Menelaos Markakis
DPhil Candidate, University of Oxford; Researcher,
Erasmus University of Rotterdam.
The public and scholarly attention given to the AGET Iraklis case has never been
commensurate with its legal and political significance. The AG
opinion (which was analysed previously on
this blog) was delivered shortly before the
UK referendum on UK’s membership of the EU and largely flew under the radar of
most commentators. The Grand Chamber judgment in AGET Iraklis, which was handed down on 21 December 2016, was
delivered on the same day as the Court’s judgment
on the retention of data by providers of electronic communication services (analysed
here)
and AG Sharpston’s opinion
on the EU-Singapore Free Trade Agreement (commentary here).
The ECJ Grand Chamber ruling
in AGET Iraklis is nevertheless very
important, as it sheds light on the sometimes strained relationship between
fundamental economic freedoms and collective labour rights.
Background
to the case
As regards the factual and domestic law background
to the case, it will be recalled that AGET Iraklis is in the business of cement
production and has three plants in Greece. The company sought to reorganise its
business and shut down one of its three plants. It further sought ministerial
authorisation to carry out collective redundancies, as required by Greek law. More
specifically, Greek Law No 1387/1983 provides that the Minister of Labour may
refuse to authorise some or all of the projected redundancies. The impugned law
further provides that applications to carry out collective redundancies are to
be considered on the basis of the following criteria: ‘the conditions in the
labour market’; ‘the situation of the undertaking’; and ‘the interests of the
national economy’. Authorisation is a condition for the validity of the redundancy
measures. In the case of AGET, the Minister of Labour refused to provide the
requisite authorisation.
The company sought to argue that the impugned
national rule was not compatible with Council
Directive 98/59/EC on the
approximation of the laws of the Member States relating to collective
redundancies and Articles 49 (freedom of establishment) and 63 (free movement
of capital) of the TFEU. The Greek Council of State asked the CJEU whether the
contested rule contravened the aforementioned rules and in case the answer to
the preceding question was in the affirmative, whether it could perhaps be
justified if there were serious social reasons, such as an acute economic crisis
and very high unemployment.
The
compatibility of the impugned national law with Council Directive 98/59/EC
The Court ruled that ‘Directive 98/59 [could not], in principle, be interpreted as precluding a national regime which
[conferred] upon a public authority the power to prevent collective
redundancies by a reasoned decision adopted after the documents in the file
[had] been examined and predetermined substantive criteria [had] been taken
into account’ (para 34). The Directive
merely set out the process to be followed before such dismissals were carried
out and explicitly authorised the Member States to apply or to introduce laws,
regulations or administrative provisions which were more favourable to workers
(paras 27-33). ‘However, the
position would, exceptionally, be
different if, in the light of its more detailed rules or of the particular way
in which it [was] implemented by the competent public authority, such a
national regime were to result in Articles 2 to 4 of Directive 98/59 being
deprived of their practical effect’
(para 35). ‘That would be so in the
case of national legislation under which collective redundancies require[d] the
prior consent of a public authority if, on account, for example, of the
criteria in the light of which that authority [was] called upon to take a
decision or of the specific way in which it interpret[ed] and applie[d] those
criteria, any actual possibility for the employer to effect such collective
redundancies were, in practice, ruled out’
(para 38).
The provisions of Council Directive 98/59/EC were ‘clearly based on the premiss that collective redundancies
[should] – once the procedures established by those provisions [had] been
exhausted, including where the consultations [had] not led to an
agreement – at least remain conceivable, albeit subject to the fulfilment
of certain objective requirements laid down by the applicable national
legislation, if such requirements exist[ed]’
(para 41). However, AGET Iraklis argued that the Greek authorities had
systematically opposed projected collective redundancies of which they had been
notified (para 42). The Court of Justice left it to the referring court to
decide whether, on account of the
three assessment criteria and of the specific way in which the competent public
authority had applied those criteria,
the Directive was deprived of its practical effect (para 43).
Freedom
of establishment and Article 16 of the Charter
The Court went on to examine the compatibility of
the impugned national measure with Article 49 TFEU (freedom of establishment).
It noted that such a national measure ‘constitute[d]
a significant interference in certain freedoms which economic operators generally
enjoy[ed]’ (para 55). It further ruled that ‘[n]ational legislation such as that at issue in the main proceedings
[was] thus such as to render access to the Greek market less attractive and,
following access to that market, to reduce considerably, or even eliminate, the
ability of economic operators from other Member States who [had] chosen to set
up in a new market to adjust subsequently their activity in that market or to
give it up, by parting, to that end, with the workers previously taken on’
(para 56). As such, it was ‘liable to constitute
a serious obstacle to the exercise of freedom of establishment in Greece’
(para 57). Indeed, the court noted that the case concerned an investment by a
company from another Member State (para 47). As the impugned national law
derogated from a fundamental economic freedom, Article 16 of the Charter
(freedom to conduct a business) was also engaged (paras 62-69).
The Court ruled that such a restriction might be
justified by overriding requirements in the public interest, such as ‘the
protection of workers’ or ‘the encouragement of employment and recruitment’
(paras 73-75). It is noteworthy and indeed commendable that the Court digressed
to the social policy objectives pursued by the EU Treaties, thereby discussing
Articles 3(3) TEU, 151 TFEU, 147 TFEU and 9 TFEU at some length (paras 76-78).
It further noted that the Member States had ‘a
broad discretion when choosing the measures capable of achieving the aims of
their social policy’ (para 81).
Next, the Court held that ‘the mere fact that a Member State provide[d], in its national
legislation, that projected collective redundancies [should], prior to any
implementation, be notified to a national authority, which [was] endowed with
powers of review enabling it, in certain circumstances, to oppose the projected
redundancies on grounds relating to the protection of workers and of
employment, [could not] be considered contrary to freedom of establishment as
guaranteed by Article 49 TFEU or the freedom to conduct a business
enshrined in Article 16 of the Charter’ (para 83). The freedom to
conduct a business was not absolute and should be viewed in relation to its
social function (para 85). The wording of Article 16 of the Charter resembled,
said the Court, that of certain provisions found in Title IV of the Charter
(Solidarity), and the freedom to conduct a business might be subject to a broad
range of interventions on the part of public authorities that might limit the
exercise of economic activity in the public interest (para 86). Alemo-Herron
(in which the
Court ruled against the UK’s application of the Directive on workers’ acquired
rights) was quickly discussed and brushed aside
(para 87). A regime which ‘[did] not have, in
any way, the consequence of entirely excluding, by its very nature, the ability
of undertakings to effect collective redundancies, since it [was] designed
solely to impose a framework on that ability’ did not affect, held the
Court, the essence of the freedom to conduct a business (para 88).
The Court further noted that, according to Article
52(1) of the EU Charter, ‘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’, such as the Article 30 Charter
right to protection against unjustified dismissal, in accordance with Union law
and national laws and practices (para 89). ‘Thus,
a national regime imposing a framework … [should] seek, in this sensitive area,
to reconcile and to strike a fair balance between the interests connected with
the protection of workers and of employment, in particular protection against
unjustified dismissal and against the consequences of collective dismissals for
workers, and those relating to freedom of establishment and the freedom of
economic operators to conduct a business enshrined in Articles 49 TFEU and
Article 16 of the Charter’ (para 90). Such a mechanism ‘[might] – in the absence, especially, of any
rules of EU law that [were] intended to prevent such redundancies and [went]
beyond the fields of information and consultation covered by Directive
98/59 – prove to be a mechanism of the sort that [could] contribute to
enhancing the level of actual protection of workers and of their employment, by
laying down substantive rules governing the adoption of such economic and
commercial decisions by undertakings’ (para 92). ‘Such a mechanism [was] thus appropriate for ensuring
the attainment of the objectives in the public interest thereby pursued’
(para 92). ‘Furthermore, in the light of the
discretion available to the Member States when pursuing their social policy,
they [were], in principle, justified in considering the existence of a
mechanism imposing such a framework to be necessary in order to ensure an
enhanced level of protection of workers and of their employment’ (para 93). ‘In
particular, it [was] not apparent that measures of a less restrictive kind
would ensure attainment of the objectives thereby pursued as effectively as the
establishment of such a framework’ (para 93). As such, the Court
concluded that such a regime was in
principle capable of satisfying the requirements stemming from the
principle of proportionality and was therefore compatible with Articles 49 TFEU
and 16 ECFR (para 94).
However, as regards the specific characteristics of the impugned national measure, the
criteria applied by the competent national authority when deciding whether to
oppose the projected redundancies (viz., ‘the conditions in the labour market’
and ‘the situation of the undertaking’) were ‘formulated in very general and
imprecise terms’ (para 99). ‘…[I]n the absence
of details of the particular circumstances in which the power in question
[might] be exercised, the employers concerned [did] not know in what specific
objective circumstances that power [might] be applied, as the situations
allowing its exercise [were] potentially numerous, undetermined and
indeterminable and [left] the authority concerned a broad discretion that [was]
difficult to review’ (para 100). ‘Such criteria which [were] not precise and
[were] not therefore founded on objective, verifiable conditions [went] beyond
what [was] necessary in order to attain the objectives stated and [could not]
therefore satisfy the requirements of the principle of proportionality’
(para 100). What is more, ‘the legislation
concerned also fail[ed] to provide the national courts with criteria that
[were] sufficiently precise to enable them to review the way in which the
administrative authority exercise[d] its discretion’ (para 101).
Consequently, the impugned regime was incompatible, because of its ‘particular detailed rules’, with the requirements
flowing from Articles 49 TFEU and 16 ECFR (paras 102-04).
The impugned measure could not be saved, said the
Court, if there were serious social reasons, such as an acute economic crisis
and very high unemployment. As regards Council Directive 98/59/EC, the Member
State concerned was not allowed to deprive the provisions of the Directive of their
practical effect, ‘as the directive [did] not
contain a safeguard clause for the purpose of authorising by way of exception a
derogation, in the event of such a national context, from the harmonising
provisions which it [laid] down’ (para 106). Nor did the EU Treaties and
related case law provide for a derogation in such cases (para 107). As such,
the peculiar context of the Greek crisis did not have a bearing, said the
Court, on the finding of incompatibility of the impugned national law with
Articles 49 TFEU and 16 ECFR (para 108).
Analysis
This commentary should be read together with the
previous post on the AG opinion. The
analysis here will only cover those aspects of the case which were not already
discussed in the previous post.
This judgment was expected with great interest from
the Greek Government and the Troika (now the ‘Quadriga’), as the second review
of the ongoing financial assistance programme is also focusing on labour market
issues. More specifically, the Greek Government has come under pressure to strip
the Minister of Labour of its power to control mass layoffs by employers or at
the very least lax the relevant requirements for such dismissals. What are then
the effects of the preliminary ruling in AGET
Iraklis in this respect?
We have seen that the CJEU ruled that Council
Directive 98/59/EC might not necessarily be deprived of its practical effect by
the impugned national measure. The referring court could therefore ‘save’ this
measure by holding that the criteria as set out in the impugned law and applied
by the Minister of Labour did not deprive the Directive of its practical
effect. This would of course depend on whether it was indeed the case that the
Greek authorities systematically opposed collective redundancies (as argued by
AGET Iraklis) or not. It remains to be seen whether the Greek Council of State
will take the view that the impugned national law is compatible with the
Directive. To be sure, this point might be somewhat moot by then, for the
reasons explained below.
As regards the compatibility of the impugned
national law with Articles 49 TFEU and 16 ECFR, the situation is far more
complicated for the Greek authorities. The Court of Justice is essentially
asking the Greek authorities to devise a new mechanism whereby the criteria
applied by the national authorities would not be formulated ‘in very general
and imprecise terms’. These criteria would have to be based on objective
conditions the fulfilment of which could be reviewed by the courts. The Court
did not offer more guidance on how the new mechanism should look like,
presumably seeking to respect the broad margin of appreciation casually granted
to national authorities in this sensitive area. As AG Wahl had argued in his
opinion, ‘[a]n alternative might have consisted in listing the types of
dismissals considered to be unjustified, as in the case of the list which
appears in paragraph 3 of the section of the Appendix to the Social Charter
relating to Article 24 thereof’ (para 71). That would indeed be an option.
Be that as it may, it should not escape our
attention that the new law would be drafted by the Greek authorities in
cooperation with the European Commission, the ECB, the IMF, and the ESM. As
such, the broad margin of appreciation in principle enjoyed by the Greek
authorities would de facto be diminished.
This is not a critique of the Court’s reasoning and should not be seen in this
light. It is rather an attempt to bring a dose of realism to the debate. Absent
an authoritative interpretation by the CJEU as to how this new mechanism should
look like, the Greek authorities are likely to succumb to the pressure exerted
by the country’s lenders to create a more ‘flexible’ labour market. This is
because, as
argued elsewhere, the Troika possesses
a much more credible ‘enforcement mechanism’, insofar as the release of further
loan instalments is made conditional upon successful completion of the review
of the programme.
In light of the above, there are two ways of looking
at the judgment in AGET Iraklis,
depending on one’s perspective. The Greek Government would presumably seek to
argue in its negotiations with the Troika that the impugned national law is not
in principle incompatible with EU law, and that EU law does not require that
such a law be disapplied. Fine-tuning the relevant provisions in line with the
EU acquis would make do. On their part, the Troika would probably argue that EU
law does not require that such a protective regime for workers exist, and that
therefore it could perhaps be abolished. Given that a state which is seemingly
constantly on the brink of insolvency does not have equal bargaining power as
its lenders, it would not be surprising if the Greek authorities came under
tremendous pressure to relax the requirements for carrying out collective
redundancies. This is more especially so because the successful completion of
the second review of the programme is linked
to measures of debt relief for Greece as well as participation in the ECB’s
quantitative easing programme.
This was most certainly not a Viking/Laval moment for the Court, as it very carefully examined
the merits and demerits of the opposing arguments and handed down a very
measured judgment. The Court surely cannot be expected to broker an agreement
between Greece and the institutions, as its proper role is to interpret and
rule on the validity of EU law. The ball is now firmly back with the referring
court and the negotiating parties, the latter being responsible to come up with
a solution that would unlock much-needed funding for the Greek economy while
being respectful of the interests of workers.
Barnard
& Peers: chapter 9, chapter 20
Photo: AGET Heracles cement factory
Photo credit:
Greekreporter.com
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