, 209–17 monetary policy 99 MoUs 3–4, 55–6, 58, 60–81 new competences, no 213–14 social policy 209–11 Troika 55–81 wages 209–10, 211–12 competitiveness, restoration of see also Sixpack; Two-pack authoritarian constitutionalism 54 collective agreements, extension of 184, 203 contracts for competitiveness 3, 28–9, 33, 39, 46, 47–50, 52–3 Euro Plus Pact 95, 155 Fiscal Treaty 16, 141 fundamental social rights 128–9 internal devaluation 4, 92 neoliberalism 1, 43 Revised European Social Charter 279–80 social policy 83 wages 43, 46, 93, 132, 141, 179 complaints employers organisations 262 ILO conventions 262–3 Revised European Social Charter, collective complaints under 7, 266, 291–4 conditionalities 14, 99, 126–34, 137, 198–204 Constitution for Europe project 3, 12, 114, 206–7 constitutionalism see new constitutionalism consultation, right to 6, 121, 155–7, 245

356  Index consultation, right to cont annulment actions 231 Charter of Fundamental Rights of the EU 122–3, 125 collective agreements 249 collective bargaining 283 Court of Justice 331–48 economic governance 154–7 effectiveness 209 employers’ associations 282–3 ESM 156–7 ETUC, direct action by 331–48 European Social Charter 109, 123 freedom of association 282 ILO Conventions 246–7 redundancies, consultation on collective 210 Revised European Social Charter 282–3 social dialogue 282 social partners 4, 56, 123, 125, 151, 206–9 trade unions 154–7, 283 workers’ representatives 249 contracts for competitiveness 28–9, 39, 46, 47–50 Convention on the Rights of the Child 1989 63, 65, 72 convergence criteria 89–92 corporate capital, privileging 28–9 corresponding rights, concept of 224–7 Council of the EU democratic governance 110–11, 121, 126–8, 141–2 direct challenges 231–6 EMU 13 EU legal framework, amendment of 3, 11–12 Stability and Growth Pact 36, 41 surveillance 15 Council of Europe (CoE) 265, 273, 275, 298 Countouris, Nicola 2 Court of Justice (CJEU) see also preliminary rulings annulment actions 231–6 challenges to measures 6, 230, 231–6 Charter of Fundamental Rights of the EU 196, 213–30 consultation, right to 331–48 democratic governance 111, 112–14, 118, 123–4, 135, 148 direct actions 231–6 ETUC, direct action by 331–48 EU legal framework, amendment of 3, 11, 20–3 fundamental social rights 61–5, 68–71 general principles of law 65 legality of austerity/crisis measures 6, 196 MoUs 61–5, 68–71 neoliberalism 297 proportionality 77 Revised European Social Charter 274

Crouch, Colin 27 currency depreciation 4, 92–4 current account positions 44 customary international law 66–7, 69, 73 Cyprus 11, 22, 136, 245 Czech Republic 3, 15 de Gaulle, Charles 164 debt-brake rule 96 decentralisation of collective bargaining 172–92 1980s, in 6, 173, 177, 185 autonomous decentralisation 188 collective bargaining 267, 284–7 democratic governance 133 favourability, principle of 251–3 flexibilisation of labour market 172, 177–8, 187, 284–5 heteronymous decentralisation 188 ILO Convention no 98 251–4 labour standards and working conditions 6, 172–92 organised decentralisation 6, 187–8 Revised European Social Charter 7, 267, 284–7 social policy 89 Declaration on Fundamental Principles and Rights at Work (ILO) 56, 73 Demir and Baykara v Turkey 7, 65, 299–301, 305–6, 311–12, 316 democracy and democratic governance 3–5, 109–51 actors 137–9 accountability 109, 114–15, 140 annulment actions 234 authoritarian constitutionalism 29, 53 Charter of Fundamental Rights of the EU 109, 114, 116, 118–19, 122–3, 135–43, 147, 149 checks and balances 111 citizenship 5, 118–21 collective agreements 221 collective autonomy 109, 117, 122–4, 128, 131, 135, 139–46, 149–50 collective bargaining 132–4, 139–43, 150, 318–19 competencies 4, 116–17, 120, 129–30, 143 conditionalities 126–34, 137 Council 110–11, 121, 126–8, 141–2 democratic deficit 4, 23, 35–6, 110, 126 economic coordination 28, 127 effectiveness 109, 114, 118, 123, 204 enhancement of democracy 143–51 equality and non-discrimination 5, 114, 116, 119, 123 ESM 127, 130–1, 146–9 European Parliament 58, 110–12, 114–16, 126, 129, 141

features, ingredients and objectives of democracy 114–18 Fiscal Treaty 5, 110, 129, 137–8, 147 formal democracy 27 full democratic path, restoration of 134–51 functional democracy 115–17 good governance, democracy as 120–3, 140 institutions 109–51 interpretation 143–6, 148–9 labour laws 109–10, 117, 119–20, 126–36, 143 legality, principle of 116 legitimacy 109–12, 115, 118, 120–1, 124, 129, 140, 143 MoUs 75, 134, 137–9, 148–9 national parliaments 4, 111, 114–15, 121, 148 national sovereignty 110, 117, 126 need for democracy 110–12 participatory democracy 109–15, 121–6, 138, 140–2, 149–51, 206–8 political parties 114–15 post-democracy 27, 29 progressive constitutionalism 54 representative democracy 114–15, 121, 149 simplified revision procedure 121 slow process of democracy 112–14 social policy 5, 116–21, 125, 128–32 social powers, distribution of 5, 114, 121–6 subsidiarity 5, 115–18, 120 substance of democracy 116 technocracy 126–34 transparency 120–3 democratic deficit 4, 23, 35–6, 110, 126 Denmark 178, 185, 187, 318 direct effect 112–13 Disabilities Convention 56, 72 discrimination see equality and nondiscrimination dismissal, rejection from unjustified 119, 136 Draghi, Mario 98 ECOFIN 13–14, 53 economic constitutionalism 30 economic governance 4–5, 153–7, 164–6, 205–9 see also new economic governance; secondary legislation, economic governance through economic policy coordination 3, 11–13, 16, 19, 33–4, 36–7, 95 democratic controls, evasion of 28 European Semester 104 legal basis 28–39 monetary policy 103–5, 106 neoliberalism 30, 36 new constitutionalism 28–39 ordoliberalism 140 Pringle case 100 social partners 205–6

Index  357 social policy 89 surveillance 3, 36, 40–1, 53–4 ECSR see European Committee of Social Rights (ECSR) effectiveness Charter of Fundamental Rights of the EU 136, 142, 146–7, 226 collective bargaining 219 consultation, right to 209 democracy 109, 114, 118, 123, 204 dispute resolution 257, 259 effective judicial protection 21–2, 99, 130, 146–7, 236 effective exercise standard 7, 273, 277–8 ESM 21–2, 99 European Convention on Human Rights 145, 226 general principles of EU law 130 neoliberalism 143 Revised European Social Charter 7, 273, 277–8 Stability and Growth Pact 40 wages 5, 103–4 effet utile principle 142 EFSF (European Financial Stability Facility) 14, 17, 33, 50, 55, 127 EFSM (European Financial Stabilisation Mechanism) 14, 17, 33, 50, 55, 127 Emergency Liquidity Assistance and Long-term Refinancing Operations 98 employee representatives see trade unions and trade union rights; workers’ organisations/representatives employers’ organisations/associations collective action/strikes 297, 320–1 collective agreements 254, 256 collective bargaining 252, 281 consultation, right of 282–3 flexible employment 177 freedom of association 144 ILO Conventions 248–9, 255, 261–2, 320–1 Revised European Social Charter 292–3 employment contracts 128, 136, 171–2 EMS (European Monetary System) 1, 12 EMU see European Monetary Union (EMU) equality and non-discrimination age discrimination 214, 220, 251 Charter of Fundamental Rights of the EU 79, 119, 214–15, 227 collective agreements 221–2 democratic governance 5, 114, 116, 119, 123 equal pay 56, 114 European Convention on Human Rights 298 freedom of association 8 fundamental social rights 79–80, 81 ILO Conventions 56, 251 inequality, growth in 23, 103, 129, 150, 192, 295–6, 318, 325

358  Index equality and non-discrimination cont MoUs 81 wages 210 ESC see European Social Charter (ESC) of 1961 ESM see European Stability Mechanism (ESM)/ESM Treaty (ESMT) Estonia 20, 183 EU legal framework, amendment of 11–24 automatic correction mechanism 15 Council 3, 11–12 economic and monetary coordination 11–13, 16–17, 19 Euro group, treaty status of 13 Fiscal Treaty 3, 11, 15–19, 23–4 institutional reactions to crisis 2–3, 11–23 intergovernmental acts, legality of crisis measures in form of 18–19, 20, 22 Lisbon Treaty 2–3, 12–13, 17–18, 23–4 new economic governance 2–3, 11–12, 15, 24 no-bail-out clause 15, 17–18 political strategy 17–19 procedure for amendments 18 Troika 11, 19, 22 Euro Plus Pact 126, 128–9, 131 collective action/strikes 165, 169 economic coordination 95 European Semester 165 flexibilisation of labour market 95, 165 new economic govern­ance 85 Six-pack 156 wages 126, 131 Euro Summits 17, 138 Europe 2020 Strategy 196–7, 205, 208 European Central Bank (ECB) see also Troika causes of crisis 87–9 competencies 4 democratic governance 137–9, 149 European Council, appointments made by 13 Emergency Liquidity Assistance and Longterm Refinancing Operations 98 ESM 15, 60, 98–100 fundamental social rights 61, 73–81 institution, recognition as an European 13 legality of interventions 98–9 moral hazard 97 MoUs with Troika 61, 73–81, 98 no-bail-out clause 96 Outright Market Transactions Programme 85, 98–101, 103 Pringle case 98–101 public authorities, prohibition on bank loans to 96 public refinancing, prohibition of 31–2 role, changes in 96–101 Securities Market Programme 97 social policy 84–5, 96–101, 103

sovereign debt 97, 100 Troika 98–9 European Coal and Steel Community (ECSC) 113 European Commission see also Troika Charter of Fundamental Rights of the EU 136–7 contracts for competitiveness 47–50 democratic governance 110–11, 113, 119, 122–4, 129–30, 138–42 ESM 15, 60 fundamental social rights 61, 63, 73–81 macroeconomic imbalances 44–6 MoUs 61, 63, 69–70, 73–81 qualified majority voting 13 royal right of parliaments 3, 51 surveillance 15 European Committee of Social Rights (ECSR) case law 158–9, 305–6, 313–15, 318–19 challenging austerity/crisis measures 230 collective action/strikes 158–9, 313–15 collective bargaining 283–7, 318–19 decisions, follow-up of 293–4 European Social Charter 190 freedom of association and assembly 305–6, 313–15, 318–19 labour standards and working conditions 190–1 procedure 290–4 Revised European Social Charter 266, 267–71, 274, 276–94 trade unions 191, 298 European Convention on Human Rights (ECHR) see also European Court of Human Rights (ECtHR) accession of EU 62, 122, 223 Charter of Fundamental Rights of the EU 66, 223–30 collective action/strikes 169 collective bargaining 6, 188, 218, 222 corresponding rights, concept of 224–7 democratic governance 111 effectiveness 145, 226 equality and non-discrimination 298 fair hearing, right to a 62–3, 72, 80, 298 freedom of association 279, 277–8 freedom of expression 161–2, 298 fundamental social rights 62–3, 70, 72, 80 ILO Conventions 228–30 interpretation 66 legality of measures 326 MoUs 62–3, 70, 72, 80 peaceful enjoyment of possessions 72, 304 private and family life, right to respect for 298 protocols 56

Revised European Social Charter 7, 268–72, 277–8 wages 81 European Council 13–14, 115, 127 European Court of Human Rights (ECtHR) challenges to austerity/crisis measures 230, 327–8 Charter of Fundamental Rights of the EU 223, 224–30 freedom of association and assembly 7, 295–321 homogeneity, principle of 225 interpretation 223–7 neoliberalism 297, 319 Revised European Social Charter 269, 270–2, 278 victims, trade unions as 327–8 European Economic and Social Committee (EESC) 113, 139–40, 155, 206, 208 European Financial Stabilisation Mechanism (EFSM) 14, 17, 33, 50, 55, 127 European Financial Stability Facility (EFSF) 14, 17, 33, 50, 55, 127 European Monetary System (EMS) 1, 12 European Monetary Union (EMU) 27–8 see also Fiscal Treaty authoritarian constitutionalism 53 deepening of EMU 47, 53, 101–3 Delors Committee 12 democratic governance 127, 130 design of EMU 84, 88, 92, 104, 106 economic policy 43, 103–5, 106 emergency measures 104 ESM, grant of banking licence to 104–5 EU legal framework, amendment of 11–14, 16 European Economic and Social Committee 140 European Semester 102–3, 106 Fiscal Treaty 105, 106 human developmental conception 84–5, 104 labour laws 102–3, 105, 106 last resort, formal role of lender and market maker of 104, 106 legal basis for alternative EMU 101–6 macroeconomic imbalances procedure 43, 46, 102, 104 MoUs 102–4 new constitutionalism 52–3 Pringle case 101, 104–5 promotion 4, 83 secondary legislation, economic governance through 28, 53 social policy 4, 83–92, 101–6 Stability and Growth Pact 103 summary note for Council Presidency June 2013 102 wages 105, 106

Index  359 European Parliament authoritarian constitutionalism 53 co-decision powers 60 consultation, duty to 111 democratic governance 58, 110–12, 114–16, 126, 129, 141 elections 111 ESM 23, 131 executive, strengthening position of 47 fundamental social rights 81 legislative powers 110, 115–16 Lisbon Treaty 121 macroeconomic imbalances 44 MoUs 75, 81 national parliaments 60, 115 ordinary legislative procedure 115–16, 126 representative democracy 115 Stability and Growth Pact 40–1 European Semester accountability 140 annulment actions 233–4 challenging austerity/crisis measures 231 consultation, right to 156 democratic governance 148, 234 economic policy 104 EMU 102–3, 106 Euro Plus Pact 165 legality of austerity/crisis measures 196–8 new economic govern­ance 42, 51, 95, 196–8 social partners 139, 197–8, 205–9 social policy 106 social security laws 102–3 European Social Charter (ESC) of 1961 Additional Protocol to ESC 1961 265, 283 collective action/strikes 158, 312 consultation, right to 109, 123 freedom of association and assembly 305–6, 312–15, 320 MoUs 63, 65 Revised European Social Charter 265, 274–80, 283, 289 trade unions 298 Troika 56 European social partners see social partners European Stability Mechanism (ESM)/ESM Treaty (ESMT) see also Fiscal Treaty budgets 99, 111 challenges 15, 19, 130 Charter of Fundamental Rights of the EU 22, 61–2, 99–100, 149, 157 collective action/strikes 169 conditionalities 14, 99 constitutional reviews 20 consultation, right to 156–7 democratic deficit 23 democratic governance 127, 130–1, 146–7 effectiveness 21–2, 99 EFSF 127

360  Index European Stability Mechanism cont EFSM 127 EMU 104–5 enhanced surveillance 50 entry into force 20 EU law, relationship to 19, 20–3, 61 European Central Bank 15, 60, 74, 98–100 European Commission 15, 60, 74 European Council 14 European Parliament 23, 131 exceptional urgency, adoption of crisis measures due to 20–1 Fiscal Treaty 16–17, 23–4 fundamental social rights 22–3, 61–2, 73–4 immunities 19, 130 implementation 15 International Monetary Fund 15 interpretation 15 legal basis 33 legality 14, 18–23, 98–100 EU legal framework, amendment of 14–15, 17–19 Lisbon Treaty 22, 325 monetary policy, exclusive competence in 99 MoUs 61–2, 69, 73–4 national parliaments 60 new economic govern­ance 85 no-bail-out clause 15, 20 Pringle case 20–3, 62, 73–4, 98–101, 130, 148–9 ratification 20 state sovereignty 58 surveillance 15 Troika 55 Two-pack 50 European Summit 232 European Trade Union Confederation (ETUC) collective action/strikes 166–8 collective complaints 266, 290, 292–3 consultation, right to 331–48 direct action to EU courts 155, 331–48 Euro Plus Pact 126 Revised European Social Charter 266, 290, 292–3 social partners 124 Ewing, Keith 161 excessive deficit procedure (EDP) 17, 35–7, 51, 96, 138 fair hearing, right to a 298 favourability, principle of 6, 94, 173–4, 251–3 fines 16, 37, 41–2, 45, 89–90 Finland 16, 186, 285 Fiscal Treaty 3, 5, 15–19, 23–4 automatic correction mechanism 96 budgets 17, 96, 137–8 collective action/strikes 169 contracts for competitiveness 48, 49–50

debt-brake rule 96 democratic governance 5, 110, 129, 137–8, 147 economic and monetary coordination 17 EMU 105, 106 entry into force 16 EU law, as part of 19, 156 excessive deficit procedure 138 implementation law, requirement to enact 16 interpretation 16–18 legality 27, 50 Lisbon Treaty 325 neoliberalism 52 new economic govern­ance 53, 85, 96 Pringle case 105 rule of law 5, 129 self-correcting mechanism, establishment of 16 Six-pack 96 surveillance 16 flexibilisation of labour market 2, 172, 176–8 collective bargaining 172, 177–8, 187, 219 conditionalities 198 decentralisation of collective bargaining 172, 177–8, 187, 284–5 Euro Plus Pact 95, 165 flexicurity 95, 165 new economic govern­ance 27, 48 social policy 4, 83–4 wages 132 forced labour 119 Foucault, Michel 38, 53–4 Fraenkel, Ernst 57 France age discrimination 251 Algeria 164 collective action/strikes 161, 162, 163–5 convergence criteria 89–90 Declaration on Rights of Man 162, 163 excessive deficit procedure 37 labour standards and working conditions 173–4, 186, 191 wages 46, 191 working time 173 Freedland, Mark 2 freedom of association and assembly 295–321 Charter of Fundamental Rights of the EU 119, 122, 135, 224–6 collective action/strikes 5, 161–2, 164, 169, 301–4, 307–10, 312 collective agreements 254–6, 315 collective bargaining 7, 188, 244, 264, 299–304, 316–19 competencies 211–13 consultation, right of 282 Demir and Baykara v Turkey 7, 65, 299–301, 305–6, 311–12, 316 demonstrations 299, 310

employers’ associations 144 European Committee of Social Rights 305–6, 313–15, 318–19 European Convention on Human Rights 7–8, 65, 119, 122, 161–2, 188, 295–321 European Court of Human Rights, case law of 7, 295–321 European Social Charter of 1961 305–6, 312–15, 320 favourability, principle of 251–2 freedom of expression 161–2 general principles of law 211 ILO case law 305–7, 314–15 Committee on Experts 305–7 Committee on Freedom of Association 305–7 Conventions 56, 244–5, 247–64, 305, 320–1 Recommendation 143 320 strike, right to 314 importance of basic trade union rights 317–19 international labour standards 7, 304–7, 319–20 interpretation 7–8 legitimate aim, restrictions which are for a 309–10, 315 living instrument principle 7, 299–300 margin of appreciation 300, 308, 311, 316–17 member states, law and practice of 307–8 national security 312 necessary in a democratic society, restrictions which are 309, 310–15 neoliberalism 319–20 non-Convention material 7, 304–7 picketing 299 prescribed by law, restrictions which are 308–9 proportionality 310, 311, 314 public safety, prevention of disorder or crime, restrictions for 312 research and development 8, 318 restrictions 7–8, 308–17 Revised European Social Charter 270–1, 277–8, 281–2, 294 right to join a union 299–300 right to strike 301–4, 307–10, 312–17, 320–1 sectoral level, importance of collective bargaining at 8, 318 selection of cases 320 solidarity/secondary action, right to 302–4, 307–8, 310–11, 313–17, 320–1 trade unions 7–8, 65, 119, 122, 161–2, 188, 295–321 Turkey 7, 65, 299–301, 305–6, 311–12, 316 freedom of expression 119, 161–2, 298 freedom to choose an occupation 72

Index  361 fundamental rights see European Convention on Human Rights; fundamental social rights fundamental social rights see also Charter of Fundamental Rights of the EU; European Convention on Human Rights authoritarian constitutionalism 54 binding international codifications of human rights 62–5 challenges by legal means 326–7 collective action/strikes 218 collective bargaining 217–30, 296 Community Charter of Fundamental Rights of Workers 1989 276 competencies 73–5 customary international law 66–7, 73 democratic governance 109, 111–14, 116, 118–23, 128–30, 138, 143 encroachment on fundamental rights 67–81 equality and non-discrimination 79–80, 81 ESM 22–3, 61–2, 73–4 EU legal framework, amendment of 11, 23–4 European Central Bank 61, 73–81 European Commission 61, 63, 73–81 European Parliament 81 European Social Charter 63, 65 general principles of law 64–5, 244–5, 269–70 ILO 56, 65–6, 72–3, 244–7 indirect and de facto encroachments 70–1 institutions 61–73, 326 International Bill of Rights 66–7 International Monetary Fund 61 international treaties 296 justification for encroachments 73–81 labour standards and working conditions 188 legality 62–3, 68–71, 326 macroeconomic imbalances 45 manifesto for respect and promotion of 349–52 MoUs 4, 55–6, 60–81 new constitutionalism 54 proportionality 77–9, 81 public interest 75–7 Revised European Social Charter 7, 63–5, 72, 268–72, 275–81, 294 substantive justification for encroachments 75–81 supervisory bodies, legal opinions of 64 Troika 4, 55–6, 60–81 General Court (EU), direct actions in 230 general principles of law annulment actions 232 Charter of Fundamental Rights of the EU 229

362  Index general principles of law cont collective action/strikes 215 democratic governance 122, 148 effectiveness 130 freedom of association 211 fundamental social rights 64–5, 244–5 ILO Conventions 66 international agreements, compatibility and conformity of 148 MoUs 64–5, 81 preliminary rulings 238 Revised European Social Charter 269–70 supremacy of EU law 216 general strikes 157 Germany Basic Law 162 collective action/strikes 162–5, 168 collective agreements 178 collective bargaining 185–7, 318 Constitutional Court 113, 116–17 constitutional reviews 20 contracts for competitiveness 47 convergence criteria 89–90 excessive deficit procedure 37 flexibilisation of labour market 187 labour standards and working conditions 172–3, 185–7 opening clauses 185, 187 Outright Market Transactions Programme 101 trade unions 186 Weimar Republic 25–6 works council 185–6 Gill, Stephen 28–9, 37–8, 41, 52, 53–4 good administration, right to 72, 81 good governance 120–3, 140 government bonds, indirect purchase of 32 government intervention collective agreements 184, 247, 249, 253–6 collective bargaining 6, 243–4 costs of bail-outs 86–7 ILO Convention no 98 247–9, 257–61 neoliberalism 43–6 wages 191 Gramsci, Antonio 28 Great Depression 1–2 Greece 1, 6, 26, 76–8, 136, 199–202 budgets 259–60 collective action/strikes 162 collective agreements 94, 182–4, 201–2, 250, 253–4, 297 collective bargaining 72–3, 78, 94, 201–2, 251–3, 284–5, 327 conditionalities 14 Constitution 20, 162 consultation, right to 246 convergence criteria 13–14

decentralisation of collective bargaining 94, 284–5 ESM 14 EU Procedures and Acts 199–201 European Committee of Social Rights 293–4 European Council 13–14 excessive deficit procedure 199 favourability clause 202 flexibilisation of labour market 72, 284–5 freedom of association 202, 251–3, 263 fundamental social rights 80–1 housing 259–60 ILO 229–30, 246, 248, 250, 253, 327 labour law reforms 94, 199–200 mediation and arbitration services, access to 257–9 MoUs 14, 72, 80–1, 199–200, 244 national measures 201–2 neoliberalism 52–3, 297 proportionality 78, 79 public refinancing, prohibition of 32 Revised European Social Charter 281, 289, 293–4 social cohesion 103 social policy 90 social work, funding trade union 259–60 sovereign debt, purchase of 97 structural intervention 257–60 surveillance 199 trade unions 182, 259–60 Troika 11, 22, 199–202 unemployment 26 unions of persons 202 wages 184, 199–202, 247, 250, 257 workers’ representatives 182, 287 working conditions 201 Habermas, Jürgen 58–9 Häde, Ulrich 30 hard and soft law 196–7, 207 harmonisation of law 104–6, 120, 154, 196, 205–11 Hayek, Friedrich 296 Hendy, John 161 Heuzé, Vincent 214–15 homogeneity, principle of 225 human developmental conception 84–5, 104 human rights see European Convention on Human Rights; fundamental social rights Hungary 22, 132–3, 174, 181, 245, 249, 254, 282 illegality see legality of measures ILO Committee of Experts 139, 246, 261–2 Charter of Fundamental Rights of the EU 229–30 collective action/strikes 302–3 collective bargaining 327

freedom of association and assembly 305–7 labour standards and working conditions 188–90 Revised European Social Charter 271 ILO Convention no 98 (right to organise and collective bargaining) 6, 73, 190, 245, 247–61, 327–8 after-effect of collective agreements, abolition or reduction of 253 Charter of Fundamental Rights of the EU 229–30 collective agreements 139–40, 247, 249–51, 253–6 Committee on Freedom of Association 247–50, 253–6 decentralisation of collective bargaining 251–4 employers’ organisations 248–9 extension mechanisms in collective agreements, restrictions on existing 254–6 favourability, principle of 251–3 freedom of association 247–61 government intervention 247–9, 257–61 institutional permanent intervention in structural framework 257–61 public sector 248–9 restrictions 247–51 structural intervention 257–61 trade unions 207 wages 247 workers’ representatives 248–9 young workers 250–1 ILO conventions 243–64, 326–8 see also ILO Convention no 98 (right to organise and collective bargaining) Charter of Fundamental Rights of the EU 66, 228–30, 244–5 child labour 56 collective action/strikes 153, 160, 169 collective agreements, extension to 7 collective bargaining 6–7, 243–5, 263 committees/supervisory bodies 246–7, 261–4, 271 Core Conventions 247 customary international law 73 Declaration on Fundamental Principles and Rights at Work 56, 73 employer organisations 248–9, 255, 261–2, 320–1 equal pay 56 equality and non-discrimination 56, 251 EU legal framework, amendment of 14 European Convention on Human Rights 66, 228–30 extremism 263 favourability principle 6 forced labour 56

Index  363 freedom of association 6, 56, 153, 169, 190, 305, 320–1 complaints 262–4 public authorities, interference by 160 ratification 245 secondary action 302–3 fundamental social rights 244–7 general principles of law 66 human rights 65–6 implementation 261–2 industrial disputes 66 interpretation 228–30, 263 labour standards and working conditions 190 list 56 minimum age 56 observer status of EU 65 procedure 245, 261–4 public service 6, 245, 249, 263 reporting 261 Revised European Social Charter 7, 272 standards 246–64 surveillance 261 termination of employment 251 trade unions 7, 261–2 welfare states 253 workers’ representatives 6, 248–9, 250–4, 261–2 implied powers, doctrine of 113 individual employment contracts 128, 136, 171–2 institutions of EU annulment actions 231–6 Charter of Fundamental Rights of the EU 213 collective bargaining 216–17 democratic governance 109–51 EU legal framework, amendment of 2–3, 11–23 fundamental social rights 61–73, 326 immunities 22–3 inter-institutional agreements 151 MoUs 61–63 social partners, status of 149 social policy 84–92 Troika, competencies of 4, 57–60, 81 Inter-American Court of Human Rights (IACtHR) 312 internal devaluation 4, 92–4 international agreements, compatibility and conformity of 148 International Bill of Rights 66–7 International Court of Justice (ICJ) 61 International Covenant on Civil and Political Rights (ICCPR) 56, 63, 65, 67, 297 International Covenant on Economic, Social and Cultural Rights (ICESCR) 56, 63–5, 67, 72

364  Index International Labour Organization (ILO) 246–64, 325–8 see also ILO Committee of Experts; ILO Conventions agreements 65 case law 169, 285, 287–9 Charter of Fundamental Rights of the EU 229–30 collective action/strikes 297, 314 collective agreements 188, 255–6 Collective Agreements Recommendation (1951) 188, 255 committees/supervisory bodies 6, 169, 189–91, 229–30, 261–4 freedom of association 8, 246–50, 253–6, 262–3, 271, 305–7 procedure 262–3 complaints 14 Constitution 326 freedom of association and assembly 188–90, 305–7, 314–15, 320–1 collective agreements 255–6 Committee on Freedom of Association 8, 246–50, 253–6, 262–3, 271, 305–7 Revised European Social Charter 271 fundamental social rights 72 legality of measures 6, 11, 81 MoUs 172 neoliberalism 297, 319 Recommendation No 143 320 reporting systems 328 Revised European Social Charter 271 trade unions, right to form and join 153 Troika 189–90 international law accountability 60–1 collective agreements 188–91 interpretation 269–73 private international law 5, 154, 165–8, 169–70 International Monetary Fund (IMF) 15, 61, 76 see also Troika International Technical Assistance Measures 78 Ireland 1, 20–3 collective agreements 184, 260–1 collective bargaining 133, 297 Constitution 20–3 ILO 245, 260 Lisbon Treaty 117 MoU 72 national minimum wage, reduction in 72 neoliberalism 297 Pringle case 3, 20–3, 84–5, 98–106, 130, 147–9, 157, 164 public refinancing, prohibition of 32 public sector 249 Recovery Plan 184 Troika 11, 22 interest rates 32, 88–9, 91

Italy 1, 133–4, 136 collective action/strikes 165 collective agreements 133, 181 collective bargaining 46, 186, 252, 284–5 Constitution 113 ILO Conventions 245 interest rates 32 labour standards and working conditions 174, 186 public sector 249 trade unions 174, 181 Jacobs, Antoine 160 Japan 312 Jospin, Lionel 36 Kapp, Wolfgang 163–4 Keynes, John Maynard 1–2 Keynesianism 1–2 labour law reforms competences 326 decentralisation 172–4, 192 democratic governance 109–10 fundamental social rights 326 labour standards and working conditions 171–4, 186–92 MoUs 92–4, 136, 244 social conditionalities 198 social policy 4 labour standards and working conditions 5–6, 171–92 see also International Labour Organization (ILO); wages and wage policies 1980s, decentralisation in 6, 173, 177, 185 autonomous decentralisation 188 benchmarking 192 centralisation 6, 172, 175, 186 Charter of Fundamental Rights of the EU 119, 136 collective agreements 171–4, 176–84, 188–91 collective bargaining 175–92 company rules 171 competencies 210 decentralisation 6, 172–92 derogations 172–4, 177–80, 186–90, 192 employment contracts 171–2 EU legal framework, amendment of 24 Euro Plus Pact 126 European Committee of Social Rights (ECSR) 190–1 favourability principle 6, 172–4 freedom of association and assembly 7, 188, 304–7, 319–20 fundamental social rights 188 harmonisation 104 heteronymous decentralisation 188

hierarchy of sources 6, 171–2, 175–81, 187 higher/broader levels, priority of 6, 171–2, 175–81, 187 international standards 7, 304–7, 319–20 labour laws 171–4, 186–92 lower/narrower levels 6, 171–2, 175–81 organised decentralisation 6, 187–8 Revised European Social Charter 7, 269–73 statutory labour law, decentralisation of 172–4, 192 Temporary Agency Work 174 trade unions 172–4, 177–82, 185–91 wages 192, 210 Working Time Directive 174 works councils 173–4, 177, 180–2, 185–7, 189 Latvia 11, 22, 136, 249 legality of measures 195–241 see also challenges to measures budgets 50–2, 101, 196, 230 challenging EU responses to crisis 230–41, 326 Charter of Fundamental Rights of the EU 6, 195–6, 217–30 collective bargaining 217–30 collective labour law 6 competences 3, 6, 195, 209–17 constitutional law 230, 326 contracts for competitiveness 49 coordination 196 Court of Justice, case law of 6, 196 EFSF 17, 33 EFSM 17, 33 ESM 14, 18–23, 98–100 European Semester 196–8 Fiscal Treaty 27, 50 fundamental social rights 62–3, 68–71, 326 general and structural responses to crisis 195–8 ILO 6, 11, 81 individual and specific responses to crisis 195, 198–204 intergovernmental acts 18–19, 20, 22 MoUs 3–4, 68–71, 244 new economic govern­ance 3, 29, 195, 196–8 Outright Market Transactions Programme 85, 98, 101 primary EU legislation, conformity with 195–6, 198 principle of legality 116 Pringle case 3, 20–3, 84–5, 98–106, 130, 147–9, 157, 164 remedies available to workers and trade unions 196, 230–41 Reverse Majority Voting 39–41, 45, 49 rule of law 116 Six-pack 27 social conditionality of financial support 198–204

Index  365

social partners 6, 196, 198, 205–9 Stability and Growth Pact 36–7, 41–2 surveillance 196 treaties 6, 195 Troika 3–4, 23, 50–2, 55–61, 75, 81, 146–7, 195–241 Two-pack 27, 50–2 legitimate expectations 69 Lisbon Treaty amendments 17–18, 22–4, 126–7, 325–6 annulment actions 234–5 Charter of Fundamental Rights of the EU 116, 213 citizenship 119 collective bargaining 210 competencies 116–17 democratic governance 5, 109, 114, 116–22, 128, 130, 138, 147, 151 ESM 22, 325 EU legal framework, amendment of 2–3, 11–12, 17–18, 23–4 European Parliament 114 Fiscal Treaty 325 international agreements, compatibility and conformity of 148 open method of coordination 125 parliamentary sovereignty 117 Revised European Social Charter 274 social partners 149, 205, 207 social policy 122 subsidiarity 116–18 Lithuania 245, 249 Lörcher, Klaus 188 Luhmann, Niklas 60 Lüttwitz, Walther von 163–4 macroeconomic adjustment programmes 127 Macroeconomic Dialogue 139–40 macroeconomic imbalances see also Six-pack Charter of Fundamental Rights of the EU 141 corrective action plans 44–6 democratic governance 139–41, 143, 148 determination of imbalance by executive 43–5 EMU 43, 46, 102, 104 macroeconomic and macrofinancial indicators 44 Macroeconomic Imbalance Procedure Regulation 41, 43–6, 102, 141 neoliberalism 43–6 participatory democracy 141 Reverse Majority Voting 45 social partners 207 Two-pack 50–1 wage policies, neoliberal restructuring and interventionism in 43–6 Manchester Liberal states 2

366  Index margin of appreciation 300, 308, 311, 316–17 Memoranda of Understanding (MOUs) budgets 78 Charter of Fundamental Rights of the EU 136, 149, 157 collective bargaining 93–4, 103–4 competencies 3–4, 55–6, 58, 60–81 Court of Justice 69–70 democratic governance 75, 134, 137–9, 148–9 equality and non-discrimination 81 EMU 102–4 ESM Treaty 69 EU legal framework, amendment of 19, 22–3 European Commission 69–70, 81 European Parliament 75 fundamental social rights 55, 60–81, 149 general interests of EU law, consistency with 148–9 general principles of law 81 good administration, procedural rules of 81 implementation 68, 134 institutional competence 75 internal devaluation 92–4 interpretation 148–9 labour laws, reform of 92–4, 136, 244 legality of measures 3–4, 68–71, 244 legitimate expectations 69 national budgetary and economic partnership programmes, endorsement of 138 neoliberalism 48 new economic governance 136 Outright Market Transactions 98 preliminary references 326 Revised European Social Charter 266–7, 273 social cohesion 103–4 social security, reform of 92–4 treaty, classification as a 68–9, 75 ultra vires 73–5 Merkel, Angela 28, 47, 48, 49 monetary coordination 11–13, 16, 19 monetary policy 100, 103–5, 106 moral hazard 97 Müller, Torsten 46, 191 national parliaments democratic deficit 4 democratic governance 4, 111, 114–15, 121, 148 ESM 60 European Parliament 60, 115 Lisbon Treaty 114 MoUs 244 royal right of parliaments 3, 51 Troika 4 weakening/sidelining of 3, 28, 53 national security 312

National Socialism 57 national sovereignty 58, 110, 117, 126 neo-Keynesianism 1 neoliberalism 1, 3, 8, 26–7, 132 authoritarian constitutionalism 53 collective bargaining 295–7 dominance 295–7 economic policies 30, 36, 52 effectiveness 143 EMU 106 European Court of Human Rights 297, 319 Fiscal Treaty 52 freedom of association and assembly 319–20 fundamental social rights 27 government intervention 43–6 ILO 297, 319 international human rights treaties 296 macroeconomic imbalances 43–6 MoUs 48 new constitutionalism 29, 33, 52–3 new economic govern­ance 39, 43–6 self-rule 38 surveillance and neoliberal normalisation 37–8 trade unions 132, 295–6, 319 wages 43–6 Netherlands collective action/strikes 165 collective agreements 178, 184 constitutional reviews 20 decentralisation 185–6 labour standards and working conditions 173, 174, 185–6 trade unions 186 Nettesheim, Martin 58 Neumann, Franz 57 new constitutionalism 28–38 authoritarian constitutionalism 4, 28–9, 38, 39–54 contested, strategic project, constitutionalism as 52–4 corporate capital, privileging 28–9 democracy 54 economic policies 28–39, 52–4 EMU 52–3 Fiscal Treaty 52 fundamental social rights 54 legal basis of economic policy 28–38 neoliberalism 29, 33, 52–3 new economic govern­ance 52 public refinancing, prohibition of 31–3 secondary legislation, economic governance through 28–38, 52–4 new economic governance 2–3, 27–9, 39–52 see also Six-pack annulment actions 52 authoritarian constitutionalism 4, 28–9, 38, 39–54

Broad Economic Policy Guidelines (BPEG) 196–7 collective action/strikes 5 contracts for competitiveness 28–9, 39, 47–50 coordination processes 197 corrective measures 197 democratic governance 109, 127–8, 136–7 ESM 85 EU legal framework, amendment of 2–3, 11–12, 15, 24 Euro Plus Pact 85, 95 Europe 2020 Strategy 196–7 European Semester 42, 51, 95, 196–8 Fiscal Treaty 53, 85, 96 flexibilisation of labour market 27, 48 hard and soft legislation, distinction between 196–7 human developmental conception 104 labour market, structural reforms of 197 legal issues 197–8 legality 3, 29, 195, 196–8 Macroeconomic Imbalance Procedure 43–6 neoliberalism 39, 43–6 new constitutionalism 52 preventive measures 197 principle measures 95–7 Six-pack 27, 33, 39, 42–3, 85, 95–6, 196 social partners, marginalisation of 5 social policy 84–5, 95–6 social security laws, reform of 197 soft legislation 196–7 Stability and Growth Pact 39–42 surveillance 95, 197 Two-pack 33, 39, 50–2, 85, 96 wages 43–6, 197 New Zealand 295 no-bail-out clause 15, 17–18, 20, 33, 96 non-discrimination see equality and nondiscrimination non-governmental organisations (NGOs) 292 non-regression standard 7, 77–8, 273, 277–81 Norway 318 Novitz, Tonia 158–9, 162 occupation and engage in work, right to choose an 119 open method of coordination (OMC) 95, 105, 125–6, 128 opening clauses in collective agreements 177–9, 185, 187 ordinary legislative procedure 115–16, 121 ordoliberalism 30, 34, 140, 143 Outright Market Transactions Programme (OMT) 85, 98–101, 103 pan-European strikes 5, 154, 161, 165–8, 169–70

Index  367 parliament see European Parliament; national parliaments; parliamentary sovereignty parliamentary sovereignty 117 participatory democracy 109–15, 121–6, 138, 140–2, 149–51, 206–8 peaceful enjoyment of possessions 304 pensions 282, 304 Pertek, Jacques 238 pluralism 109, 117, 120, 122, 135 Poland 20, 164 political parties 114–15 political strikes 5, 157–65 general strikes 157 protest strikes 154, 159, 164–5, 169–70, 288 purely political strikes 154, 157–65, 167, 169 Portugal 1, 252–4 budgets 241 collective action/strikes 162 collective agreements 182–4, 203–4, 253–4, 256 collective bargaining 186, 203–4, 241, 252–3, 284–5 constitutional law 326 democracy 204 EFSF 203 EFSM 203 employers’ associations 183–4 EU Procedures and Acts 203–4 freedom of association 263 fundamental social rights 204 ILO Conventions 245, 248 legal issues 204 legality of austerity/crisis measures 6 MoUs 69, 146–7, 203–4, 241, 244 national measures 204 preliminary rulings 240–1 proportionality 78 strict conditionality 203 trade unions 182, 248 Troika 11, 22, 203–4 wages 184, 203, 241, 248 workers’ representatives 182, 203, 287 preliminary rulings applicants, role of 239 challenging austerity/crisis measures 231, 236–41, 326 Charter of Fundamental Rights of the EU 236–8, 240 decisions 238, 240 general principles of EU law 238 interpretation 231, 236–41 jurisdiction of Court of Justice 237–40 MoUs 325 national courts 231, 236–41 national law, interpretation of 237 national measures, challenging 231, 236–41 nature of acts to be challenged 238–8 primary law, interpretation of 237–9

368  Index preliminary rulings cont recommendations 238 secondary law 237–8 treaties 238 validity of acts 237–41 wording of orders for reference 239–41, 326 primacy of EU law 57–8, 113, 117, 216 primary law avoidance of restrictions and duties 130–1 Charter of Fundamental Rights of the EU, as 213 EU law 24 interpretation 237–9 legality of austerity/crisis measures 195–6, 198 preliminary rulings 237–9 sources of EU law 24 supremacy of EU law 57–8 Pringle case 3, 20–3, 84–5, 98–106, 130, 147–9, 157, 164 private and family life, right to respect for 119, 298 private international law and collective action 5, 154, 165–8, 169–70 proportionality 81, 214–16, 222, 227, 230, 310, 311, 314 protest strikes 154, 159, 164–5, 169–70, 288 public interest 75–7, 164–5, 255, 279–80 public refinancing, prohibition of 31–3 quantitative easing 97 Reagan, Ronald 2 Rebhahn, Robert 160 redundancies, consultation on collective 210 Rehn, Olli 102 reporting systems 261, 290–1, 328 representative democracy 114–15, 121, 149 Reverse Majority Voting 39–41, 45, 49 Revised European Social Charter (RESC) 265–94 Additional Protocol to ESC 1961 265, 283 amicus curiae role of ETUC 293 autonomy of Charter 274 case law 7, 271, 274, 285, 287–90 Charter of Fundamental Rights of the EU 274–6, 327 collective action/strikes 153, 169, 270, 288–9, 292, 294 collective agreements 285–7 collective bargaining 72, 267, 270, 274–5, 279–90 collective complaints 7, 266, 291–4, 327 acceleration 293 admissibility 291, 292–3, 327 amicus curiae role of ETUC 293 complainant organisations, requirement in relation to 291–2

ETUC, right of 266, 290, 292–3 filing 291–3 Protocol 266, 290–4, 327 ratification and acceptance requirements 291, 294, 327 Community Charter of Fundamental Rights of Workers 1989 276 competitiveness, restoration of 279–80 consultation, right to joint 282–3 Council of Europe 265, 273, 275 decentralisation of collec­tive bargaining 7, 267, 284–7 effective exercise standard 7, 273, 277–8 employers’ organisations 292–3 ETUC 266, 290, 292–3 EU law, relationship to 267, 273–6 European Committee of Social Rights (ECSR) 266, 267–71, 274, 276–94 European Convention on Human Rights 7, 268–72, 277–8 European Court of Human Rights 269, 270–2, 278 European Social Charter 1961 265, 274–80, 283, 289 freedom of association 270–1, 277–8, 281–2, 294 freedom to choose an occupation 72 full implementation standard 273 fundamental social rights 7, 268–72, 275–81, 294 general principles of international human rights law 269–70 higher level collective bargaining, derogation from 7, 267, 285–7 human rights instrument, RESC as 268–9 ILO case law 285, 287–9 Committee on Freedom of Association 271 Conventions 7, 272 procedure 290 standards 271 supervisory bodies, case law of 271 international standards 7, 269–73 interpretation 7, 267–70 context, object and purpose 268–9 international law, in harmony with 269–73 principles specifically related to Charter 273 statements 290 teleological approach 268–9 justification for reducing social rights 276–81 labour law provisions, specific collective 281–90 legal framework 7, 267–81 legality of measures 326 Lisbon Treaty 274 mapping exercise 282, 284–6, 288 MoUs 266–7, 273



Index  369



constitutionalism as contested, strategic project 52–4 coordination of national economic policies 3 deregulation of labour, product and service markets 3 economic governance 25–54 emergency laws 28 EMU 28, 53 European Commission 3, 51 executive 25–7, 53 Fiscal Treaty 3, 27, 53–4 new constitutionalism 28–38, 52–4 new economic governance 3, 27–9, 39–54 preliminary rulings 237–8 progressive constitutionalism 3 sanctions 3 Six-pack 3, 27 social movements, powers of 3 social partners 123 structural reforms 28 Two-pack 3, 27 wages 3 Securities Market Programme (SMP) 97 sincere cooperation, principle of 148 Six-pack annulment actions 233 authoritarian constitutionalism 51 Budgetary Frameworks Directive 42–3 Charter of Fundamental Rights of the EU 5 collective action/strikes 5, 165 corrective arm 96 democratic control, lack of 3 Euro Plus Pact 156 excessive deficit procedure, protocol on 42–3 Fiscal Treaty 96 legal basis, lack of 27 macroeconomic imbalances procedure (MIP) 45, 102 new economic govern­ance 27, 33, 39, 42–3, 85, 95–6 preventive arm 96 sanctions 45 secondary legislation, economic governance through 3, 27 social partners, marginalisation of 5 Stability and Growth Pact 36, 196 Slovak Republic 182, 287 Slovenia 46, 191 Social Compact for Europe 150 social conditionalities 198–204 social dialogue consultation, right of 282 democratic governance 109–10, 122–5, 132–5, 142, 150, 206–7 Revised European Social Charter 7, 267 social partners 206–9 wages 105

non-governmental organisations 292 non-regression standard 7, 273, 277–81 pensioners 282 procedural issues 266, 280–1, 290–4 public finances, aim of redressing imbalances in 279–80 public interest 279 ratification and acceptance 291, 294, 327 reporting systems 290–1, 328 research and analysis, minimum level of 281 restrictions legitimate aim, for a 278, 279–80 necessary in a democratic society 278–81 prescribed by law 278–9 social dialogue institutions, diminished role of 7, 267 social progress standard 7, 273 studies with organisations concerned, discussion of 281 trade unions 7, 262, 266–70, 280–2, 287–8, 290, 292, 294, 327 Troika 56 Vienna Convention on the Law of Treaties 268, 269, 273 workers’ representatives 7, 267, 283, 287–8 Romania 136, 182, 282 collective agreements 182–3, 254 collective bargaining 132, 284–5 ILO Conventions 245 public sector 249 Troika 11, 22 rule of law 56–7 authoritarian constitutionalism 53 Charter of Fundamental Rights of the EU 57 democratic governance 111–12, 116, 122, 129, 136, 146 Fiscal Treaty 5, 129 suspension 57 sanctions annulment actions 233 corrective action plans 45 economic coordination 3, 33–4 excessive deficit procedure 35–6, 96 fines 16, 37, 41–2, 45, 89–90 macroeconomic imbalances 45 secondary legislation, economic governance through 3 Six-pack 45 Stability and Growth Pact 37, 40–2 Schmitt, Carl 26, 28, 57 Schmitt, Mélanie 157, 176 Schömann, Isabelle 203, 282, 284 Schulten, Thorsten 46, 191 secondary legislation authoritarian constitutional­ism 3, 28–9, 53–4 Charter of Fundamental Rights of the EU 213, 227

370  Index social model 23, 118–19, 129, 131, 135, 140, 157, 204, 218, 243 social movements, powers of 3 social partners 205–9 see also trade unions and trade union rights Amsterdam Treaty 205 annulment actions 233–4 challenging measures 230–1 Charter of Fundamental Rights of the EU 109, 123–5, 207, 209 collective action/strikes 153–7, 168 collective autonomy 264 collective bargaining 210 consultation, right to 4, 56, 123, 125, 151, 206–9 co-regulators, as 125 Court of Justice, challenges before 6 democratic governance 109, 116, 118, 122–9, 133–4, 139–43, 149–51 economic governance 205–9 European Economic and Social Committee 206, 208 European Semester 139, 197–8, 205–9 functional substitute for institutions, as 124 institutional status 149 law-making procedures 150–1 legality of measures 6, 196, 198, 205–9 Lisbon Treaty 138, 149, 205, 207 macroeconomic imbalances 207 National Reform Programmes 205 new economic govern­ance 5 participatory democracy 149–51, 206–8 Stability and Growth Pact 205 Tripartite Social Summit 206 social policy 3–4, 83–92 causes of crisis 4, 86–8, 106 collective bargaining 89 competencies 209–11 competitiveness 4, 83 convergence criteria 89–92 coordinated wage determination 5 decentralisation 89 democratic governance 5, 116–21, 125, 128–32 economic governance 4 economic policy 89 egalitarian social policy, need for 5, 84 EMU 4, 83–92, 101–6 Euro Plus Pact 128–9 European Central Bank 84–5, 98–101, 103 European Semester 104–6 flexibilisation of labour market 4, 83–4 institutions 84–92 internal devaluation 92–4 internal market 4, 83 labour law 83–4 Lisbon Treaty 122 new economic govern­ance 84–5, 95–6

new role of social policy 83–106 open method of coordination 125–6 Outright Market Transactions Programme 101 Pringle judgment 84–5, 98–106 response to crisis 92–101 social partners 198, 205–7 social policy 198 social security law 84 soli­daristic collective bargaining 5 Stability and Growth Pact 88–90 treaties 84, 86 Troika 4, 92 wages 5, 83, 89–92 social powers, distribution of 5, 114, 121–6 social progress standard 7, 273 social rights see fundamental social rights social security causes of crisis 88 Charter of Fundamental Rights of the EU 136 collective bargaining 253 democratic governance 109, 119, 130–1, 150 EMU 102–3 European Semester 102–3 MoUs 92–4 reform 4, 92–4, 109, 197 social policy 84 soft law 126, 196–7, 207 solidarity/secondary action, right to 302–4, 307–8, 310–11, 313–17, 320–1 sources of EU law 24 South Africa 311 sovereign debt 11–12, 86–7, 97, 100 Spain 1, 26, 251–3 collective agreements 181, 183, 253, 256 collective bargaining 185, 251–3, 284–5, 297 consultation, principle of 246 freedom of association 311 ILO Conventions 245, 263 interest rates 32 neoliberalism 46 public refinancing, prohibition of 32 trade unions 181 Troika 11, 22 unemployment 26 wages 136, 247 works council 181 Stability and Growth Pact (SGP) 36–41 adjustment path 39–40 budget discipline, enforcement of 16 convergence criteria 89–90 corrective component 36–7, 40–2 Council, recommendations of 36, 41 democratic governance 148 economic coordination 36 effectiveness 40 EMU 103

EU legal framework, amendment of 12, 16 European Parliament, co-decision rights of 40–1 excessive deficit procedure 36–7 fines 41–2 interest-bearing security/deposits 40–1 legality of measures 36–7, 41–2 Macroeconomic Imbalance Procedure 41 neoliberal economic policy, juridification of 36 new constitutionalism 36–7, 41 new economic govern­ance 39–42 preventive component 36–7, 39, 40–1 public spending, limits on 39 Reverse Majority Voting 39–41 sanctions 37, 40–2 Six-pack 39, 196 social partners 205 social policy 88–90 Stability Pact 36 state debt as percentage of GDP 39 surveillance and coordination of economic policies 36, 40–1 tightening of Pact 39–42 time limits 39 Two-pack 96 Stability, Coordination and Governance of EMU and ESMT see Fiscal Treaty standards see labour standards and working conditions state parliaments see national parliaments state sovereignty 58, 110, 117, 126 Strategy 2000 127, 129 strikes see collective action/right to strike structural intervention 257–61 subsidiarity 5, 115–18, 120 Summits see Euro Summits supremacy of EU law 57–8, 113, 117, 216 Sweden 135, 318 Tapiola, Kari 176 Tatarstan Republic 311 tax revenues, reduction in 26 technocracy 126–34 temporary agency work 174 Thatcher, Margaret 2 trade unions and trade union rights 5, 163–70 see also collective action/right to strike; collective agreements; collective bargaining; European Trade Union Confederation (ETUC) annulment actions 234–6 basic rights, importance of 317–19 challenges to measures 7, 230–1, 266 Charter of Fundamental Rights of the EU 297–8 constitutionalisation of rights 296 consultation, right of 283

Index  371

Council of Europe 298 design of measures, involvement in 153, 159 economic governance 5, 153–7 equality and non-discrimination 298 freedom of association and assembly 7–8, 65, 119, 122, 161–2, 188, 295–321 freedom of expression 298 hard core rights, interpretation of 269–70 ILO Conventions 7, 207, 261–2 legality of measures 196, 230–41 marginalisation 93, 153–9, 186–91, 243, 249, 259–64, 310, 325–6 flexible employment 177 neoliberalism 132, 296 workers’ representatives, extension of prerogatives to 7, 267, 287–8 yellow unions 184, 178 national representative unions 266, 290, 292, 294 neoliberalism 132, 295–6, 319 private and family life, right to respect for 298 Revised European Social Charter 7, 262, 266–70, 280–2, 287–8, 290, 292, 294, 327 right to form a union 153 right to join a union 153, 298–300 workers’ representatives, extension of trade union prerogatives to 7, 267, 287–8 yellow unions 174, 178 Transnational Trade Union Rights Network (TTUR) 155, 331–48 Troika 1, 98–9 see also Memoranda of Understanding (MoUs) accountability in international law 60–1 Charter of Fundamental Rights of the EU 4, 56 collective competence 4 competencies 55–81 conditions of access 4, 198–204 ESM 23, 55 flexibilisation of labour market 198 fundamental social rights 4, 55–6, 60–81 institutions 4, 57–60, 81 ILO 189–90 international organisation, definition of 61 legal basis 3–4, 55–61 legality of measures 3–4, 23, 50–2, 55–61, 75, 81, 146–7, 195–241 MoUs 3–4, 55–6, 58, 60–81 Revised European Social Charter 56 social conditionality 198–204 social policy 4, 92 state of emergency view 56 Turkey 7, 65, 161, 299–301, 305–6, 311–12, 316 Two-pack authoritarian constitutionalism 51–2 Council 52

372  Index Two-pack cont democratic control, lack of 3 entry into force 50 European Commission 50–2 legal basis, lack of 3 legality of measures 27, 50–2 macroeconomic adjustment programmes 50–1 member states, financial aid from 50 national budget plans, authorisation of 50–2 new economic govern­ance 33, 39, 50–2, 85, 96 secondary legislation, economic governance through 3, 27 Stability and Growth Pact 96 surveillance and coordination of budgetary policies 51 third countries, financial aid from 50 Troika 50–2 Uerpmann-Witzack, Robert 60 United Kingdom banking systems, near collapse of 86 benchmarking 192 Coalition government, reactionary nature of 296 collective action/strikes 160–1, 164–5 collective bargaining 185, 318 currency depreciation 92 Fiscal Treaty 3, 96 freedom of association 296 immunities 160–1 labour standards and working conditions 185–6 neoliberalism 296, 319 quantitative easing 97 public sector 249 secondary action 302–3, 307–8, 311, 313–17, 320–1 United States 1, 32, 86, 97, 192, 311 Van Rompuy, Herman 28 Vienna Convention on the Law of Treaties 68, 304 Vienna Convention on the Law of Treaties between States and International Organizations 69 wages and wage policies authoritarian constitutionalism 54 causes of crisis 4, 88 collective agreements 253–4 collective bargaining 263



competencies 209–10, 211–12 contracts for competitiveness 47 coordination 5, 90–2, 105, 106 effectiveness 5, 103–4 EMU 92, 105, 106 equal pay 56, 114 equality and non-discrimination 56, 114, 210 Euro Plus Pact 126, 131 flexibilisation of labour market 132 harmonisation 209–10 ILO Convention no 98 247 interest rates 91 interventionism 191 labour standards and working conditions 192 neoliberalism 43–6 new economic govern­ance 43–6, 197 peaceful enjoyment of possessions 304 secondary legislation, economic governance through 3 social dialogue 105 social policy 5, 83, 89–92 unit wage costs 47 Warneck, Wiebke 160 Weimar Republic 25–6 welfare state 31–3, 119, 136, 260, 263 see also social security workers’ organisations/representatives collective agreements 6, 174, 177, 180–2, 185–7, 204, 248 collective bargaining 175, 182, 185 complaints 262 consultation, right to 249 covenants 174 decentralised collective bargaining 185 definition 159 European Coal and Steel Community 113 European Works Councils Directive 123 ILO Conventions 6, 248–9, 250–4, 261–2 labour standards and working conditions 173–4, 177, 180–2, 185–7, 189 non-union representatives 6–7, 18, 93–4, 181–2, 189, 252 opening clauses 177 Revised European Social Charter 7, 267, 283, 287–8 trade union prerogatives, extension of 7, 267, 287–8 working conditions see labour standards and working conditions Working Time Directive 174 young workers 250–1