Amedeo Arena, Assistant Professor of European Law - University of Naples “Federico II” School of Law

Judgment of the court (Second Chamber) of 11 September 2014, Essent Energie Productie BV v. Minister van SocialeZaken en Werkgelegenheid, Case C-91/13.

The European Court of Justice (ECJ) has consistently maintained that, in contrast to workers from EU Member States, Turkish nationals do not possess the right to freedom of movement within the European Union. Their rights are limited to the territory of the specific host Member State (Savas, para 59; Derin, para 66). The Essent judgment offers a current and straightforward example of how, in specific situations, the EU’s internal market freedoms can be utilized to circumvent these limitations, indirectly expanding the freedom of movement for Turkish nationals and other third-country nationals.

Facts and legal background

Netherlands legislation prohibits employers from engaging foreign nationals without work permits for work within the Netherlands.

Essent, a company based in the Netherlands, contracted the construction of scaffolding at one of its Dutch branches. A workforce comprised of Turkish and other non-EU nationals was engaged for this project. However, Essent did not directly employ these workers. Instead, they subcontracted the construction to BIS, another Netherlands-based company. BIS, in turn, contracted Ekinci, a company incorporated in Germany, to temporarily post the workers to the Netherlands for the project’s duration.

Due to the absence of work permits issued by Dutch authorities for this posting, the Netherlands Minister imposed a fine of EUR 264,000 on Essent for violating Netherlands labor laws.

During the subsequent legal proceedings before the Netherlands Raad van State (Council of State), two provisions became central: Article 41(1) of the 1970 Additional Protocol to the EEC-Turkey Association Agreement and Article 13 of Decision No. 1/80 of the Association Council from September 19, 1980. Both are considered standstill clauses. The former prevents the introduction of new restrictions on employment access, while the latter addresses restrictions on the freedom to provide services between Turkey and EU Member States. Consequently, the Netherlands court paused proceedings to seek clarification from the ECJ regarding the interpretation of these provisions.

The Judgment

Initially, the ECJ examined whether Article 41(1) of the Additional Protocol and Article 13 of Decision No 1/80 were applicable to the circumstances of the primary proceedings. The Court acknowledged the direct applicability of these provisions and their potential to overrule conflicting national legislation. However, it emphasized that the rights conferred upon Turkish nationals are limited to “the territory of the host Member State alone.” In this case, the ECJ determined that the host Member State was Germany, where the Turkish workers resided and were employed legally, rather than the Netherlands, their temporary work location, whose labor market they did not intend to join. Therefore, the ECJ concluded that Article 13 of Decision 1/80 was not relevant to this case.

The Court reached a similar conclusion when considering Article 41(1) of the Additional Protocol. While Turkish companies providing services within a Member State could invoke this provision, the case did not involve service provision between Turkey and the Netherlands. The sole connection to Turkey was the presence of Turkish nationals among the workers Ekinci posted to the Netherlands. This link was deemed “insufficient” by the ECJ to activate Article 41(1) of the Additional Protocol.

Subsequently, the Court shifted its attention to Articles 56 and 57 TFEU, which guarantee the freedom to provide services within the EU. Although the referral for a preliminary ruling did not include questions regarding these articles, the Court believed their interpretation could assist the referring court in resolving the case.

Referencing Advocate General Bot’s Opinion, the Court pointed out that the act of posting workers between companies based in different Member States (Ekinci and BIS in this instance) falls under the purview of the free movement of services. This holds true even if some workers are not EU citizens. Furthermore, the Court asserted that Articles 56 and 57 TFEU could be invoked not only by the service recipient (BIS), but also by the end user (Essent).

Based on these premises, the ECJ determined that the Netherlands’ work permit requirement, along with its administrative burden, hindered the provision of foreign workers to a user company in the Netherlands by a service-providing company in another Member State.

Given the lack of harmonization in this area, the ECJ addressed the potential justifications for the Netherlands’ measure. While acknowledging the Netherlands Government’s interest in preventing labor market disruptions as a legitimate public interest concern, the Court noted that posted workers, who return to their home country upon project completion, are not seeking access to the host state’s labor market.

The Court also confirmed the right of Member States to verify that a company posting foreign workers from another Member State is genuinely providing services and not exploiting this freedom for other purposes. However, the ECJ deemed the Netherlands’ work permit requirement disproportionate to this aim, suggesting less restrictive methods for achieving the same goal. For example, the service-providing company could be required to demonstrate the legal status of its workers to Dutch authorities regarding residency, work permits, and social security coverage in their employing Member State. Additionally, preemptive reporting to Dutch authorities about the presence of posted workers, their anticipated duration of stay, and the services justifying their posting could be implemented.

Consequently, the ECJ concluded that Articles 56 and 57 TFEU preclude national legislation that makes the provision of non-EU workers by a company in one Member State to a user company in another Member State conditional upon the issuance of work permits for those workers by the receiving Member State.

Comment

This ruling sheds light on the unique situation of Turkish workers posted between Member States following the ECJ’s judgment in Abatay. These workers can invoke Article 13 of Decision 1/80 against a Member State where they seek labor market integration through continuous employment, but not against a Member State where they are temporarily posted. Similarly, while a Turkish company and its Turkish employees providing services in a Member State can rely on Article 41(1) of the Additional Protocol to challenge restrictive national measures in that Member State, an EU company employing Turkish nationals cannot use the same provision to challenge measures restricting the movement of its Turkish employees.

Given these inconsistencies and the evident trade-restricting effects of the Netherlands’ work permit requirement, the ECJ’s decision to expand the scope of the preliminary ruling to encompass Articles 56 and 57 TFEU appears reasonable. However, it’s worth noting that in the relatively recent Vicoplus case, the ECJ ruled that the freedom to provide services, interpreted in conjunction with the 2003 Act of Accession, did not preclude the Netherlands’ work permit requirement for Polish workers posted to the Netherlands during the transitional period stipulated in the Act of Accession. While AG Bot dedicated a significant portion of his Opinion to differentiating Vicoplus from the present case based on factual and legal grounds, it’s unfortunate that the ECJ missed the chance to address the potential perception of unequal treatment between Turkish and Polish posted workers.

The ECJ referenced Vicoplus solely to support its finding that the act of posting workers between Ekinci and BIS, companies established in different Member States, qualified as freedom to provide services. However, neither Ekinci nor BIS sought to rely on this freedom. The question arises: could Essent invoke Articles 56 and 57 TFEU against Netherlands labor legislation, despite not being the direct recipient of the service?

In his Opinion, AG Bot initially observed that since the freedom to provide services promotes the establishment of an internal market, individuals beyond “service providers and recipients,” who nevertheless have a “material connection” to those who do, should have the right to challenge domestic restrictive measures using this freedom. The Court had employed a similar approach regarding the free movement of workers in the Las case: “Article 45 TFEU may be relied on not only by workers themselves, but also by their employers. In order to be truly effective, the right of workers to be engaged and employed without discrimination necessarily entails as a corollary the employer’s entitlement to engage them in accordance with the rules governing freedom of movement for workers” (para 18).

The Advocate General then presented an interesting application of the abuse of rights doctrine. Due to the prevalence of intermediary companies between principal contractors and employees, Netherlands legislation broadened the definition of “employer,” holding the principal contractor accountable for securing work permits for non-EU workers employed by its subcontractors to prevent work permit requirement circumvention. AG Bot argued that to avoid circumvention of restrictions on the freedom to provide services, the principal contractor’s liability under national labor law should be mirrored by an expanded ability to invoke Articles 56 and 57 TFEU.

Regrettably, the ECJ did not address the first argument, which could have clarified the ability of individuals outside the scope of fundamental freedoms to invoke them based on a “material connection” with those within the scope. In cases like Carpenter and, more recently, Dogan, the ECJ focused on the impact of national measures (e.g., deportation orders, immigration requirements) targeting individuals connected to service providers (e.g., spouses) on the service providers themselves.

Instead, the ECJ presented a condensed, three-paragraph version of AG Bot’s anti-circumvention argument, concluding that denying Essent the right to invoke Articles 56 and 57 TFEU would enable the Netherlands to hinder the freedom to provide services by enforcing the work permit requirement on the principal contractor. It’s noteworthy that in previous rulings, the ECJ utilized the abuse of rights argument to achieve the opposite outcome: limiting the scope of EU provisions in situations where the conditions for their application were artificially created, contradicting the objectives of EU law (Emsland-Stärke, paras 52-53).

Once the ECJ established a link between Essent and the freedom to provide services, the fate of the work permit requirement for posting non-EU workers to the Netherlands was sealed. The conditions, timeframes, and administrative burden associated with obtaining work permits clearly hindered the cross-border provision of workers. The ECJ dismissed the Netherlands government’s argument that the measure was intended to prevent labor market disruptions, emphasizing that posted workers are not seeking to enter that market “as they return to their country of origin or residence after the completion of their work.” While conceding that Member States can verify the legitimacy of service provision by companies posting foreign workers from other Member States, the Court rigorously assessed the proportionality of the measure and proposed not just one, but two less restrictive alternatives to achieve the same objective.

Lastly, it’s important to recognize that unlike recent rulings like Dogan, which exclusively concern Turkish nationals, the Essent judgment applies to the posting of workers of any non-EU nationality between companies in different Member States. This broader applicability stems from the finding that neither Article 41(1) of the Additional Protocol nor Article 13 of Decision No. 1/80 applied in this case.

Barnard & Peers: chapter 14