Right To Take Collective Action

The Committee consisted of the following Members:

Chair: Mr Mike Weir 

Barwell, Gavin (Croydon Central) (Con) 

Blomfield, Paul (Sheffield Central) (Lab) 

Burt, Lorely (Solihull) (LD) 

Clark, Greg (Minister of State, Department for Communities and Local Government)  

Goggins, Paul (Wythenshawe and Sale East) (Lab) 

Harris, Rebecca (Castle Point) (Con) 

Heaton-Harris, Chris (Daventry) (Con) 

Hopkins, Kelvin (Luton North) (Lab) 

Murray, Ian (Edinburgh South) (Lab) 

Nokes, Caroline (Romsey and Southampton North) (Con) 

Ruane, Chris (Vale of Clwyd) (Lab) 

Simpson, David (Upper Bann) (DUP) 

Wright, Jeremy (Lord Commissioner of Her Majesty's Treasury)  

Alison Groves, Committee Clerk

† attended the Committee

The following also attended ( Standing Order No. 119(6) ) :

Esterson, Bill (Sefton Central) (Lab) 

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European Committee C 

Monday 21 May 2012  

[Mr Mike Weir in the Chair] 

Right to Take Collective Action

4.30 pm 

The Chair:  Does a member of the European Scrutiny Committee wish to make a brief explanatory statement on the decision to refer the relevant documents to this Committee? 

Chris Heaton-Harris (Daventry) (Con):  It is a pleasure to serve under your chairmanship, Mr Weir, and as this is my first time, I would appreciate it if you treated me gently were I to get anything wrong. 

The Committee might find it helpful if I take a few minutes to explain the draft regulation’s background and the European Scrutiny Committee’s reasons for recommending a reasoned opinion. The regulation is a response to a number of judgments by the Court of Justice—notably in the Viking Line and Laval cases—that have sought to clarify the principles that national courts should apply when determining whether restrictions on the exercise of economic freedoms guaranteed by the EU treaties are justified, particularly when those restrictions result from industrial action to protect workers’ rights. 

In the Laval case, the Court held that collective action to protect local workers against possible social dumping, whereby lower-paid workers are posted by companies in one member state to work in another member state, could constitute an overriding reason of public interest sufficient to justify a restriction on the freedom to provide services. On the facts of the case, however, the Court also held that the action taken by Swedish trade unions, which were blockading access to construction sites, amounted to an unlawful interference. 

The Laval ruling and others exposed difficulties in ascertaining the core employment terms and conditions to which posted workers are entitled in the host state of temporary employment. They also exposed difficulties in determining the extent to which EU law may inhibit or prevent trade unions from taking action to defend the rights and jobs of the indigenous work force. The rulings have been met with consternation from trade union associations, which has led to pressure on the European Commission to clarify how workers’ rights are protected under EU law. 

This short draft regulation of five articles is a result of that pressure, but it is simply a restatement of the right to take collective action and the freedom to provide services across all EU member states without prioritising either. In other words, the exercise of collective action must respect economic freedoms, and the exercise of economic freedoms must respect collective action. As such, the draft regulation does not clarify the Court’s judgments, should such clarification be needed, which leads the Government to conclude that the draft regulation is unnecessary. The Government, however, do not conclude that the draft regulation contravenes the principle of subsidiarity. 

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By contrast, the European Scrutiny Committee considers that the draft regulation does contravene the principle of subsidiarity because the Commission has failed to adduce clear evidence of the necessity for EU legislative action. Such evidence should include how the proposal would achieve its stated objectives. The Committee’s view is that evidence of necessity is prerequisite both for action at EU level and for conformity with the principle of subsidiarity, so it recommended that the House of Commons should issue a reasoned opinion. 

A reasoned opinion is a new procedure under the treaty of Lisbon that gives national Parliaments a mechanism for challenging Commission legislative proposals on subsidiarity grounds. National Parliaments have eight weeks from the publication of a proposal to submit a reasoned opinion. The eight-week deadline for this proposal is midnight Brussels time tomorrow— 22 May. If such opinions represent one third of all national Parliament votes—each Parliament has two votes, with one for each Chamber in the case of bicameral Parliaments—the Commission must reconsider its proposal. With this proposal, the one-third threshold is very close to being reached, which would be a first. Should the threshold be reached, the Commission will have to consider whether to maintain, amend or withdraw the proposal. 

This Committee will consider a motion to approve the draft reasoned opinion in the annex to the extract from the European Scrutiny Committee’s report in the bundle. The European Scrutiny Committee recommends that the motion be approved. 

The Chair:  I call the Minister to make an opening statement. 

4.34 pm 

The Minister of State, Department for Communities and Local Government (Greg Clark):  It is an unexpected pleasure to be serving under your chairmanship this afternoon, Mr Weir. Members will have been expecting the Minister of State, Department for Business, Innovation and Skills, my hon. Friend the Member for Hertford and Stortford (Mr Prisk), but they will have seen that he has been detained in the Chamber. I shall seek to represent him with professionalism. 

This afternoon’s proceedings give the Committee the opportunity to discuss whether the European Commission’s recently published proposal for a draft regulation on the right to take collective action breaches the principle of subsidiarity and to decide whether to send a reasoned opinion on the regulation to the presidents of the EU institutions. 

It might be helpful if I pause, as my hon. Friend the Member for Daventry did, to reflect a little on the new mechanism with which we are engaged today and on the principle of subsidiarity itself. As my hon. Friend said, the possibility for national Parliaments to raise an objection to legislative proposals by issuing a reasoned opinion was introduced under protocol 2 of the Lisbon treaty. National Parliaments may raise an objection, which is referred to as a reasoned opinion, if they do not believe that a draft proposal is compliant with the principle of subsidiarity. 

Although I am opening this debate, it is for the Committee to decide whether a reasoned opinion should be issued. The requirement is that the Government

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provide time for the Committee to conduct its own debates on the matter. The principle of subsidiarity is set out in article 5.3 of the treaty on European Union. For Union action to satisfy the principle of subsidiarity, it is necessary to show that the objectives of a proposed action cannot be sufficiently achieved by member states acting on their own, and that they can be better achieved by action on the part of the Union. 

Although that sounds straightforward, this is a difficult and complex area, and there is often a range of views on whether legislative proposals are in accordance with subsidiarity. That is true of views between member state Governments and Parliaments, the Commission and the Court of Justice of the European Union. The Government’s explanatory memorandum, which was submitted by the Under-Secretary of State for Business, Innovation and Skills, my hon. Friend the Member for North Norfolk (Norman Lamb), sets out the Government’s assessment of whether the Commission’s proposal meets the test of subsidiarity. There is clearly much common ground between the opinions of the European Scrutiny Committee and the Government about the regulation. We are in absolute agreement that the Commission has failed to make a case for action. The Government do not consider the regulation to be necessary. 

The draft regulation was published alongside a draft directive with the intention of better enforcing the existing posted workers directive. Separately, the European Scrutiny Committee has asked for information about that draft enforcement direction, which my hon. Friend the Under-Secretary will supply shortly. I note that that Committee has indicated that it may wish that directive to be debated at some point, but it is not a matter for discussion today. 

The draft regulation on which we are focusing has become known as Monti II because it is modelled closely on three recommendations in Mario Monti’s 2010 report to restore confidence in the single market. First, it reaffirms existing European Court of Justice case law on the balance between collective action and economic freedoms. Secondly, it requires dispute mechanisms in member states to be made available to those involved in cross-border disputes. Thirdly, it sets up an alert mechanism when there is a serious collective action that might disrupt the single market. 

As my hon. Friend the Member for Daventry said, the draft regulation is a response to a long-running debate following the Viking Line and Laval judgments by the ECJ on the right to strike in cross-border situations. The rulings acknowledge the importance of economic freedoms and apply tests for collective action based on appropriateness, necessity and reasonableness. The judgments have caused controversy, particularly among unions, which believe that they favour economic freedoms at the expense of the collective right to action. 

The Government agree about the importance of ensuring the right balance between economic freedoms and social rights. Modern economies need both economic dynamism and social justice. However, in the Government’s view, the existing case law achieves the right balance. It falls to national courts to apply the tests and to determine whether strike action is proportionate. The draft regulation simply states that both fundamental rights and economic freedoms must be respected, but offers no further advice

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on how they should be applied in a specific case. National courts would have to return to existing case law for direction. 

The cases of Viking Line and Laval dealt with extreme circumstances, and there is no reason to believe that the principles in those judgments will create extra risk for collective action that has a legitimate purpose. The EU’s priorities must be on ensuring growth and competitiveness, and the regulation would be a distraction from that agenda—it is a waste of everyone’s time. 

We are not alone in being sceptical about the regulation. There has been widespread dissatisfaction about the proposal from unions, businesses and, indeed, member states, including in the Council of Ministers, so it is not anticipated that the proposal will proceed far or quickly. I remind the Committee that the proposal requires unanimity in the Council of Ministers, which seems unlikely on present evidence. 

The reasoned opinion sets out the view that the draft regulation breaches subsidiarity because no case has been made to show that the action is necessary. A reasoned opinion is intended to set out the views of Parliament, not of the Government. I understand that reasoned opinions have already been sent by the national Parliaments of Denmark, Sweden, Finland and Luxembourg, but other Parliaments are, like us, still considering the issue. I look forward to the Committee’s debate. 

The Chair:  We now have until 5.30 pm for questions to the Minister. I remind Members that they should be brief and that I have the discretion to allow supplementary questions. 

Kelvin Hopkins (Luton North) (Lab):  It is a pleasure to serve under your chairmanship, Mr Weir. 

The issue has arisen because of two cases—Laval and Viking Line—and the document was initially driven by trade union interests. We now appear to have a fudge that satisfies no one, so will the Minister be making that point strongly as and when this is discussed in Brussels? 

Greg Clark:  That is the Government’s view, and there are two opportunities for Parliament to make that view, including through the debate on whether a reasoned opinion should be proposed. Separately, the Government will make their view clear in the Council of Ministers. We have been clear that the proposal is irrelevant and unnecessary. 

Kelvin Hopkins:  The trade unions were under the impression that the matter concerned a fundamental right. We thought that, under our law, such a right is just that—fundamental. It now appears that it is a qualified right, but does not that put European Union law in a very bad light indeed? In fact, one could hardly consider something to be law, in our sense of the word, if it can be adjusted because of economic interests. 

Greg Clark:  I am grateful to the hon. Gentleman for his comments, and he is right to say that if the unions believe that there is a problem to be resolved, the one thing that we can agree on is that the proposal is irrelevant to its resolution. We can have separate debates on whether there is a problem. Article 2 of the proposed regulation states that the exercise of collective action

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must respect economic freedoms, but there is no attempt to specify the relative priority of either or to change the case law. It seems to be otiose and irrelevant to bring forward a regulation that advances the existing arrangement not at all, and clarifies it not a bit. 

Kelvin Hopkins:  When the International Transport Workers Federation challenged the Viking Line decision, it lost vast sums of money because it did not win. Does the Minister think that the British trade unions— I spent most of my life in trade unions before I became a Member—were right to believe and trust in employment law as decided by the European Union, rather than campaigning for good trade union laws at national level? 

Greg Clark:  I am not familiar with the details of the particular cases, but my understanding is that they were not terribly representative of the broad approach to trade union rights and the existing right to strike. Even members of the European Trade Union Confederation believe that the proposed arrangements do not go anywhere near addressing their concerns, which leads many people to conclude that, whatever the intentions behind the regulation, neither side is satisfied. At a time when we well know that there are many other priorities in the European Union, the proposal seems to be a waste of everyone’s time. 

Kelvin Hopkins:  The situation came as a terrible shock to Lord Monks, who was then secretary of the European TUC. He had been a lifelong Euro-enthusiast— I do not consider myself an enthusiast for the European Union, but he certainly was—but he was so profoundly shocked by the judgments that he reconsidered his Euro-enthusiasm. Does the Minister think that the regulation will be seriously damaging across the whole of Europe unless something is done about it? 

Greg Clark:  It is symptomatic that this is something that has caused enthusiasts of EU institutions, as Lord Monks may have been, to lose their faith in them, although those of us who did not have much faith in the first place might feel vindicated by that. Such regulations are debated in every national Parliament and in the Council of Ministers, but when even the people who think that there is a problem feel that this regulation is irrelevant to its resolution, it corrodes faith in the institutions of the European Union. 

Kelvin Hopkins:  I am grateful to you, Mr Weir, for allowing me to ask several questions. 

What position will the Government adopt when the draft directive is reconsidered, if the reasoned opinion has sufficient support? Will they take the employers’ side, or will they reaffirm the view that a fundamental right is a fundamental right, and that the right to strike should not be qualified after the event because of economic interests? 

Greg Clark:  The hon. Gentleman and I agree on the importance of the right to strike, which clearly needs to be balanced with important economic freedoms. Indeed,

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on the matter of social rights, there is a debate on whether the police should have the right to strike. It is always right to debate such matters, and the right to strike has been an important part of debates in the House over many years. Article 3 of the proposed regulation makes available dispute resolution mechanisms for cross-border disputes, but, in the United Kingdom, ACAS is available for cross-border disputes, as is the equivalent organisation in Northern Ireland, so the measure is regulating for something that is not necessary. If there is a debate to be had about the right to strike, that is a matter for national Parliaments, but the measures in the regulation seem to be at cross purposes. 

Kelvin Hopkins:  I think we have some agreement there. However, my concern lies with the reasoned opinion and sufficient support among member states. Will other member states, perhaps with more Governments of the left rather than the right, support the trade union view that we should re-establish the right to strike as a fundamental right that should not be qualified by arbitrary economic considerations? 

The Chair:  Order. Before the Minister answers, I think we are getting a wee bit far from the subsidiarity point. I have allowed Mr Hopkins to ask questions, but the Minister should bring the discussion back to subsidiarity. If you have any more questions, Mr Hopkins, please bear that in mind. 

Greg Clark:  I will indeed, Mr Weir. Part of the issue in subsidiarity is necessity, and the Government contend that that is not a necessary contribution to regulation. There are two mechanisms for debates on the necessity for further regulation of employment matters to be discussed. If, as my hon. Friend the Member for Daventry said, there are a sufficient number of reasoned opinions, there is a requirement for the regulation to be reconsidered, withdrawn and perhaps replaced. There is also the Council of Ministers. We understand that it is not only national Parliaments that are critical of the regulations; it is also the view of other member states. Given that unanimity is required, it seems that the opportunity to consider these matters, which I am sure will be welcomed by some, will have to be provided through a different mechanism. 

Kelvin Hopkins:  Thank you for your indulgence, Mr Weir. I will support the reasoned opinion, but perhaps from a different standpoint from the Minister and his colleagues. I am sure that the Committee will not be surprised to hear that I strongly support the trade union position. We have discussed subsidiarity many times in Committee and at the European Scrutiny Committee, of which I am a member. Some of us think that subsidiarity is more a decorative part of the constitution rather than an effective part, if one might make a Bagehot-like allusion. When we see subsidiarity become a reality we might take it more seriously. As I said, I shall support the motion simply because I want the whole thing to be discussed again. 

Greg Clark:  In the past few hours I have become a student of the doctrine of subsidiarity. I had not appreciated the important depths of the nuances, and the question as to whether necessity is an integral part of subsidiarity.

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So compelling is the subject matter that I am beginning to envy the time that members of the Committee spent debating these matters. I have found it very instructive. I suspect that neither this Committee nor the European Scrutiny Committee is going to resolve these issues during this Session of Parliament, let alone this sitting of the Committee. 

For whatever reason, there is a shared view on the part of the Committee and the Government, and between different members of the Committee, that the regulations before us are not required. They are a distraction from some of the debates that ought to be taking place. Perhaps for different reasons from different people, the Government are appropriately making time for the Committee to express its view and give a reasoned opinion to EU institutions. 

Ian Murray (Edinburgh South) (Lab):  It is a great pleasure to serve under your chairmanship for the first time, Mr Weir. Knowing you as I do, you will be gentle with us all, given your nature. 

I have a few questions for the Minister, following the contribution from my hon. Friend the Member for Luton North. Although we agree that the matter needs to be looked at again, one of the key principles in the draft directive is to try to rebalance the decisions made in the European Court of Justice with the social aspects of the rights not just of posted workers but of home workers. What pressure will the Government put on the Commission to deal with that? What pressure would be needed to be on the right side of the argument? It is clear that the case law that has been submitted with regard to these issues is quite unhelpful. Indeed, reading Monti II has done very little to clear that up. 

Greg Clark:  The competence of the EU applies to collective action that has a cross-border element. It has always been accepted and understood that action that is entirely domestic is a matter for the domestic institutions. There is a relatively narrow aspect for which even the question of regulation at EU level arises. Looking at these particular cases, the Government have taken the view that they are relatively sui generis; that they do not give sufficient grounds for concern as to the body of case law at European level on cross-border disputes to require change in regulation of this sort, not least because the changes in regulation being sought seem very opaque and not terribly effective. 

Ian Murray:  I am grateful to the Minister for that answer. It is clearly stated in some of the documentation that these proposals are an attempt to 

“steer a course between these two positions”. 

That steering between the two positions has been seen as the fudge. The need for these provisions in terms of subsidiarity is there for all to see. The key question is what will the UK Government do to impress on EU institutions the fact that the case law influencing much of the discussion around these issues is far too much on the economic freedom side, as it is being read. How do we readdress that balance in terms of social rights, to ensure that the founding treaties of the EU are balanced, as they were when they were written? 

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Greg Clark:  We have a slight difference of view. The Government believe that the existing case law is sufficiently clear to be relied upon without further changes. I know from what the hon. Member for Luton North has said that this may be a dispute between interested parties, and that the ETUC may take a different view. The Government’s view is that the case law is clear, but one thing on which we can agree is that the proposed regulations, far from making things clearer, risk making them more opaque. 

Ian Murray:  I appreciate that the Under-Secretary of State for Business, Innovation and Skills, the hon. Member for North Norfolk, who has responsibility for employment relations, consumer and postal affairs, is otherwise detained. In his correspondence, he said that joint and several liability was unnecessary, because member states would be in a better position to determine these kinds of enforcements themselves. When he made his response, did he have any idea what the UK Government might do to try to resolve issues relating to joint and several liability? 

Greg Clark:  My hon. Friend has taken the view that it is for national courts to determine each of those aspects. The precedence is sufficiently clear. The proposals include a joint and several liability system, which would make contractors liable if their sub-contractors failed to honour or pay. The requirements arise from existing case law and, again, the proposed regulations do not clarify or advance those in any way. Domestic courts can make provisions for joint and several liability based on existing case law. 

The Chair:  If no other Members wish to ask questions, we shall proceed to the debate on the motion. 

Motion made, and Question proposed,  

That the Committee considers that the draft Council Regulation on the exercise of the right to take collective action within the context of the freedom of establishment and the freedom to provide services (European Union Document No. 8042/12 and Addenda 1 to 3) does not comply with the principle of subsidiarity for the reasons set out in Chapter 1 of the First Report of the European Scrutiny Committee (HC 86-i); and, in accordance with Article 6 of Protocol (No. 2) of the Treaty on the Functioning of the European Union on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.—(Greg Clark.)  

4.56 pm 

Ian Murray:  I shall be brief, because I think the Committee agrees on the conclusion. However, I want to put on record the strong view of the Opposition that defined rights at work should be robustly defended in the courts, including the European courts. My hon. Friend the Member for Luton North said that that was part of the founding principles of the trade union movement, proposing that we go forward with some of these issues. The case law has suggested otherwise to a greater or lesser extent. I appreciate that we may disagree on that, as the Minister said, but the Opposition think that unless a directive is introduced to clarify what takes precedence—economic rights or social rights—we are no further forward. 

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Many proposals in the draft directive are very welcome in trying to clarify issues relating to rights. Joint and several liability is one of those. However, the Monti II regulations have confused the matter further rather than resolved such issues. There is concern that the spirit of the directive has been fudged, to use my hon. Friend’s words. We must find a way as quickly as possible to clarify the case law and introduce a directive at European level that allows us to consider some of the issues and ensure that economic imperatives do not override the social justice component of the rights of individual workers. 

4.58 pm 

Kelvin Hopkins:  I support what my hon. Friend says. I have been seriously concerned about these issues since they first arose. I was one of those who spoke in the Chamber on such matters in the past. I was appalled by the apparent corruption, almost, of the European Court of Justice. It is supposed to stand for principles that are established in law, but all of a sudden it buckled under pressure from employers and economic interests. That is not what courts are supposed to do, and I certainly hope they never do that sort of thing in the United Kingdom in our own legal systems. 

The proposed directive is a fudge. It is better to have no fudge and to try to ensure that the existing directives are clarified and enforced. There must be some admission that the European Court of Justice judgments were wrong. That is what I want to see. I hope that voices will be raised in that direction during further consideration and that the directive will be withdrawn. If that does not happen, I am sure that the trade union movement in this country and workers in general will want to see the British Government standing up for adherence to trade union rights, and possibly even a return to traditional freedoms and immunities. We used to have those before Mrs Thatcher and her Government changed the law; the position before 1979 was far better than it is now, and I would like to see those provisions restored. If we do not get protection from the European Court of Justice and the European Union, we will want something put in place in our legal system to guarantee worker and trade union rights. I shall leave it there, but such matters are very important, and they will be taken seriously by trade unions across Europe. 

5 pm 

Chris Heaton-Harris:  If the hon. Member for Edinburgh South wants speed in these matters, the European Commission is the wrong place to look. Getting to this point has taken years, and it will take a number of years in future to come to an opinion that can be agreed across council. 

I have been listening to what my hon. Friend—my friend, actually—the Member for Luton North has said. As for the two cases, Viking Line was about the Rosella, a ferry that travelled between Finland and Estonia. It was flagged as a Finnish ferry, paying Finnish rates. When Estonia joined the EU—not under Margaret Thatcher, but under Mr Blair—there was a big fudge on all sorts of different issues, one of which was employment law and employment rights. The ferry was losing money,

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so the company wanted to reflag it as an Estonian ferry and pay Estonian wages. One good thing that everybody agreed on—the accession of Estonia to the EU—caused something bad to happen, which was that those workers’ rights were affected and their pay decreased. The Laval case is very similar, involving a Latvian building company that posted workers to its Swedish subsidiary. They were working for less money than the Swedish subsidiary was paying local workers. A strike followed, and we all know the results of the judgments that flow from that. This is not only about the fundamental freedoms to which the EU aspires, which are confused at best when mixed all together. When we also include different pay rates that exist in different countries across the EU, it is supremely complex. 

Kelvin Hopkins:  I agree entirely with the hon. Gentleman. I am sure, however, that had individual Estonian sailors been recruited to fill vacancies on the Viking Line and been paid at rates that other workers were getting, there would have been no objection. It was the fact that it was reflagged and workers were employed on lower rates, simply to make profits for companies. 

Chris Heaton-Harris:  That is exactly right, and it is the reason why those court cases happened. 

I want to say that although speed will not be of the essence, getting a reasoned opinion sent is, because we have a deadline of midnight to do so. I would like to think that everybody feels that is a fair idea, no matter what their political view, or on which side of the House they sit. This is the first time that a reasoned opinion has been used in such a way to stop the European Commission in its tracks, before it creates another fudge on another bunch of things. We should use it properly, and I would like to think that a lot more reasoned opinions will be used in future. 

5.3 pm 

Greg Clark:  This has been an instructive debate, informed by some expert speeches from, in particular, the hon. Member for Luton North and my hon. Friend the Member for Daventry, as befits distinguished members of the European Scrutiny Committee. It shows that employment rights and trade union rights are topics on which there is a lot to be discussed, and my view is that those should be debated vigorously in this House. Where there is a European competence, which is narrowly on these cross-border issues, while there are very different points of view, I think we are in agreement that the proposed regulations are a disappointment, in terms of any attempt to deal with the issues that arise. 

Given that this is a novel procedure, I am, as Members know, in the unusual position of introducing the subject for debate. However, that really is to give voice to the Committee, and it will be Committee members who respond to the recommendation of my hon. Friend the Member for Daventry, on behalf of the European Scrutiny Committee. I am conscious of the tight deadline. I only hope that the meticulous Chair of that Committee, my hon. Friend the Member for Stone (Mr Cash), has counted the days accurately, given recent precedents. Given what I know about my hon. Friend, I am sure that that will have been done rigorously. The Committee

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has to come to a view today on the European Scrutiny Committee’s view that a reasoned opinion in the terms expressed should be given. 

It has been a pleasure to play my part in allowing the Committee to participate in this occasion. I think that there is a proposal that in future the Committee should be able to move these motions directly, rather than

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officially doing so through the Government. I think that that would be welcomed by all. 

Question put and agreed to.  

5.5 pm 

Committee rose.  

Prepared 22nd May 2012