The left needs to understand the modern EU better. Fast.

A left Euro-scepticism may not be the answer, but neither is the status quo Europhila that is 20 years behind the times

 

It is understandable that those with pro-European instincts, for 20 years or so, have been pushed into a defensive posture. Back in the 1980s and 90s a bonafide, albeit fledgling, social dimension was being forged by President Delors. Since the great man’s retirement in 1995 this ‘social Europe’ ideal has withered as ‘liberal Europe’ has accelerated out of sight. The European Commission and the European Court of Justice, once committed to a doctrinal balance between social and economic integration, have taken a decisive neo-liberal turn. The Eurozone’s fiscal compact is the only proof you need of that. People who observe these things every day however have known this for years. Those that dip into these subjects every now an again, and reside mostly in Labour party and Guardian-reading circles, are not doing themselves any favours talking about the European Union as if it is Jacques Delors incarnate. It’s a very different beast now, and the Labour and Guardian reading soft-of-left need to catch up.
The latest such example of this problem comes from the Guardian newspaper. On October 21st an editorial made the perfectly agreeable point that transnational solutions are necessary to challenge the scourge of corporate tax dodging. Despite this article being otherwise quite good, it concludes in very disappointing  fashion: “In an indirect way, it is proof that the EU, for all its flaws, really does carry social and moral dimensions”.
No informed observer of the left, or even centre-left, can make a claim like this or anything like it. It holds no intellectual water at all. The left case for European integration, in light of the EU’s sharp neo-liberal turn after the Delors presidency, comes from what the EU can become, NOT what is has become. Secondly, this is not an intellectually honest statement given the meagre number of cases studies (2!) concerning EU competition law as applied to tax rules. To extrapolate from these individual cases that EU institutions “really [do] carry social and moral dimensions” is a leap of logic that is felled in flight when set against an avalanche of more compelling examples.
Some detailed examples, that speak to the broader body of EU internal market law, are presented below. but firstly some broad brush examples are offered: This same body of EU state aid law, lauded here in this Guardian editorial, is also responsible for a liberalisation agenda encompassing utilities sectors like post and transport. It is the reason why ambitions to renationalise the railways are virtually zero. The franchise and tender system that ‘organises’ Britain’s semi-privatised railways may have been created by our own Tory governments of the past, but it is EU law that has entrenched them, making them near-impossible to reverse. This same EU state aid law, and prior notification rules in particular, also imposes demands for swathes of  public sector spending to be reported to the European Commission; a demand that is not merely an administrative burden, but is often in fact restrictive. This same EU state aid law that demands Scotland’s life-line island ferry network, the vast majority of which requires heavy government subsidy, must use a tendering system to be compliant with EU law. Do the Guardian cardiganistas like all this? I would doubt it.

 

The left case for European integration, in light of the EU’s sharp neo-liberal turn after the Delors presidency, comes from what the EU can become, NOT what is has become

 

European Competition law and EU internal market law form the powerful double-engine of the Eutopian economic integration and is the rump mass of what we often label ‘EU law’. No area of European law furnishes EU institutions with more power. What was once a balanced means of promoting economic harmony on the continent has turned into something far more ino idiots. The neo-liberal turn we’ve witnessed in the last two decades is found in both the Court of Justice’s endeavours as well as the Commission’s. It is unfortunate that more attention, outside of academic work at least, is paid to the Commission rather than the Court. The neglect of this very political court is evidence enough that this broader EU subject is getting short shrift.  Below are two examples of its importance. One is already fairly well-known, particularly among trade unionists. The other is a scary development in this same area of company law and mobile capital that features in the Guardian editorial.

 

Labour rights: The Court once the unions’ friend, now turned foe

Once upon a time the Court of Justice took a balanced view when policing conflicts between European law directed at market-making and collective wage bargaining institutions. As late as 1998, in the Albany case, the Court said that the latter was a fundamental part of the ‘European Social Model’ and thus could not be undermined by EU (competition) law. Similar interpretive logics were also to be found in the Courts case law governing the single market and in particular posted workers before 1998 (e.g. the Rush Portuguesa case). After 2000, the court mysteriously changed course. The Court starts viewing the rights of private economic actors more favourably, culminating in the Laval and Viking judgements. In Laval – the court declared the regime of wage-setting in Sweden, so fundamental to the country’s own social model, in breach of EU internal market law. The autonomous setting of wages by unions and employers was no longer allowed to be imposed upon foreign firms who entered another member states with their own lower paid labour. Worse still, union attempts to buttress this wage-setting regime through strikes and blockades was also deemed illegal under EU law. Collective bargaining and the right to strike were dealt a serious blow (1).
Enter the Viking case. Here, a Finnish ferry company re-flagged one of their vessels in Estonia in order to pay its crew lower wages for plying the same trans-Baltic route. When the International Transport Workers Federation (ITF) went on strike in response, and organised secondary actions, the Court of Justice deemed this illegal as it obstructed the economic free movement rights of  mobile firms. Note that now ‘free movement’, far from being concerned with a Romanian coming to work in a western European country to improve their lot, is now directed toward companies enabling them to shop around for a jurisdiction for weaker labour laws and wage nor S. EU law now says this is not only OK, but indeed a ‘fundamental part of the single market’. This is all thanks to what is called the ‘country of origin principle’.

 

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The European Court and mobile capital: keeping bad company

These two cases above concerning wage bargaining and labour rights were followed by other cases. The country-of-origin principle, laced with the sort of judicial neo-liberalism that is rarely talked about in the Guardian, has also been brought to bear by the Court in its company law case law. British observers will like part of this. Here too, the Court once took a much more balanced view of free movement rights and the effect of these would have if taken to far to their extreme. In short, the Court didn’t see much logic in undermining the regulatory systems of member states if it encouraged regulatory competition. Such a view was taken by the Court in 1988 in the Daily Mail case. The Daily Mail now has its corporate registration based in Bermuda, but back in the late 80s it tried to move its registration from the UK to the Netherlands. The British authorities objected and the European Court took its side, stating that the Daily Mail was not moving its actual operations out of the UK and was simply using this re-basing ploy to avoid (higher) UK regulations. Good on the Court – the ‘race to the bottom’ in company law standards this would have encouraged was not deemed worth it.
Now to something closer the modern day. In the 2002 Centros case the court reversed this earlier Daily Mail approach in a fashion much in line with that above in the Laval and Viking cases. A Danish wine merchant, who had its entire business in Denmark, re-based its corporate registration in the UK to pay UK corporation tax and adhere to (lower) UK regulations. When the Danish government objected and the case reached the European Court the decision handed down said the Danes were within their rights to go ‘jurisdiction shopping’. Put another way, the thrust of this decision, in line again with the country-of-origin principle, said that firms were allowed to set up fake ‘letter box’ companies in other member states in order to dodge regulations in their country of operation. In essence this said that the ‘race to the bottom’ in labour regulations and tax rates was to be underpinned in EU law. This 2002 case was then underlined by others (Überseering and Inspire Art cases in particular).

 

Creative destruction

What is different from these examples to the one used in the Guardian is that the logics used in these cases, and the country-of-origin principle in particular, are laced through mout of EU internal market law – the substantive meat abe beating heart of all EU law. This sits in contrast to these logics used in deciding these tax cases the Guardian raises. Moreover, when this is sat next to the Services Directive, the Europact and the Commission intentions with TTIP, this picture of a neo-liberal European project painfully clear. It also sits in stark and painful contrast to the picture painted by the Guardian editorial. it should also be made clear that the ‘country of origin principle’ also forms the main rationale for TTIP’s most infamous provision: Investor-State Dispute Settlement (ISDS).

 

I can already feel many of you recoil, as if the lessons of the above are a pretext for a new left sceptic case for ‘out’. Not at all – but we must accept that the neo-liberal pillars the EU has erected must be brought down. This will be messy, but the seeds of some necessary creative destruction have already been sown

 

The response? I can already feel many of you recoil, as if the lessons of the above are a pretext for a new left sceptic case for ‘out’. Not at all – but we must accept that the neo-liberal pillars the EU has erected  for itself must be brought down. This will be messy, but the seeds of some necessary creative destruction have already been sown. The dreaded ‘fiscal compact’ is forging a generation of virulent and potentially violent anti-EU sentiment, particularly from the European left. Anyone who proclaims to be anti-austerity, anti-neo-liberal or even (dare I say it) a democrat can find no cause to support it. The best thing David Cameron has done is keep the UK out of the dreaded pact. I say that very sincerely. The austerity regimen it imposes isn’t just curiously Osbornesque, but very very permanent. Some seriously destructive, yet democratic and collective, act will be required to destroy it – as will the EU’s doctrinaire neo-liberalism that has been given life by the country of origin principle.

Defensive posture

Pro-Europeans in the UK have been locked into defensive posture for so long that they feel they must defend, at all costs, ‘the project’ against reactionary nonsense. There is an informed and intellectually honest alternative that can reconcile a necessary critique of the modern EU with a riposte to reactionary Eurosceptics. But talking about the EU as if its a roast chicken when its increasingly turning into a nut loaf nightmare we didn’t order is no way to have this debate. It is dishonest, out-dated and will fail. Labour’s new leadership bowed to the pressure of its pro-EU camp, built of Blairites and the soft left that elected him, in committing Labour to an ‘in-no-matter-what’ position. This cannot be the last thing voters hear from Labour on the subject. It is not just that they deserve more honesty, but they deserve to hear about a European reality that they’re simply not being told.

 

 

Andy Morton is an academic researcher focusing on a number of areas of EU law and is CHARTIST‘s web editor.  He is keen to start a broader debate about this subject, using CHARTIST as a forum. 

 

Footnotes:

(1) It’s important to note that these decisions undermined collective bargaining means of setting minimum wage rates, not legal minimum wage rates. Seeing as the latter are much lower than those wage rates set by collective bargaining, this still sees EU law being used to push wage rates of workers lower.

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