European Court ruling boosts social dumping

British construction unions have been warned that a ruling by the European Court of Justice implies that foreign companies can operate exclusively in other countries without respecting local company and employment legislation. As a result, it gives a green light to social dumping.

The alert has been sounded by Werner Buelen, secretary of the European Federation of Building and Woodworkers. He has asked all affiliated unions to refer the case to their legal departments in order to check the repercussions for national legislation.

The European Court's decision concerned a British company with a sole director operating in the Netherlands.

Buelen said: "The company only has activities in the Netherlands and has no plans to develop activities in Britain. One can say that it is a 100% British company that was created to exercise activities only in the Netherlands."

The ruling (case C-167/01: 30 September 2003) states that the company does not need to be registered under Dutch law as a foreign company.

Buelen pointed out that local law in most European countries imposes its own requirements on those wishing to operate as a construction company. Dutch law, for example, imposes much stricter conditions than the UK regarding registration, minimum capital and personal liability of directors.

But the European Court concluded that the Dutch requirements were in conflict with the European principle of free establishment of companies and thus could not be imposed on a British company.

Buelen said: "This case is a dangerous precedent because it confirms that foreign companies can operate exclusively in other countries without respecting national obligations.

"Most countries recognise specific measures designed to prevent their nationals from attempting, under the cover of the rights created by the European Treaty, from circumventing national legislation or prevent individuals from fraudulently taking advantage of European Community law. With this case, these specific preventive measures, which are important to avoid social dumping, are under pressure," Buelen said.

TGWU national secretary Bob Blackman described the legal decision as "just irresponsible".

He said: "There is no point in having standards if people can get around them simply because they are foreign."