¹ Comité Intergouvernemental créé par la conférence de Messine, Rapport des Chefs de Délégation aux Ministres des Affaires Etrangères, Brussels, 21.4.1956 (the ‘Spaak Report’), 60 (the author’s translation).

² Case C-341/05, Laval un Partneri Ltd v Svenska Byggnadsarbetareförbundet [2007] ECR I-11767 (hereinafter, ‘Laval’).

³ Case C-438/05, International Transport Workers’ Federation v Viking Line ABP, judgment of 11 December 2007 (hereinafter, ‘Viking’); Case C-346/06, Dirk Rüffert v Land Niedersachsen, judgment of 3 April 2008 (hereinafter, ‘Rüffert’); and Case C-319/06 Commission v. Luxembourg, judgment of 19 June 2008 (hereinafter ‘Luxembourg’).

⁴ Laval, above n 2, para 99.

⁵ Case C-341/05, Laval, Opinion of 23 May 2007, paras 230 & 233.

⁶ Case C-113/89, Rush Portuguesa v Office Nationale d’Immigration [1990] ECR I-1417.

⁷ Reich, N, ‘Free movement versus social rights in an enlarged Union: the Laval and Viking cases before the European Court of Justice’ (2008) 9 German Law Journal 125, available at <http://www.germanlawjournal.com/pdf/Vol09No02/PDF_Vol_09_No_02_125160_Developments_Reich.pdf> accessed 28 August 2008Google Scholar.

⁸ Barnard, C, The Substantive Law of the EU: The Four Freedoms (2nd edn, Oxford, Oxford University Press, 2007) ch 14.Google Scholar

⁹ Ibid.

¹⁰ Case C-346/06, Rüffert, Opinion of 20 September 2006, para 102.

¹¹ Rüffert, above n 3, para 38.

¹² It is also possible to find some support for the proposition in Case C-255/04, Commission v France [2006] ECR-I 5251. In that case, the court struck down legislation establishing a presumption that performing artists had employee status while working in France and were therefore subject to French legislation on social security law and annual paid leave. The court referred (at para 48) to the rule of coordination, in Regulation 1408/71, under which self-employed workers working temporarily in a Member State other than their country of origin remained under the social security jurisdiction of the home state. The court also considered (at para 50) that it was relevant, in this context, that self-employed workers fell outside the scope of the right to paid leave as set out in the Working Time Directive (which at that point was Council Directive 93/104/EC, [1993] OJ L307/18). Given the court’s reliance on these specific arguments, there is a case for saying that Commission v France does not go so far as to establish that there is a restriction simply from the application, without more, of regulatory labour standards which impose costs on either employers or workers from another Member State, although the matter is far from clear.

¹³ As in, eg Joined Cases C-369 & 376/96, Arblade [1999] ECR I-8453.

¹⁴ In addition to its general ruling on Art 49, the court held that the law which was applied by the Swedish courts in Laval, the Lex Britannia, was discriminatory because it permitted collective action to be taken against an overseas collective agreement, but not against one made in Sweden. The court also held that, since there was discrimination on grounds of nationality in this case, it could only be justified if it fell within one of the grounds of public policy, public security or public health, and that none of these was relevant to Laval. This ruling was separate from the court’s decision on the first (and main) question put to it, which was whether strike action, taken with the aim of persuading a foreign service provider to sign a collective agreement in the host state, was compatible with Art 49 of the Treaty and the Posting of Workers Directive. In the context of this question, there was no discrimination, only a ‘restriction’ under Art 49 in the sense discussed in the text.

¹⁵ See his Opinion, above n 4, paras 279 et seq (where he discusses whether the provisions of the relevant collective agreement concerning insurance payments and a contribution towards the unions’ costs of monitoring observance of wage rates were proportionate under the justification test in Art 49).

¹⁶ Laval Opinion, ibid, para 133.

¹⁷ Rüffert Opinion, above n 10, para 41.

¹⁸ Ibid, para 44.

¹⁹ Ibid, para 103.

²⁰ Directive 2006/123, [2006] OJ L376/26.

²¹ See Barnard, C, ‘Employment rights, free movement under the EC Treaty and the Services Directive’ in Rönnmar, M (ed), EU Industrial Relations and National Industrial Relations: Comparative and Interdisciplinary Perspectives (Deventer, Kluwer, 2008)Google Scholar.

²² Laval, above n 2, para 98; see the contribution of Alan Dashwood to this volume.

²³ Art 49, for example, refers to the freedom to provide services being protected ‘in respect of nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended’. As the court said in an early case, ‘the provisions of the Treaty on freedom to provide services cannot apply to activities whose relevant elements are confined within a single Member State’: Case 52/79, Procureur du Roi v Debauve [1980] ECR 833, para 9.

²⁴ Either test is possible under the national laws of different Member States; the judgment of the court in Case C-212/97, Centros Ltd v Erhvervs-og Selkabsstryrelsen [1999] ECR I-1459 places limits on the capacity of Member States to apply the so-called ‘real seat’ principle, which insists on the need for a physical link between the company’s operations and its applicable law. See the discussion in the text, below.

²⁵ See Laval, above n 2, paras 42–50.

²⁶ Ibid, para 49.

²⁷ Laval Opinion, above n 5, para 107.

²⁸ Ibid, para 145.

²⁹ Ibid, para 149.

³⁰ Regulation (EC) 593/2008 of the European Parliament and of the Council of 17 June 2008 [2008] OJ L177/6; see further, below.

³¹ Viking, above n 3, para 70 (referring to Case C-211/89, Factortame [1991] ECR I-3905, paras 20–2).

³² Centros, above n 22; Case C-208/00, Überseering v Construction Co Baumanagement GmbH (NCC) [2002] ECR I-9919; Case C-167/01, Kamer van Koophandel en Fabrieken voor Amsterdam v Inspire Art Ltd [2003] ECR I-10115; and Case C-411/03, SEVIC Systems AG [2005] ECR I-10805.

³³ See M Becht, C Mayer and H Wagner, ‘Where do Firms Incorporate? Deregulation and the Cost of Entry’, ECGI-Law Working Paper No 70/2006.

³⁴ See Section III, below.

³⁵ See, eg Deakin, S and Morris, G, Labour Law (4th edn, Oxford, Hart Publishing, 2005) 111–13Google Scholar.

³⁶ Laval, above n 2, para 57.

³⁷ See Commission, Proposal for a Regulation of the European Parliament and the Council on the law applicable to contractual obligations (Rome I), COM(2005)650 final, 15 December 2005.

³⁸ European Parliament and Council Directive 96/71/EC concerning the posting of workers in the framework of the provision of services.

³⁹ In this regard, the UK’s approach to the implementation of the Directive is noteworthy: there is no legislation specifically referring to the Directive, merely a series of provisions setting out the scope of particular employment statutes. The National Minimum Wage Act 1998, for example, applies where a person ‘is working, or ordinarily works, in the United Kingdom under his contract’ (s 1(2)(b)), and the Working Time Regulations are stated ‘to apply to Great Britain only’ (SI 1998/1833, reg 1(2)). In the case of rights to employment protection contained in the Employment Rights Act 1996, Parliament simply repealed a provision which had formerly excluded from the scope of the Act situations where the employee ‘ordinarily worked outside Great Britain’ (Employment Relations Act 1999, s 32(3)), the implication being that the statute would be construed, implicitly, as having a territorial reach (which would bring workers temporarily posted to the UK from other Member States within its scope), but no further. This result was duly arrived at by the House of Lords in Lawson v Serco Ltd [2006] ICR 250, although the principle of territoriality was applied flexibly in that case to cover employment in overseas military bases. The anti-discrimination statutes apply to employment ‘at an establishment in Great Britain’, but they have on occasion been given a limited extra-territorial effect under Art 39 EC, as in Bossa v Nordstress Ltd [1998] IRLR 284. See, generally, Deakin and Morris, above n 35, at 111–12.

⁴⁰ See the Opinion of AG Mengozzi, above n 5, paras 135–6. See also the chapter by Dashwood in this volume.

⁴¹ Laval, above n 2, para 61, referring to Case C-60/03, Wolff and Müller [2004] ECR I-9553.

⁴² Laval Opinion, above n 5, paras 145 & 149.

⁴³ On the analogy between the doctrine of pre-emption in American constitutional law and the interpretation of directives in European Union law, see Deakin, S, ‘Two types of regulatory competition: competitive federalism versus reflexive harmonisation. A law and economics perspective on Centros ’ 2 CYELS (Oxford, Hart Publishing, 2000) 231 Google Scholar.

⁴⁴ The 12th and 22nd recitals, respectively.

⁴⁵ Laval, above n 2, para 80.

⁴⁶ Ibid. See also Rüffert, above n 3, para 33.

⁴⁷ Deakin, S and Wilkinson, F, ‘Rights versus efficiency? The economic case for transnational labour standards’ (1994) 23 ILJ 289 CrossRefGoogle Scholar.

⁴⁸ See, eg Laval, above n 2, paras 74–7.

⁴⁹ Laval, above n 2, para 58.

⁵⁰ Ibid; see above.

⁵¹ It may be asked why posted workers do not benefit from the protection of Arts 12 and 39 EC on non-discrimination and equal treatment for workers in the context of free movement, respectively. In this regard, Reich suggests the following rationale: ‘[T]he workers employed by Laval are not seeking access to the Swedish labour market but will be removed once the construction work as contracted is finished. In principle, they remain under Latvian jurisdiction. Therefore, the provisions concerning free movement of workers (Art 39) and non-discrimination (Art 12 EC) can be disregarded in this context’ (above n 7, 133–4). In essence, there is a conflict between the Art 49 rights of the service providers and the Art 39 rights of their workers. Reich’s solution is one in which Community law is seen as inherently more protective of the free movement rights of the employers.

⁵² Davies, P, ‘Posted workers: single market or protection of national labour law systems?’ (1997) 43 CML Rev 571 Google Scholar; and Deakin and Morris, above n 35, 116. The court’s pre-Laval case law had been concerned not simply with protecting the interests of employers, but also in articulating the rights of posted workers to the core of protections the Directive accorded them, as in Wolff and Müller, above n 38. The court had also taken the view that the goal of protecting workers could be pursued concurrently with that of ensuring equality of treatment between domestic and foreign undertakings operating on the territory of the Member States concerned (Case C-164/99, Portugaia Construções [2002] ECR I-787), and had ruled that, while purely ‘economic’ objectives such as the protection of domestic businesses could not amount to justifying factors, Member States were entitled to take steps to prevent unfair competition on the part of employers paying workers below the minimum wage (Wolff and Müller, above n 38). See also AG Mengozzi’s reference to ‘the aim of protecting posted workers laid down in Art. 3 of Directive 96/71’ at para 187 of his Opinion (above n 5).

⁵³ Art 55 EC (ex-Art 66). According to the court in Rüffert, above n 3, the Directive ‘seeks in particular to bring about the freedom to provide services’ (para 36).

⁵⁴ Davies, above n 52, 600.

⁵⁵ On this, see, generally, Wedderburn, Lord, The Social Charter, European Company and Employment Rights: An Outline Agenda (London, Institute of Employment Rights, 1990)Google Scholar; Deakin, S, ‘Labour law as market regulation: the economic foundations of European social policy’ in Davies, P, Lyon-Caen, A, Sciarra, S and Simitis, S (eds), Principles and Perspectives on EC Labour Law: Liber Amicorum for Lord Wedderburn (Oxford, Oxford University Press, 1996) 63 Google Scholar.

⁵⁶ To refer, again, to AG Mengozzi’s formulation (at para 145 of his Opinion, above n 5).

⁵⁷ Section II.B, above.

⁵⁸ See Laval Opinion, above n 5, para 190. The court had previously decided that, where the law of a Member State allowed a domestic employer to obtain an exemption from a sector-level collective agreement by making a company or plant-level agreement, in circumstances where a foreign service provider did not have such flexibility, there was a breach of Art 49: Portugaia Construções, above n 52.

⁵⁹ Here, the court clearly departed from the approach taken by AG Mengozzi, who had concluded that ‘the right to take collective action granted by Swedish law to trade unions to enable them to impose the wage conditions laid down or governed by Swedish collective agreements provides a suitable means of attaining the aim of protecting posted workers laid down in Art 3 of Directive 96/71’ (para 187 of his Opinion, above n 5).

⁶⁰ Rüffert, above n 3, para 30.

⁶¹ Ibid, para 37.

⁶² Ibid, para 40.

⁶³ Above, n 3.

⁶⁴ Council Directive 91/533 on an employer’s obligation to inform employees of the conditions applicable to the contract or employment relationship.

⁶⁵ Council Directive 97/81/EC concerning the Framework Agreement on part-time work concluded by UNICE, CEEP and the ETUC.

⁶⁶ Council Directive 99/70/EC concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP.

⁶⁷ Ibid, para 50 (references omitted).

⁶⁸ Ibid, para 48.

⁶⁹ Ibid, para 53.

⁷⁰ Rome I Regulation, 40th recital.

⁷¹ Spaak Report, above n 1, ch 2.

⁷² Ibid, 61–3.

⁷³ Ibid, 66.

⁷⁴ See S Deakin, above n 55.

⁷⁵ Deakin, S, ‘Regulatory competition and legal diversity: which model for Europe?’ (2006) 12 European Law Journal 440 CrossRefGoogle Scholar.

⁷⁶ See generally Kenner, J, EU Employment Law: From Rome to Amsterdam and Beyond (Oxford, Hart Publishing, 2003)Google Scholar.

⁷⁷ Cohen, J and Sabel, C, ‘Directly-deliberative polyarchy’ (1997) 3 European Law Journal 313 CrossRefGoogle Scholar.

⁷⁸ Sabel, C and Zeitlin, J, ‘Learning from difference: the new architecture of experimentalist governance in the European Union’ (2008) 14 ELJ 271 CrossRefGoogle Scholar.

⁷⁹ Laval Opinion, above n 5, para 260.

⁸⁰ Case C-212/97, above n 24.

⁸¹ Unite Press Release, <http://www.amicustheunion.org/Default.aspx?page=8247> accessed 28 August 2008.

⁸² See the judgments in the posting cases referred to above, n 52.

⁸³ See further Barnard in this volume.

⁸⁴ Most importantly, in the context of free movement of goods, in Joined Cases C-267 & 268/91, Keck and Mithouard [1993] ECR I-1697.

⁸⁵ Case C-387/01, Weigel v Finanzlandesdirektion für Vorarlberg [2004] ECR I-4981; see also Case C-365/02, Lindfors [2004] ECR I-7183.

⁸⁶ Weigel, above n.85, at para 54.

⁸⁷ Ibid, para 55.

⁸⁸ Case C-190/98, Volker Graf v Filzmoser Machinenbau GmbH [2000] ECR I-493.

⁸⁹ Graf, Opinion, para 32.

⁹⁰ Graf also points to the possible relevance of a shift in the prevailing ‘market access’ test in free movement cases, from one which accepts a material barrier to exit or access as sufficient to trigger Community law, to one which requires a formal barrier to access or one which is equivalent to it: Barnard, C and Deakin, S, ‘Market access and regulatory competition’ in Barnard, C and Scott, J (eds), The Law of the Single Market: Unpacking the Premises (Oxford, Hart Publishing, 2002)Google Scholar.

⁹¹ See Epstein, R and Greve, M, ‘Conclusion: preemption doctrine and its limits’ in Epstein, R and Greve, M (eds), Federal Preemption. States’ Powers, National Interests (Washington DC, AEI Press, 2008) 318–23Google Scholar.

⁹² A rare discussion is that of AG Poiares Maduro in his Opinion in Viking, at para 63 et seq, discussing partitioning alongside discrimination, although the issue of cost externalisation is not addressed.

⁹³ S Gardbaum, ‘The breadth vs. the depth of Congress’s Commerce Power: the curious history of preemption during the Lochner era’ in R Epstein and M Greve (eds), above n 91.

⁹⁴ Rice v Santa Fe Elevator, 331 US 218, 230 (Douglas J).

⁹⁵ See above, section III. By analogy, the US Fair Labor Standards Act 1938, a federal measure, explicitly indicates that the states may set higher minimum wages and stricter limits to working hours than those set out in the Act. In some states, legislatures have sought to pre-empt ‘living wage laws’ set at local level through state-level legislation which aims to set a ceiling as opposed to a floor. Pre-emption has become an enormously complex and controversial issue in this and other contexts in the US, giving rise to a ‘prominent and often polemical debate’: R Epstein and M Greve, ‘Introduction: preemption in context’ in R Epstein and M Greve (eds), above n 91, 1.