ECJ 4 October 2024 - Judgement on East / West Divide, future of EU social policy and fate of transport workers - case 541/20

A momentous case - instead of an introduction

This was an extraordinary judgment. In December 2020, five EU Member States (Lithuania, Bulgaria, Romania, Cyprus, Hungary, Malta, Poland) supported by another three (Belgium, Estonia and Latvia) challenged central elements of the EU Mobility Package adopted in July 2020, mainly Regulation 2020/1054 on transport workers' driving times, rest periods, place of rest and return to their residence once a month, Regulation 2020/1055 on establishment of transport firms relating to the regular return of vehicles to the operational centre, number of vehicles and drivers attached to that centre and cabotage rules in general and Directive 2020/1057 on specific rule for posting of drivers in the transport sector. At the centre of the action: the business model based on cabotage rules (i.e. rules limiting the amount of transport services internal to one country which can be served by a transport business from another country) which allows to serve as many routes as possible with drivers paid as little as possible. It turned out to be an East West conflict: the claim was raised against the European Parliament and the Council, who were supported by Denkmark, Germany, Greece, France, Luxembourg, the Netherlands, Austria, Italy and Sweden. The case was much more complex than that, explaining why the Court needed no less than 1496 paragraphs to decide it. There are books on the degree to which environmentally justified cabotage rules are used or abused to drive down employment conditions of transport drivers, which next to fuel prices constitute the main cost factor for road transport, and there may well be books on this legal dispute as well.

What is the socio-economic problem here?

Anyone who travelled by car last summer would have seen the lorries parked on rest stations overnight, with drivers fixing meals by the road side and sleeping in their vehicles, sometimes able to use showers as well as toilets, sometimes improvising personal hygiene by other means. This is the visible side of some of the problems: drivers are on the road not just to transport goods from East to West or North to South in the EU, but also to supply other transport services after they have delivered their load, thus often remaining on the road for weeks, sometimes months (Bulgaria complained during the proceedings about a fine imposed by the Belgian police because a driver had been on the road without a chance to return home for 13 weeks - paragraph 198). Yet, the business of transport also generates revenue in EU Member States which are still catching up on economic development, having joined the EU 20 years ago. It cannot be a coincidence that all of the claimants and their supporters except for Belgium belong into that category, while all the supporters of the EP and the Council are in the other category. This first reaction looks at three elements: (1) a cultural clash on the character of EU legislation (2) the degree to which the Court thinks the EU legislature is able to shape the EU internal market between conflicting demands of environmental and social protection and (3) whether the legislation at stake is likely to improve conditions in the EU transport sector .

Main results: most rules under attack maintained - but inroads in cabotage rules made

Before that, let's realise what the Court did and did not do. It upheld the working time rules for drivers, and the addition that the employer needs to ensure for them to be able to sleep in "gender-friendly accomodation with adequate sleeping and sanitary facilities" instead of in their vehicles once a week (!) during their 45 hour rest period, that they can return either to their place of residence or the employers place of establishment for one 45 hrs rest period every four weeks (an unwaivable right), and that the working and driving times continue to be controlled more tightly by modern tachographs (the gist of upholding Regulation 2020/1054). Further, those drivers who work on cabotage (i.e. deliveries in a country where their employer is not established, and not between the country of employer establishment and another country) are protected by the revised directive on posting of workers (the ghist of upholding Directive 2020/1057). Finally, the transport companies' obligation to return each vehicle to the home base every eight weeks falls, because it was not proportionate to the aims pursued by it (the gist of partially invalidating Regulation 2020/1055). Having vehicles on the road beyond the country of establishment is of course the core of a business model where the transport company is located at the fringes of the EU, and mainly provides services in the centre, using low-waged drivers. Nevertheless, the Court did not rule out that a similar rule might be proportionate, giving very specific guidance on what statements in impact assessments may or may not be relied upon.

Can legislation be changed, and contain open clauses?

The claimants challenged the revised and tightened working and rest time rules also on the grounds that these rules are not crystal clear and change existing law, thus violating the rule of law. The claimants thus pick up an argument also made by Hungary and Poland in their anulment claim against the budget regulation (which authorised the EU to withhold funds in cases of rule of law violations). The bone of contention was this provision

“8a.??????Transport undertakings shall organise the work of drivers in such a way that the drivers are able to return to the employer’s operational centre where the driver is normally based and where the driver’s weekly rest period begins, in the Member State of the employer’s establishment, or to return to the drivers’ place of residence, within each period of four consecutive weeks, in order to spend at least one regular weekly rest period or a weekly rest period of more than 45 hours taken in compensation for reduced weekly rest period.

However, where the driver has taken two consecutive reduced weekly rest periods in accordance with paragraph?6, the transport undertaking shall organise the work of the driver in such a way that the driver is able to return before the start of the regular weekly rest period of more than 45 hours taken in compensation.

The undertaking shall document how it fulfils that obligation and shall keep the documentation at its premises in order to present it at the request of control authorities.”

The contention was that this is difficult to interpret, and thus violates the principle of legal certainty. The litigants, among others, stated that this would legally compel the drivers to return to base or residence once a month, even if they did not want to do this, and conjured a picture of lorries travelling empty to those places just to satisfy the EU. The Court answered by repeating the principle that administrative discretion and abstract legal notions are not excluded by that principle. The interesting part here is the idea that open norms are to be avoided as far as possible, in order to guarantee that there is no scope for interpretation - in some perceptions this was a principle of interpretation in formerly socialist countries (see Mank, 2013, p 6 referring to "hyperpositivism"). Accordingly, the EU legislator may use open norms, whose intepretation may change with time (paragraph 182), and also the content of the norms is not preordained by explanatory memorandums issued by the EU Commission (paragraph 197). This section is also interesting for the way how the Court of Justice demonstrates some ignorance of the world of work, when it explains later on that (a) the employer does not have to organise the route such that the driver returns either home or to the employer's place of establishment because (b) the employer may allow the driver to return home/to the place of establishment by public transport and only is under an obligation to allow enough time for that in both directions to leave 45 hours of rest and (c) the employer does not have to reimburse the cost of transport to the place of residence / establishment if the driver chooses not to return (paragraph 178) - it would not be surprising if some employer association manual would advise "have your non-EU drivers sign a statement that they freely choose not to travel home every month".

Is the EU legislator allowed to shape the market to generate socially responsible employment conditions for drivers?

The litigants here brought a large bundle of arguments: the drivers' free movement rights are impacted by the imposition of a monthly break at home or at base, the free movement of services on the side of the transport firms is compromised, there is violation of fundamental right to environmental protection. Above all, the EU legislator can only create proportionate health and safety legislation if they conduct a comprehensive impact assessment and mainly follow its results. Finally, any EU legislation must safeguard freedom of establishment in so far that any rule making establishment in any of the Member States more cumbersome (or less profitable) in practice than in another Member State must be thoroughly justified. That latter argument succeeded in invalidating the obligation to bring lorries back to base every eight weeks.

The Court seemingly demonstrates some awareness for social rights, with references to the social market economy, social progress and social protection (paragraph 263), derived from the AGET Iraklis ruling in particular - that is the ruling according to which Greece had to scrap part of its legislation on collective dismissals.

In reality, the ruling is far from revolutionary. The Court states that not even the EU legislator may create rules for the internal market without justification (paragraph 365). This is far from logical: EU wide rules, or re-regulation, will not affect the internal market to the same extent as national legislation. Accordingly, if the economic freedoms are not instruments of deregulation after all, the EU legislator should have more leeway (some even argue unlimited scope to legislate H?pner 2021). Yet, as far as transport is concerned, freedom to provide services only applies in so far as liberalisation has taken place (Article 58 TFEU), but the Court finds that while the EU legislator is called to establish such freedom as far as it sees fit, reversing steps to liberalisation must be thoroughly justified. Freedom of establishment is guaranteed also in the transport sector, and the EU legislator must safeguard it.

The extent to which the Court investigates the democratic process which resulted in Regulation 2020/1055 is extraordinary. Proportionality of limitations of freedom of establishment can only be safeguarded, if each and every statement collated in an impact case study is objective to the highest extent. In particular, the considerations of the sectoral trade unions must be disregarded (see paragraphs 730-734). Nevertheless, while one article of the regulation is invalidated, the reasoning remains purely procedural: Parliament and Council "have not produced and set out clearly and unequivocally the basic data on the basis of which that obligation was adopted and on which the exercise of their discretion depended" (paragraph 737). This seems to indicate that the EU legislator may adopt a very similar or identical rule if sufficient amounts of data are supplied.

Interestingly, in earlier parts of the judgment the Court concedes a "broad discretion" to the legislature "where it intervenes in a field involving political, economic and social choices" , concluding that only measures which are "manifestly inappropriate" to achieve the stated objectives will be inlawful (paragraph 313). Thus according to the Court, the legislature does not shape the socio-economic reality (which also evolves within the guidance of the law), but instead "intervenes" into a quasi-natural evolution of a sector ripe with exploitation. Nevertheless, the generosity expressed here is immediately limited by the demand that the legislature's choice must be based on objective criteria and all the "technical and scientific data" available at the time.

Will this legislation improve the working conditions of drivers?

If course I will not question that there needs to be thorough legislation on driving times, and its documentation. I also cannot find it outrageous for a driver to have the right to sleep in a bed in a house while having access to a shower and a toilet (if that is what is meant by "gender-friendly accomodation with adequate sleeping and sanitary facilities") once a week. However, and here comes the difficult bit, is it really wise to impose the costs of this on the individual employer? The Court discusses "economic operating models" (paragraph 555) or business model (paragraph 318) which entail providing transport mainly or exclusively on territories other than that where the company is established, "despite the necessarily temporary nature of cabotage operations". This argument is also made in relation to limitations of cabotage operation (paragraph 850). The Court also finds that there are impacts of the geographical location of an operator (paragraph 322).

While the respect for the legislature's decision demands to disregard the factual different implications of legislation, one remains free to muse on other forms of regulation. If goods are to be transported over long distances, the problems with overnight stays for drivers will remain (especially if one considers access to a shower and a bed in a house more than once a week to be adequate), and operators from the fringes of the EU will have more problems to provide this. Also, there are environmental arguments for cabotage on the road: it would be irrational to have lorries return empty to the base. This will always lead to "business models" maximising use of low wage labour - but even without abuse, this leads to at least a few nights away from home for drivers. Now, what about a common fund of all the transport companies enabling the creation of a network of good rest stations? Obviously, this is beyond the legislation, and modelled on practices that evolved from collective bargaining in other sectors, e.g. generating funds to cover times when the weather does not allow working on building sites, or generating common funds to finance annual leave in sectors where workers are not usually employed for the full year. It is correct that finding agreement among businesses in different Member States for this might be very difficult, and convincing the EU Commission that such endeavours would not be anti-competitive even if based on agreements with trade unions might be a complex task.

However, will Europe see the end of drivers camping on parking lots without such structures? Will promoting the idea that there is an unbridgeable conflict of interest between periphery and core help achieving such solutions? Is it realistic to conceive such solutions for a sector allegedly prone to human trafficking? These are veritable questions. It should be allowed to engage in a bit of lateral thinking here.