ITF – INDUSTRIAL ACTIONS AGAINST VESSELS – JURISDICTION AND LIABILITY
By Henrik Frandsen
Lille Torv 6
DK-8000 Arhus C, Denmark
Tel: +45 7011 1122
Fax: +457011 1133
Industrial actions from trade unions can lead to vessels being stuck in ports and owners suffering significant losses. This article deals with recent case law in Denmark regarding (i) jurisdiction for owners’ claims for compensation against foreign trade unions and (ii) the liability of ITF – International Transport Workers Federation – and ITF inspectors for unlawful actions.
The first case I’m going to deal with is relevant to our European colleagues as the case has been heard at the European Court of Justice and deals with the proper venue/jurisdiction for claims against foreign trade unions for unlawful industrial actions. Based on a decision from the European Court of Justice the Danish labour court has confirmed in the Tor Caledonia matter that a foreign trade union (in this case a Swedish trade union) can be sued in the EU country where the shipowner is domiciled (in this case Denmark) even if the industrial action took place outside Denmark. The claim of the shipowner was based on financial losses due to an unlawful notice of industrial action by the Swedish trade union.
The facts of the case were as follows:
The Danish carrier, DFDS and its subsidiary DFDS Torline A/S are operating several passenger- and cargo-lines in Northern Europe i.a. between the Scandinavian countries and the UK. DFDS Torline A/S was operating a ro-ro vessel by the name Tor Caledonia between Gothenburg in Sweden and Harwich in the UK. Tor Caledonia was registered in the Danish International Ship register (DIS) and thus considered a Danish vessel. The crew was polish and was employed on the basis of individual contracts in accordance with a frame work agreement between some Danish trade unions on the one hand and Danish Shipowners’ Association on the other.
In 2001 the Swedish trade union for sea farers (SEKO) became aware that Tor Caledonia was calling at Gothenburg with a foreign crew not employed on the basis of the ITF standard agreements and decided to initiate industrial action against the vessel and the Danish owner. It should be noted that the conditions for the Polish crew under their employment contracts with DFDS Torline A/S were in many aspects better than provided for in the ITF standard agreement – nevertheless, SEKO demanded that DFDS Torline A/S entered into an ITF standard collective agreement which would provide employment conditions for the crew according to the ITF standards.
DFDS Torline A/S refused to sign a collective agreement with SEKO arguing that SEKO had no interest in this case as neither no members of SEKO nor Swedish nationals were employed on the vessel. SEKO then served a notice of industrial action instructing its Swedish members not to accept employment on Tor Caledonia. This notice was not harmful to DFDS Torline A/S as no members of SEKO were intended to be employed on Tor Caledonia. However, SEKO also called for sympathy action from other trade unions and the Swedish Transport Workers’ Union followed this request and gave notice of sympathy action and instructed its members not to engage in any work relating to Tor Caledonia. This sympathy action was serious to DFDS Torline A/S as it would prevent the vessel from loading and discharging in Gothenburg. Therefore, DFDS Torline A/S decided to take action in the Danish labour court against SEKO and the Swedish Transport Workers’ Union, claiming that the two unions should acknowledge that the actions were unlawful/contrary to collective agreements and that they should withdraw the notices of industrial action.
Just to explain that in Denmark the venue for disputes between trade unions and employers is a court specialised in employment law and thus called the labour court; the ordinary Danish courts are not competent to deal with such disputes. The labour court deals with disputes quite quickly, and in this case a hearing was soon scheduled in the labour court. On the day of the hearing, however, SEKO decided to suspend the industrial action and a few days later the notice of industrial action from the Swedish Transport Workers’ Union was withdrawn.
However, by that time DFDS Torline A/S had already decided to withdraw the Tor Caledonia from the Gothenburg-Harwich route and to charter another vessel to serve this route.
DFDS Torline A/S suffered financial losses as they had chartered a substitute vessel and DFDS Torline A/S decided to seek compensation from SEKO at the Danish Maritime and Commercial Court in Copenhagen claiming that SEKO was liable in tort for rendering a notice of unlawful industrial action and inciting other Swedish trade unions to give notice of sympathy action, which was also unlawful. The labour court is not competent to deal with claims for compensation and DFDS Torline A/S thus had to bring the action before the Danish Maritime and Commercial Court whereas the Danish labour court would decide whether the industrial action was unlawful under Danish employment law. As the question of whether the industrial action was unlawful or not was of paramount importance to the question of whether the DFDS Torline A/S was entitled to compensation – it was common ground that DFDS Torline A/S would not be entitled to compensation if the industrial action by SEKO was lawful – the Maritime and Commercial Court decided to stay the proceedings awaiting the decision of the Danish labour court whether or not the industrial action was lawful.
SEKO contested that the Danish labour court was competent to deal with this dispute. SEKO was domiciled in Sweden and the industrial actions took place in Gothenburg and the only connection to Denmark, was the fact that DFDS Torline A/S is a carrier domiciled in Denmark. Therefore, SEKO argued that the Danish labour court was not competent to deal with this dispute as there was no venue against SEKO in Denmark. The Danish labour court held that in order to decide on the points regarding the jurisdiction, an interpretation of article 5 (3) of the Convention of 27 September 1968 on jurisdiction and the enforcement of judgment in civil and commercial matters – the former Brussels Convention – was necessary. The Danish labour court decided to refer a number of questions to the European Court of Justice for a preliminary ruling. As many of you are aware, it is possible for a court in an EU member state to refer questions to the European Court of Justice if the court is not certain how to apply or interpret EU law.
Thus, the Danish labour court before dealing with the main dispute regarding the alleged unlawful labour actions in Sweden (partly carried out and partly suspended before they were due) sought to establish the applicable venue; Denmark or Sweden; or whether Danish or Swedish law was applicable.
As many of you are aware the current Brussels I regulation (Council Regulation (EC) No 44/2001) article 5 (3) states that a party domiciled in member state may be sued in another member state – in matters relating to tort, delict or quasi-delict – in the courts of the place where the harmful event occurred. The question was then whether the harmful event had taken place in Denmark as DFDS Torline A/S was domiciled in Denmark and suffered their financial loss there.
A number of questions were referred to the European Court of Justice, including how to interpret article 5 (3) in respect to industrial actions. In February 2004 the European Court of Justice rendered a rather cryptic ruling stating i.a. that article 5 (3) must be interpreted as meaning that the damage resulting from industrial action taken by a trade union in a Contracting State to which a ship registered in another Contracting State sails must not necessarily be regarded as having occurred in the flag State with the result that the shipowner can bring an action for damages against that trade union in the flag State”. “In that connection, the State in which the ship is registered must be regarded as only one factor, among others, assisting in the identification of the place where the harmful event took place”.
As you will note the ruling of the European Court of Justice is not clear at all as ECJ states that Denmark as flag state would not necessarily be the proper venue for actions against the trade unions and there are other factors which should also be considered when deciding where the harmful event took place. If you are interested, the ruling of ECJ is published in the official European Gazette under reference number C-18/02.
The ruling of the ECJ did not solve the court proceedings at the Danish labour court as the trade unions maintained the argument that Denmark was not the proper venue for court proceedings against the trade unions. The Danish labour court therefore continued the proceedings and on 31 August 2006 the labour court rendered a judgment that the financial loss from the notice of industrial action was suffered by DFDS Torline A/S in Denmark and thus there was jurisdiction in Denmark for the claims. Moreover, the Labour Court found that Danish law (rather than Swedish law) was applicable and according to Danish law such notice was unlawful as Danish law provides that collective agreements entered into by a foreign trade union on Danish vessels may only include members of the trade union or individuals from the country where the trade union is domiciled. Consequently, SEKO’s demand for a collective agreement for the Polish crew (who did not reside in Sweden) was unlawful.
Subsequently, at settlement was made in the case at the Maritime and Commercial Court and obviously SEKO had to pay some kind of compensation to DFDS Torline A/S
Although the ruling of ECJ is not clear it can – together with the decision from the Danish labour court – found jurisdiction in other EU countries against trade unions from all EU countries. Under EU law a shipowner should sue a trade union in the country where the union is domiciled unless the owner is able to rely on one of the alternative jurisdictions provided for in the Brussels I Regulation. Article 5 (3) provides an alternative jurisdiction in tort matters at the “courts for the place where the harmful event occurred” and the ECJ has now confirmed that this rule is applicable in shipping – this is not a surprise – and means that a shipowner can sue a trade union in the flag state of vessel, i.e. often in their own jurisdiction even if it is a foreign trade union and the industrial action took place outside the flag state.
This rule provides great comfort to owners as they do not need to go abroad and sue trade unions at the domicile of the unions. The rule is in particular advantageous to owners if the industrial action is lawful in the country of the trade union but unlawful in the flag state. This was the situation in the Tor Caledonia matter where the industrial action was lawful under Swedish law but unlawful under Danish law. Following the ECJ ruling “forum shopping” is expected to increase among shipowners, i.e. to seek the jurisdiction most advantageous to their course, and trade unions to be more careful when taking industrial actions against vessels from other EU countries given the risk that the trade union may have to appear in court in a another EU country.
As a final remark I would like to point out that the Tor Caledonia matter is one of three important cases either pending or having recently been decided by the European courts in respect to jurisdiction and applicable law in cases against trade unions concerning industrial actions.
The other cases are the Viking Line case (C-438/05) regarding whether the ITF actions constitute an unlawful restriction on freedom of establishment and the Laval case (C-341/05) regarding whether collective actions are contrary to freedom to provide services. It will be too far reaching to go into details regarding these cases in this article and a study of the cases I just mentioned will provide much more details to you in respect to the questions of industrial actions on the one hand and the EU fundamental rights on the other hand.
The second case I would like to mention to you concerns the liability of ITF and ITF Inspectors when forcing ship owners to sign ITF standard collective agreement and to pay wages according to ITF standards during unlawful industrial actions against vessels.
As you may know it is common practise for ITF to demand owners of vessels flying a flag of convenience to sign ITF standard collective agreements and to pay minimum wages set by ITF to the crew members. If such agreements are not accepted by the owners, owners will often face that the stevedores in harbours will not engage in loading or discharging the vessel. Obviously, ITF will deny that the industrial action taken by the stevedores has anything to do with ITF requiring the owners to accept the ITF standard collective agreement and to remunerate the crew members by ITF standards. For some reason the industrial action against the vessel will cease once the owners give up and pay.
Such actions have also taken place in Denmark; however, Danish case law now provides a very useful remedy against ITF collective agreements signed under duress and additional wages paid to crew members. Based on a Danish case from 2006 owners may hold ITF liable and the ITF inspectors jointly liable for the losses following unlawful industrial actions against a vessel.
The facts of the case were as follows:
The vessel BBC Chile, registered in Antigua, was scheduled to call at Aarhus in Denmark to load parts for wind turbines in October 2004. ITF learned that this vessel flying a flag of convenience was going to call at the Danish port and requested the owners to sign an ITF standard collective agreement before calling at Aarhus.
Upon arrival in Aarhus the ITF inspector, KG, went on board and required the owners to sign the agreement with retroactive effect and to pay wages according to ITF standard levels for the current and former crew members. Obviously, the owners refused to make such an agreement and shortly after KG had left the vessel, the stevedores decided to take industrial actions against the vessel by stopping the discharge operations.
Under Danish law industrial actions in support for members of other trade unions are unlawful/contrary to the collective agreement and four days later the stevedore’s trade union admitted that the industrial action was contrary to the their collective agreement and ordered the stevedores to resume the work. In the meantime, KG had ‘convinced’ the owners to accept the ITF standard collective agreement and a ‘settlement agreement’ according to which owners had to pay approx. 586,000 USD to the crew members. Some 467,000 USD to the former crew members was subsequently deposited on a bank account by KG. Approx. 10,000 USD was payment to ITF as ‘entrance/membership fees’ and ‘welfare funds contribution’. The master signed the agreement and noted the following: “signed under protest and illegal duress”.
Subsequently, the owners sued ITF and KG before the Maritime and Commercial Court in Copenhagen alleging that the ITF standard collective agreement and ‘settlement agreement’ were signed under duress and invalid according to the Danish Act on Contracts; that the unlawful industrial actions by the stevedores were initiated by ITF and KG and, moreover, that ITF and KG were jointly liable for the owners’ loss, i.a. the amounts paid to the crew members. IFT contested that the ITF standard collective agreement was signed under duress.
Based on extensive witness statements in court, the court found that ITF had taken part in the unlawful industrial actions by the stevedores due to the link between ITF and the stevedores trade union; that the ITF collective agreement and ‘settlement agreement’ was only accepted by owners due to unlawful industrial actions preventing the vessel from discharging and that ITF and KG had been aware of this. On this basis the court found that ITF and KG were jointly liable and had to indemnify the owners for their loss.
Hopefully, you realise that this judgment could be useful if a situation occurs where ITF demands signing of an ITF collective agreement which owners are forced to accept because they face industrial actions. Of course ITF will always deny that they have anything to do with the industrial action by the stevedores, however, often it is quite clear that the industrial action was encouraged by ITF. Then the collective agreement is signed under duress and is invalid. After this judgment was rendered by the Maritime and Commercial Court, in Denmark we have seen a much lower number of ITF actions against vessels. Apparently, the risk that ITF and the ITF inspectors will be liable for owners’ loss has given ITF second thoughts about actions in Denmark.
If you are dealing with similar ITF matters this judgment may be useful to you.