Europe’s ‘Highly Competitive Social Market’ Economy

The European Union is not only to establish an internal market but is also to work for the sustainable development of Europe, which is based, in particular, on a highly competitive social market economy aiming at full employment and social progress, and it is to promote, inter alia, social protection.

Case C-201/05, Aget Iraklis referred to the CJEU by the Greek Council of State (Supreme Administrative Court) concerned the question of whether the powers of the Minister for Labour to refuse planned collective redundancies under certain circumstances are compatible with EU Law

Advocate General (AG) Wahl’s Opinion the AG had declared: ‘The European Union is based on a free market economy, which implies that undertakings must have the freedom to conduct their business as they see fit’. The Opinion had concluded that the Greek rules were indeed in breach of Article 49 of the Treaty for the Functioning of the European Union (TFEU) and of Article 16 of the Charter of Fundamental Rights of the EU (Charter).

Article 49 Treaty for the Functioning of the European Union (TFEU) Freedom of establishment grants to nationals of the Member States and which includes the right for them to take up and pursue activities as self-employed persons and to set up and manage undertakings, under the conditions laid down for its own nationals by the law of the Member State where such establishment is effected, entails, in accordance with Article 54 TFEU, for companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the European Union, the right to exercise their activity in the Member State concerned through a subsidiary, a branch or an agency See parr. 45-57 + on possible justification parr. 61-70 + par. 104

Article 16 of the Charter of Fundamental Rights of the EU (Charter) Freedom to conduct a business The freedom to conduct a business in accordance with Union law and national laws and practices is recognised.

The CJEU reached four key conclusions Offered some reassurances but also cautioned the Greek authorities that some aspects of their national laws on collective redundancies may indeed be incompatible with EU Law. The minimum protection: informing and consulting workers The notification to a national authority The freedom to conduct a business The veto right: objective and proportionate

The minimum protection: informing and consulting workers the judges inferred from ‘Article 5 of Directive 98/59 that that directive is intended […] to provide minimum protection with regard to informing and consulting workers in the event of collective redundancies and that the Member States remain free to adopt national measures that are more favourable to those workers’. In the case, the Greek legislation allowing a public authority the power to prevent collective redundancies is not, as often argued, incompatible in principle with Directive 98/59 that regulates collective redundancies at European level

The notification to a national authority The mere fact that a Member State stipulates a requirement that any projected collective redundancies must be notified to a national authority, which has simultaneously the right to oppose these redundancies on grounds relating to the protection of workers and of employment, ‘cannot 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’ either.

The freedom to conduct a business Article 16 of the Charter as establishing a fundamental freedom to conduct a business, it then went on to stress that ‘the freedom to conduct a business may be subject to a broad range of interventions on the part of public authorities that may limit the exercise of economic activity in the public interest’. the veto by public authorities in collective redundancies was solely designed to impose a framework on the ability of companies to proceed to collective redundancies.

The veto right: objective and proportionate the veto right of the public authorities could both be justified, as its objective was to protect workers (expressly referring to Article 30 of the Charter), and be proportionate. It went as far as suggesting that ‘it is 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’.

(…) Veto right: objective and proportionate The CJEU noted that the three criteria, which the Greek public authorities take into account for the purpose of deciding whether they oppose collective redundancies (‘interests of the national economy’, ‘situation of the undertaking’ and the ‘conditions in the labour market’) are not up to the job. The ‘interests of the national economy’ was considered to relate to an economic aim, which cannot constitute a public interest reason justifying a restriction on EU fundamental freedoms. The ‘situation of the undertaking’, while in principle these were found to be capable of relating to the public interest, the CJEU lamented the fact that the administrative authorities’ discretion was unfettered by their overly-generic wording. It then went on to express its expectation that the criteria relied upon by the public authorities be detailed and specific enough so as to allow employers a certain degree of predictability in terms of their application by public authorities and to allow courts to review how public authorities exercise their discretion.

(…) Veto right: objective and proportionate The ‘conditions in the labour market’ To read into Article 3(3) TEU’s ‘highly competitive social market economy’ a vision of Europe’s economic (and social) relations that is less straightforwardly committed to an unbridled freedom for undertakings to conduct their business ‘as they see fit’. The fundamental market freedoms remain fundamental, but it must be balanced against a range of social objectives recognised by the Treaties. This is a rehearsal of a well-established jurisprudence of the CJEU, the balancing exercise is more sensitive to the fact that collective redundancies do not solely affect the rights and interest of undertakings, but also those of workers and, no less importantly, of society at large.