4 September 2019

Posting in the Orient Express or the Advocate General M. Szpunar’s Opinion on ”chain posting”

Posting in the Orient Express

In her novel ‘Murder on the Orient Express’, published in 1934, Agatha Christie did not broach the issue of the exact place where the murder had been committed. All that is known is that it took place on a train, the Orient Express, on its Simplon-route, which crosses several countries on its journey from Istanbul to Calais, at some point before or after the train was stopped in then-Yugoslavia. The reader is, however, left in the dark as to the question in which country it occurred. This question, which would have been of crucial importance for subsequent criminal proceedings, in order to determine which national criminal law is applicable, was clearly not within the remit of Hercule Poirot’s investigation.

In spite of appearances, this is not the beginning of the holiday detective novel. Quite the contrary, it is in this way that the CJEU’s Advocate General Prof. Maciej Szpunar commenced his Opinion of 29 July 2019 in the Austrian-Hungarian case C-16/18 Dobersberger. It concerns the Austrian member of the management board of a Hungarian company, who was found guilty of failing to fulfill the company’s obligations under Austrian law regarding the so-called ‘chain posting’.

State of play and the first preliminary question – is the Posting Directive applicable here?

A Hungarian company Henry am Zug Hungary Kft. from 2012 to 2016 posted Hungarian citizens to work in Austria. They were mostly hired out to it by another Hungarian and their work consisted in providing on-board service, preparation of food and drinks as well as providing cleaning on board of trains of the state operator ÖBB travelling to Salzburg and Munich, whose starting or final station was Budapest, and which stopped at Vienna Central Station). Henry am Zug was actually a subcontractor – ÖBB awarded the contract to an Austrian company D., which in turn, via the chain of subcontractors, awarded the contract to Henry am Zug.

According to the Austrian inspectors, Mr. Dobersberger’s alleged infringement of provisions consisted in that:

  • no notification was made to the competent Austrian authority regarding the employment of the posted workers of one week in advance of the commencement of their work in Austria;
  • no documents relating to the workers’ social security registration had been retained at the place of their deployment within Austria;
  • at the aforementioned place of deployment, no possibility of consulting the employment contracts, documents evidencing the payment of wages and documents relating to the wage categories in German was provided.

Henry am Zug defended itself by claiming that catering and cleaning services in trains provided by it (within the subcontracting framework) were not covered by the Posting Directive, thus the company did not have to make notifications or make documents available. In the Company’s opinion, this, among others, resulted from the fact that the service was provided en route from and to Budapest.

Advocate General M. Szpunar agreed with the Company’s position, stating that the provision of services such as in the case at hand was not covered by Article 1(3) of Directive 96/71. In other words, in the Advocate General’s view, the workers in the instant case could be employed under Hungarian (and not Austrian) conditions. This leads to the conclusion that the Austrian authorities were not entitled to control whether they had been abided by.

‘Subcontracting chain’ and answers to the second and third preliminary questions

The Opinion also contains other interesting statements by the Advocate General, including those concering chain of subcontractors, restrictions imposed by Austrian regulations and the issue of the so-called ”social dumping”.

First, when interpreting the concept of the terms ”under a contract concluded between the undertaking making the posting and the party for whom the services are intended” (Article 1(3)(a) of Directive 96/71), the Advocate General noted that there was no agreement between Henry am Zug and ÖBB, but that there were 3 agreements, between ÖBB and D. as well as between the latter and Henry am Zug.

According to Prof. Szpunar – despite subcontracting and the chain of contracts – there in fact existed a contract within the meaning of Art. 1(3) of Directive 96/71 between Henry am Zug and ÖBB. This statement may have practical and far-reaching effects when interpreting the above concept also in other situations. It does extend the concept of the recipient of services referred to in the abovementioned provision of the Directive 96/71.

On the other hand, when interpreting the term ”provided there is an employment relationship between the undertaking making the posting and the worker during the period of posting” (Article 1(3)(a) of Directive 96/71), the Advocate General acknowledged that it was not relevant whether the posted worker was sent to the host country directly by his employer or by an undertaking to which he had been posted. As a result, according to Prof. Szpunar, Art. 1(3)(a) of Directive 96/71 could also be applied if the posting undertaking does not use its own workers, but workers of another undertaking who had been hired out to it back in the Member State of posting. As the Advocate General put it, Directive 96/71’s scope of application covers ”all temporary posting operations subject to the freedom to provide services”.

Finally, having analyzed the disputed Austrian provisions, Prof. Szpunar found that in relation to the above-described situation, they constituted restriction to the freedom to provide services in the EU, which was not justified. Therefore – they are incompatible with the EU law. Advocate General’s indications in this respect concern essentially the facts of the Dobersberger case, however, it seems that at least one of his remarks may have wider, universal repercussions. It concerns the issue of notification – Prof. Szpunar pointed out to the fact that he did not see ”why employers should declare one week in advance who is posted”.

”Social dumping”

Finally, it is worth paying attention to the Advocate General’s analysis of the so-called ”social dumping”. He pointed out, first, that ”prevention of ‘social dumping’ is more akin to the economic ground of justification of maintaining industrial peace – which has not been recognised by the Court as an overriding reason relating to the public interestas well as that ”’social dumping’ and the protection of workers of the posting Member State are two completely different matters”.

Secondly, the Advocate General stated that ”in an internal market which is characterised by the free flow of goods, services and factors of production, there is the inherent danger that ‘social dumping’ becomes more of a political term, rather than a legal one, a political term typically resorted to in economies with a well-developed infrastructure. Indeed, there is the danger that, in a one-sided manner, primarily the perspective of the host (Member) State is taken into account. (…) To put it bluntly, what is ‘social dumping’ for some is, quite simply, ‘employment’ for others.

Thirdly, Prof. Szpunar found that ”if the concept of ‘social dumping’ is thus too broadly applied, this would amount to nothing less than the protection of domestic industry against cheaper competition from another Member State, a protection which normally cannot be maintained under Union law”. At last, he noticed that ”as the term ‘dumping’ implies, there must be a negative intention to eliminate competition – and not just to benefit from better conditions. However, the need to prevent ‘social dumping’ cannot be invoked against a service provider who simply turns the possibilities offered by the internal market to his economic advantage – and that of his client, the recipient of the services. (…) After all, the internal market is underpinned by the principle of comparative advantage”.

Opinion in Dobersberger and the next cases

Further Austrian cases regarding restrictions to the free provision of services by entrepreneurs posting workers to Austria (at least 10 lates cases await their consideration by the Court, the closest decision of the CJEU in some of them is expected for the first half of September) will show whether the above considerations can be understood generally – in relation to both Austrian cases, but also to cases of entrepreneurs hailing from other Member States.

Marcin Kiełbasa

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