Abstract
This article is the first part of a research to the structure and legal nature of EU economic governance and its damaging impact on the right to collective bargaining during the crisis. The objective of the first part is to explain and assess the concept of EU economic governance and to develop a clear vision on the nature, content and limits of the right to collective bargaining.
Keywords
1. Introduction
With the financial and economic crisis behind us, the EU is finding a new impetus to develop and reinforce its social dimension. The crisis has led to the emergence of economic governance as an important policy mechanism for the EU. However, this so-called ‘EU economic governance’ system also caused some questionable EU Recommendations and national measures in the field of social policy (and employment). The objective of this pair of articles (Part. 2 will be published in the next edition of the ELLJ) is to investigate the problematic relationship between EU economic governance and the right to collective bargaining. In particular, it looks at the question of whether the Recommendations arising from the EU economic governance mechanisms did/do not prompt the Member States to (drastically) restrict the fundamental right to collective bargaining. 1 To be able to answer this question, this first part undertakes to give a short overview of the basic structure of the EU economic governance system in which it will look at the standard mechanism of the European Semester, its most important instruments and its legal status. Second, it will focus on the content of the right to collective bargaining in the legal orders of the EU, the Council of Europe and the ILO. It will do so by enlisting the different elements of the right, which will be called ‘indicators’. In addition, it will have a quick look at the right to social dialogue and finalise by disseminating the possibility to restrict the right to collective bargaining and the justification test to assess whether a restriction could be a violation of the right or not. In the next article (Part 2), an overview will be given of the impact of EU economic governance during the crisis on the right to collective bargaining in some specific EU Member States. And fourth and last, the second article will take into account the new developments and the current evolution in the Country Specific Recommendations of 2018.
2. Eu economic governance
The EU uses economic governance as a system to monitor Member States’ policies in the context of the Union’s budgetary rules and its growth strategy (now: Europe 2020). 2 The current systems of EU economic governance are based on the development of the Economic and Monetary Union (with the start of the Stability and Growth Pact in 1997) 3 and gradually gained importance and a broader application with the Lisbon Strategy in 2000 and the Europe 2020 Strategy (and the introduction of the European Semester) in 2010. Two main forms of economic governance can be distinguished. Firstly, the standard EU economic governance which is framed in the European Semester and, secondly, what I like to call the ‘extreme EU economic governance’, which is applied to countries that need financial assistance from the other Member States (e.g. Greece, Portugal, Ireland, etc.). This extreme form is part of the European Stability Mechanism (ESM) and, for the time being, is outside the EU legal order, although it is clearly very closely linked to the EU.
2.1 Standard economic governance
The complex nature of economic governance turns it difficult to give a definition. Nonetheless, this article defines standard economic governance as ‘the set of supervisory mechanisms, embedded in the European Semester, whereby the Union, using the Open Method of Coordination, provides Member States with (hybrid) guidelines, mainly in the budgetary, economic and social fields, based on information made available to it, in order to support the economy and achieve the objectives of the Europe 2020 growth strategy’. This definition refers to the ‘Open Method of Coordination’ (OMC) and qualifies the guidelines as ‘hybrid’. As far as the OMC is concerned, economic governance does indeed use a soft law method whereby the EU provides guidance (‘Country Specific Recommendations’), based on the results of various monitoring instruments, to the Member States. In principle, the Recommendations do not have a binding legal force. Member States are not obliged to implement them and can ignore them. However, EU economic governance is not as ‘soft law’ as it might seem at first sight. In particular, non-compliance with the rules of the monitoring mechanisms relating to the budget (the Stability and Growth Pact (SGP)) and the macroeconomic situation (the Macroeconomic Imbalance Procedure (MIP)) may lead to sanctions, including enormous financial penalties. 4 Therefore, certain instruments are provided with an enforcement mechanism which prevents Member States from simply ignoring the Recommendations. On one hand, the threat of financial sanctions - although not yet imposed by the EU in practice - puts a clear pressure on Member States to comply. On the other hand, the Country Specific Recommendations related to social policy and employment are not directly covered by any sanction mechanism, yet they are often not entirely unrelated to the SGP and the MIP. The Recommendations are interlinked (see the example of France in the second part). 5 As a result, EU economic governance is not purely a soft law system, but a hybrid system with elements of both soft law and hard law. 6
The European Semester is the EU’s monitoring calendar or cycle. 7 It consists of a complex set of agenda items for the different EU institutions and the Member States. The basic structure, however, is rather simple. First the European Commission publishes the Country Reports in February. A country report describes a Member State’s budgetary and socio-economic situation as comprehensively and objectively as possible, using a variety of monitoring mechanisms with indicators. The country report gives a complete overview of the country’s situation on the basis of which the Commission will later rely to make Recommendations. In March-April, Member States will publish their Stability Programmes and National Reform Programmes. In the Stability Programmes, they indicate what measures they have taken and will take to comply with the EU’s budgetary Recommendations (which are contained in the SGP). In the National Reform Programmes, the countries will do the same with regard to the measures they have taken (or will take) to respond to the other Country Specific Recommendations, which they have received from the EU in the previous year. In May, on the basis of the Country Reports and the submitted Stability and National Reform Programmes (and all the other economic governance instruments), the European Commission will draw up new Country Specific Recommendations, which will then be approved by the Council in July and officially published in August. The Member States will thereupon be able to get to work on the implementation of the new Recommendations and the cycle can start anew.
As mentioned, the Stability and Growth Pact (SGP) and the Macroeconomic Imbalance Procedure (MIP) are of a special importance in the standard EU economic governance. Especially the budgetary rules of the SGP have an enormous impact as they are based on the Maastricht criteria which basically determine if a country is financially healthy or if it should be placed under a strict monitoring. The two basic rules are: 1. The annual budgetary deficit of a Member State cannot be higher than 3% of its GDP; 2. The national sovereign debt of the Member State has to be lower than 60% of its GDP (with exceptions). 8 As the crisis was foremost a European sovereign debt crisis, the rules and enforceability of the SGP were made more strict by the six-pack (2011), 9 the two-pack (2013) 10 and the Fiscal Compact. 11 The six-pack introduced the MIP to link the budgetary problems to the broader macroeconomic context of a Member State. 12 In case of budgetary problems (i.e. a breach of the Maastricht criteria), a Member State might end up in an Excessive Deficit Procedure (EDP) under the corrective arm of the SGP. 13 In case of excessive macroeconomic issues, the Member State might end up in an Excessive Imbalance Procedure (EIP) under the corrective arm of the MIP. 14 Both the EDP and EIP are much dreaded situations for the Member States, as they involve a very tight policy monitoring by the Commission and possibly end up in sanctions, including financial fines.
2.2 Extreme economic governance
In addition to the European Semester, there is a system of extreme EU economic governance for Member States that are in need of financial assistance, as was the case for Greece, Ireland, Portugal and Cyprus, among others. These situations are not regulated by the EU itself but (since 1 May 2013) 15 by the European Stability Mechanism which is enshrined outside the EU legal order in the Inter-state ESM Treaty between the Euro-area Member States. 16 Nevertheless, the links with the EU are very close and it is envisaged that the ESM will eventually be integrated into the EU. 17 If a Member State applies for financial assistance, the ESM will send the so-called ‘Troika’: 18 experts from the European Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF) will assess the Member State’s situation and needs and subsequently submit to the Member State a sort of contract called the ‘Memorandum of Understanding’(MoU). 19 This MoU sets out the loans (or other forms of financial aid), but also a large number of fiscal, economic, social and other measures to restore the Member State’s budgetary health and its economy. Although the Member State is in no way obliged to accept the MoU, the choice for the Member state usually comes down to acceptance or bankruptcy with all its consequences. The Troika will also monitor the implementation (through the Economic Adjustment Programmes (EAPs)) after the conclusion of the MoU, as the loan pledges will be released in different parts only, depending on the progress in the implementation of the recommended measures. 20 As a result, the penalty for non-compliance with the provisions of the MoU and the EAPs is the refusal to release the payment of the loans, which may give rise to the Member State’s bankruptcy. This very drastic sanction puts extreme pressure on the Member State and rather turns the ESM system into a hard law mechanism. 21
3. Right to collective bargaining
There is no single definition of ‘collective bargaining’. Bamber, Sheldon and Gan broadly define collective bargaining as ‘a process of accommodation of interests, covering all types of bipartite or tripartite discussions, concerning labour and industrial relations which may have a direct or indirect impact on the interests of employees or groups of employees’. 22 This process normally takes place between the social partners (bipartite), in particular employers’ organisations and employees’ organisations (trade unions). In the case of tripartite collective bargaining, the government is also involved. For the protection of the fundamental right to collective bargaining in Europe, one has to look at various instruments in three different international legal orders: the International Labour Organisation, the Council of Europe and the European Union. The right is reflected in a number ILO Conventions and Recommendations, in the first place the fundamental Convention no. 98 on the right to organise and collective bargaining and the corresponding Recommendation no. 91 concerning collective agreements, but also Convention no. 150 regarding labour administration, Convention no. 151 and Recommendation no. 159 on the Right to Organise and Procedures for Determining Conditions of Employment in the Public Service and Convention no. 154 and Recommendation no. 163 concerning the promotion of collective bargaining. Next, in the Council of Europe the right to collective bargaining is recognised by the European Court of Human Rights as an essential part of Article 11 of the European Convention on Human Rights 23 and is enshrined in the different parts of Article 6 of the European Social Charter (but most importantly Art. 6, §2 ESC). Last, in the European Union, the right to collective bargaining, was laid down in Article 28 of the Charter of Fundamental Rights of the European Union and it also is mentioned in the 8th principle of the European Pillar of Social Rights. It is thus a clearly recognised right in the various international legal orders (International Labour Organisation, Council of Europe and EU), either by explicit reference in the fundamental instrument or (also) by recognition of the competent supervisory bodies.
The right to collective bargaining includes both a positive obligation to promote collective bargaining and a negative obligation on the part of the public authorities not to intervene in the negotiations (principle of the autonomy of the social partners/voluntary nature of the negotiations). By examining the different legal instruments, the case law of the supervisory mechanisms and the legal doctrine together with industrial relations research it is possible to distinguish the different elements of the fundamental right. These elements are referred to as ‘indicators’ and are useful in identifying possible restrictions on the right to collective bargaining. The research found 22 indicators of the right to collective bargaining. Thirteen of them can be categorised in the first place as part of the obligation to promote collective bargaining. The other nine are indicators of the negative obligation (principle of autonomy and voluntary nature). It is not the intention of this article to give an exhaustive overview of these indicators but to give a precise overview in order to give the reader a good idea of the basic content of the right to collective bargaining.
3.1 Promotion
First, there is a precondition of freedom of association. It must be possible for voluntary, free, independent and representative trade unions and employers’ organisations to be set up and grow (with public support where necessary) and not be undermined. 24 Second, the condition of representativeness entails that social partners or governments shall install objective procedures for recognising the most representative organisations (in so far as only these may bargain collectively) with reasonable quotas if representative quotas are imposed. 25 Third, collective bargaining with employees’ organisations (trade unions) should be preferred to negotiations with non-organised employees. 26 Fourth, the personal scope of the right should not be interpreted too strictly (as only workers in the private sector). 27 Fifth, the material scope of the negotiations is not limited to traditional working conditions and is determined by the parties: no restrictive interpretation. 28 Sixth, the social partners are free to determine their own relationship and procedures. If this is not done spontaneously, the State shall promote and support it. 29 Seventh, collective bargaining can take place at any level (national/industry/sectoral/company, etc.), it is up to the social partners to choose the appropriate level. 30 This indicator addresses the issue of forced decentralisation and it also could be qualified as an indicator connected to the negative obligation of the right. Eighth, the hierarchy (legal coordination) of the levels of negotiation shall be established. 31 Ninth, collective agreements legally take precedence over individual employment agreements (unless the social partners agree otherwise). 32 Tenth, negotiators shall have access to appropriate training and information, which are deemed necessary for the negotiations. 33 Eleventh, any maximum period of time imposed for the negotiations should be proportionate. 34 Twelfth, only voluntary procedures can be laid down in order to help the parties find a solution in the most autonomous way possible in the event of a conflict during the negotiations (no compulsory arbitration). 35 And thirteenth, encouraging (usually by the employer) renunciations by the employees of their right to collective bargaining are problematic (e.g. promising additional benefits for employees who do not support/join the trade unions in order to make collective bargaining impossible). 36
3.2 Voluntary nature (autonomy)
As mentioned, the following nine indicators are connected to the negative obligation for States (or sometimes the social partners themselves) not to interfere too deeply with the autonomy of the social partners and the voluntary nature of the collective bargaining process. First, the parties should (in principle) not be forced to negotiate (or to stay at the negotiation table, as an initial government order for the social partners to sit together is often deemed acceptable). 37 Second, the parties (and the state) must respect the principle of good faith and implement collective agreements that have been concluded. 38 Third, the public authorities should not interfere with the content of collective agreements, e.g. in order to bring them into line with their socio-economic policies. 39 Fourth, in principle, legislation should not force the renegotiation of rights or conditions already acquired through social dialogue (or collective bargaining). 40 Fifth, a restriction on (future) collective bargaining (e.g. setting wage standards, restricting wage indexation) can only be imposed under certain conditions (exceptional, temporary, necessary, previous consultation, etc.). 41 Sixth, the parties determine (in principle) the duration of the collective agreement. 42 However, the survival of the collective agreement (after the end of its term) does not fall under the protection of the right to collective bargaining. 43 Seventh, the compulsory automatic renewal (or prolongation) of the collective agreement is not permitted. 44 Eighth, the public authorities may not refuse administrative approval for the declaration of universal applicability (extension) on account of the collective agreement’s content, but purely formal conditions may be imposed. The extension of collective agreements is only possible if the parties are actually the most representative, and sometimes a previous tripartite analysis is required. 45 And finally, ninth, if the state itself is a party to the collective agreement, it can only exceptionally hide behind the budgetary situation in order to breach or adjust the agreement. 46
3.3 Social dialogue
Social dialogue is a broader concept than collective bargaining. In addition to collective bargaining, this also includes other processes, such as information and consultation. For example, when the government asks the social partners for an opinion on a proposal for new social legislation. It is less clear whether there is a real (fundamental) right to social dialogue. 47 Only the non-binding ILO Recommendation No. 113 and Art. 6 §1 of the European Social Charter (bipartite only) explicitly recognise this right. However, it is an important principle that can benefit in certain cases from the protection of the right to collective bargaining, given that collective bargaining is inextricably linked to social dialogue and also covered by this broad concept. Nonetheless, this article will not expand deeper on the content and legal status of this right to social dialogue and focus on the fundamental right to collective bargaining.
3.4 Restrictions to the right to collective bargaining
Like other fundamental rights, the right to collective bargaining is not absolute. However, there is an important distinction between a restriction and a violation of the right. A limitation on the different aspects of the right does not necessarily mean that there is also a violation. This means that the justification of a restriction is possible. For the indicator on wage setting intervention, the case law of ILO monitoring bodies and the ECSR has laid down special justification conditions. In this case the nature of the measure should be exceptional, temporary and necessary and it is important that there was a previous consultation with the social partners. For the other indicators, the standard justification test used by the ECtHR (for limitations of rights in the ECHR), 48 the European Court of Justice (for limitations of rights in the EU Charter) 49 and many other (e.g. constitutional) national courts can be applied. This test consists of three cumulative conditions. A restriction is permissible if, firstly, it satisfies the condition of legality (laid down in a law in the material sense), secondly it satisfies the condition of legitimacy (the measure has a legitimate aim) and, thirdly, it must be necessary in a democratic society, which can be verified by a pertinence test (the measure is useful, relevant and sufficient to achieve the aim) and the proportionality test (the measure is proportionate to the aim to be pursued). 50
It will mainly be the proportionality test that will often determine whether or not a restriction constitutes a violation. Proportionality also complicates the legal assessment and is subjected to many factors. 51 The ILO and ECSR supervisory bodies are less reluctant to declare a state measure disproportionate than the ECtHR or the EU Court of Justice. This may follow from the greater enforceability of the decisions of the latter two courts. The weaker impact of their decisions has led the ILO monitoring bodies and the ECSR to feel freer to turn a blind eye to the interests of the Member States, while the ECtHR and the Court of Justice have to take into account part of the serious political consequences that their decisions can have. Moreover, the Court of Justice and the ECtHR are more attentive to the margin of appreciation of the Member States which they are deemed to have, certainly in the case of social policy. 52 Certain restrictions could thus, on one hand, be considered a violation by the ILO supervisory bodies or the ECSR because of their disproportionality, while on the other hand, the ECtHR and the Court of Justice could decide that the same measure is justified. For the ECtHR and the Court of Justice, this is clearly more of a marginal test.
An element to assess the proportionality of restrictions to the right to collective bargaining is the question whether a social dialogue or consultation with the social partners took place prior to the introduction of any restriction. 53 A lack of social dialogue can contribute to the disproportionate nature of a disability. The less the social partners are involved, the more severe the limitation of their autonomy will be and the more likely it will be to be disproportionate. 54 Further, often the government will justify a restriction on the grounds of its public interest. This requires a balance between the public interest (as a legitimate objective) and the right of the social partners. 55 It is a difficult exercise, given that it is certainly not the intention that all other interests should simply give way to the public interest. Furthermore, as stated above, the test of justification must take account of the public authorities’ margin of appreciation, 56 which is reasonably wide in the conduct of social or socio-economic policy, certainly as regards the assessment of the ECtHR and the Court of Justice. 57 A measure will also be regarded as proportionate more easily in the event of exceptional circumstances. 58 Of course, the notion of ‘exceptionality’ must not be used lightly. Not every deviation from a normal state is eligible for this. However, the context will play a role and the supervisory bodies will have to take into account the circumstances in which the government acts. A severe economic-financial crisis can be an exceptional circumstance that gives more discretion to the government to implement certain restrictions. In this respect, it is worth noting the large margin of appreciation that the ECtHR granted to Greece to conduct its socio-economic policy in the context of the crisis. 59 Lastly, the ECtHR also uses the concept of ‘pressing social need’ to assess whether the measure is really necessary in a democratic society. 60 For example, the ECtHR has rejected the existence of an urgent social need for Turkey to ban trade unions for civil servants. 61 Finally, there may be a disproportionality if the public authorities could have taken other relevant measures that would have had less (or the least) far-reaching impact on the right to collective bargaining. 62 Not everyone is a supporter of this assertion, and the ECtHR has not found disproportionality in certain cases even though less restrictive measures were possible, suggesting that this element alone is not sufficient to demonstrate the disproportionate nature. 63 This is also linked to the principle of subsidiarity, which states that it is primarily up to the public authorities to implement policies and protect fundamental rights. 64 However, the argument could be made that a supervisory body should take into account the fact that the public authorities could have chosen alternative measures which did not restrict the right to collective bargaining. Nonetheless, the supervisory body should exercise restraint in this respect.
4. Conclusion
Even though the overview of EU economic governance mechanisms has been kept concise in this article, it should have become obvious to the reader that it is a complicated and hybrid system that on top of that has evolved significantly over the last decade and is likely to continue to do so in the future. The qualification of EU economic governance as a hybrid legal system is a step away from the classic theory which would put it away as a purely soft law mechanism. As will be demonstrated in the second part (to be published in the next edition of the ELLJ), the Recommendations of the EU and the Troika have been far from innocent or harmless and they were often supported by an enormous political and economic pressure. Next, this article tried to give a short overview of the fundamental status of the right to collective bargaining and its relation to social dialogue. The most important aspect is without a doubt the different indicators, which form the basic content elements of the right to collective bargaining, according to the international written legal instruments, the jurisprudence of the international supervisory bodies and the legal doctrine. The distinction made between the promotional indicators and the indicators on the voluntary nature (autonomy) of the right is not absolute and is in the first place a helpful theoretic qualification tool. In addition, the right to collective bargaining itself is also not absolute and therefore can be restricted, if such a limitation can pass the presented justification test.
To read about the actual impact of EU economic governance on the social policy (in light of the right to collective bargaining) of Belgium, France, Sweden, Italy, Spain, Portugal and Greece and on the transformation that has been taken place under the Juncker Commission (with an assessment of the Country Specific Recommendations of 2018), please read Part. 2 ‘From imposed restrictions of the right by EU Member States towards a social economic governance’, to be published in the next ELLJ in 2019.
Footnotes
Declaration of Conflicting Interests
The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author(s) received no financial support for the research, authorship, and/or publication of this article.