In Govia GTR Railway Limited v The Associated Society of Locomotive Engineers and Firemen, the Court of Appeal (“CA”) upheld the High Court’s decision to reject an application by GTR, the owners of the franchise running Southern Rail, for an interlocutory injunction to prevent ASLEF, the train driver’s union, from calling strike action for a number of days in December 2016 and January 2017. In dismissing the appeal, the CA rejected GTR’s arguments that the strikes would be in breach of EU law and confirmed the limited application that EU law would have in cases of industrial strike action.
This case relates to the widely publicised dispute between ASLEF and GTR over the use of driver only operated passenger trains on the Southern Rail network. GTR have always contended that the use of driver only operated trains is safe and has also guaranteed that there will be no job losses and therefore that the strike action is unnecessary, unjustified and grossly disproportionate.
Anyone using the Southern Rail network will be able to attest to disruption the strikes have had and are likely to cause. GTR estimate that over 600,000 journeys would be affected every day resulting in a loss to it in the region of £20m. From the outset of its claim, GTR accepted that the strike was not in breach of domestic law and that a proper and lawful ballot had been held in which members had voted overwhelmingly to strike. GTR’s case was that the strike action would breach EU law, as it would constitute an unlawful interference with the right of establishment confirmed by article 49 of the Treaty on the Functioning of the European Union (“TFEU”), and the right to provide and receive services pursuant to article 56.
Article 49 makes it unlawful for a state to impose restrictions on the freedom of nationals of one member state to establish themselves in a territory of another member state. In order to bring a claim under article 49, GTR necessarily relied on the fact that it is 35% owned by French company Keolis SA, which also plays an active part in GTR’s decision making. ASLEF conceded that this was sufficient to make the right under article 49 applicable.
The arguments in relation to article 56 were more complex, as there are specific provisions under the TFEU which relate to transport and in particular the establishment of a single European railway area. This meant that GTR could not claim under article 56 for an infringement of its own right to provide services; instead GTR sought to rely on the right of its passengers to provide and receive cross-border services, which it argued would be impinged by the strike action. In making this argument GTR particularly focused on the fact that there would be disruption to the operation of its railway to Gatwick airport, which it argued would undoubtedly impede GTR’s passengers’ ability to provide services to, or receive services from, persons situated in other EU member states. GTR argued that it was able to bring such a claim under article 56 as the party facilitating the provision of the services to its passengers.
The key question for the High Court and the CA in considering whether to grant interlocutory action was whether there was an arguable case that the EU law applied in these circumstances. If it was found that the EU law did apply, then in order to show that it was not acting unlawfully ASLEF would at a full hearing have to have shown that it could justify its actions as a proportionate means of achieving a legitimate aim.
Considering the claim under article 49, the CA accepted that it was well established that, in an appropriate case, an action can be brought against a private body which is alleged to have imposed a relevant restriction, as opposed to the state itself. It also accepted that a claim may arise where a person was discouraged from extending its activities within another member state, in a situation where it was already established there.
As to whether the strike action in this case had breached article 49, the CA referred to the decision of the European Court of Justice (“CJEU”) in International Transport Workers Federation and another verses Viking Line ABP in another (2007), which GTR had offered in support of its claim. It noted that in Viking the CJEU had confirmed that it was the objective of the industrial action which must be a measure which would hinder or make less attractive the exercise of the freedom of establishment and not the mere fact that damage may result from the industrial action. In Viking, the union was seeking to prevent the employer from engaging Estonian employees on one of its ships; this objective was, of itself, a hindrance to the exercise of freedom of establishment. The CA noted that, as a point of policy, were the strike itself to be considered to be the relevant restriction which may fall foul of European law, this would have a profound effect on the legality of strike action which had been recognised by the CJEU in the Viking as a “fundamental right which forms an integral part of the general principles of community law“.
In deciding whether the issue was the objective or the strike action, the CA said that a helpful test to apply is to ask whether, if the rules the unions were seeking to enforce were laid down by government, would there be an unlawful interference with the freedom of establishment? In the CA’s judgment it was inconceivable that a rule which did not discriminate on the grounds of nationality and which required a driver and a guard on all trains to ensure the safe closing of doors could be said to constitute a deterrent to freedom of establishment or to make it less attractive.
The CA also noted that article 49 is “not intended to protect companies from having to deal with strong or even bloody minded trade unions” and that a national from one member state “would have to make its accommodations with them in the same way” as a national from the member state in which the unions were based; the purpose of Article 49 is to allow companies to have access to an open and free market, not to give them a more favourable protection than locally-based enterprises.
In respect of the arguments under article 56, GTR sought to rely on a number of CJEU judgments including Ciola v Land Vorarlberg (1999) which, it argued, established that a company may rely on an infringement of its customers’ rights to bring a claim under article 56. Ciola was a claim brought by the manager of a marina who had been prosecuted by the local authority for granting mooring rights for non-residents in excess of the quota set by the local authority. Mr Ciola challenged his prosecution in the CJEU, which ruled that the quota was illegal as it infringed Mr Ciola’s article 56 right to provide services and the rights of his customers to receive services. However the CA noted that this case merely established that the state cannot impose on an individual a rule which impinges that person’s right under article 56 to provide services to its clients whose right to receive those services would in turn be impacted. It therefore did not assist GTR in this case in seeking to act as claimant in respect of its passengers’ rights.
In any case, the CA decided it was not necessary for it to express a concluded view on this point as the considerations it had set out in relation to article 49 were the same for article 56: when determining whether a provision of the TFEU is engaged, it is necessary to focus on the purpose or object of the industrial action, as opposed to the effect of industrial action itself. Again, the CA held that to use the driver only operated trains would amount to no more than an indirect or uncertain impact upon the passengers who would make their way to Gatwick airport by other routes during the strike.
The CA therefore rejected GTR’s appeal. It concluded by noting that if GTR’s claim under article 56 was to succeed then it would undermine a right to strike in a most fundamental way if all passengers potentially indirectly affected by the strike could claim that it was interfering with their right to provide and receive services. Subject to a defence of justification, the union’s liability would be open-ended and the CA considered that this would be an extraordinary consequence of GTRs’ argument succeeding.
This judgment is interesting in its acceptance that the French company’s 35% shareholding in GTR was sufficient to establish the cross-border element necessary for GTR to rely on article 49 of the TFEU, although it is not clear what the minimum shareholding might be required to establish such standing. The CA’s discussion of the authorities regarding the ability of a service provider to rely on the impingement of the rights of its passengers or customers under EU law is also interesting and, whilst the CA did not give a judgment on this point, it was clearly not convinced by GTR’s attempts to “ride on the coat tails of its passengers” in its claim under article 56.
However, the most helpful aspect of this judgment is the CA’s consideration of the various authorities on industrial action by unions and their potential infringement of European law. The CA made clear that the authorities relate to cases where the infringement of EU law was found to be the objective or purpose of the industrial action, not the fact that damage could result from industrial action. In this case, the use of driver only operated trains was not an infringement of freedom of establishment or, to the extent it was necessary for the CA to consider it, the freedom to provide or receive services.
Following the second day of strike action by ASLEF on 11 January, GTR confirmed that it was appealing to the Supreme Court, in the hope of preventing the further strikes planned for January until the case can be heard in full. We will update this blog as and when the Supreme Court gives its decision.