Magic escape of the Minister of Social Affairs in illegal employment cases

This morning the Netherlands Counsel of State in The Hague has ruled an important decision concerning the connection between the position of citizens of the new member states of the European Union, like Bulgaria and Romania, and that of third country citizens, in this case of Japan.

The Counsel:"Employment of Romanians and Bulgarians without a work permit was illegal and can be penalized, although Japanese citizens are favoured by the Dutch Japanese Trade treaty 1912"

The dispute was ignited after the Labour inspection had fined several companies that employed the new EU-citizens without a valid work permit. Following the Treaty of Accession with the new EU member  states, in 2007 the Netherlands, as an existing member state, invoked the option to take "transitional measures" where it concerned the access to its labour market. Hence, Dutch employers had to apply for a work permit for Romanians or Bulgarians until the maximum allowed term ended on 1 January 2014. However, a work permit was very difficult to obtain, and the regulation was not very clear and consistent. Many companies hired these new EU-citizens as self employed entrepreneurs, or trusted employment agents that seconded temporary staff to be compliant with the regulations. In many cases the Labour inspection evaluated this as an illegitimate construction to evade work permit requirements, and put a taut penalty of 8000 Euro on every single offence. It's no exception that some companies were confronted with fines over half a  million Euro when dozens of new EU-citizens where found working illegitimate on a project.

Japanese Trade Treaty

In the ruling on of the Counsel of State on 24 December 2014 it considered that employers of Japanese citizens are exempted from the duty to obtain a work permit due to the Dutch Japanese Trade Treaty that contains a so called Most-Favored-nation Clause. Up to the late 1920-ies this was a very common instrument in trade treaties between states to ensure that each-others interest are not jeopardized by benefits that are only given to other states by a contracting party. Since the Netherlands had agreed with Switzerland in 1875 (!) that Swiss nationals acquired almost unconditional residence rights in Holland, the Japanese could benefit from this antique, but still binding bilateral contract.

This illuminating consideration of the Counsel led to a new perspective on the validity of transitional measures that Holland had taken to prevent an already overcrowded labour market with an abundance of Romanian and Bulgarian employees. Because in the tradition of the most favourite nation clause in trade treaties, article 14 of the Annex VI to the Admission Protocol stipulates:

Notwithstanding the application of the provisions laid down in paragraphs 1 to 13, the present Member States shall, during any period when national measures or those resulting from bilateral agreements are applied, give preference to workers who are nationals of the Member States over workers who are nationals of third countries as regards access to their labour market.

Preference

On 24 July 2015 the district court of Breda, with a referral to the Sommer case of the EU Court of Justice, quite convincingly considered that this paragraph allows Romanian workers to have preference over third country nationals working in the Netherlands, like the Japanese, and therefore they should also have the same, unconditional access to the Dutch labour market.

Although the Counsel of State did not yet review this verdict of the district court, from the actual ruling of today it may be concluded that this consideration is overruled. In this parallel appeal case the Counsel has noted that the principle of preference in the Admission Protocol does not expand to the same broader effect of the most favourite nation clause in the Japanese Trade Treaty, since the derived unrestricted access of Japanese workers is only making a specific exemption on the general restrictions in the Netherlands applied to third country citizens.

However it remains unclear from the considerations of the Counsel to what extent the "preference clause" should lead to actual benefits to employees of the new member states when obviously these benefits have been granted to (some)  citizens from outside the EU.  When can we still speak of an "exemption"  if a member state has closed one or multiple bilateral treaties with third countries that allow their citizens an easier access to their labour market than is granted to the citizens of new member states? The brief and rather simplistic referral to the Sommer-case - that this ruling is of no direct relevance - is not very convincing, since the EU-court did emphasize the general rule of paragraph 14:

"According to that paragraph, Bulgarian nationals must not merely enjoy the same conditions of access to the labour markets of the Member States as third-country nationals, but must receive preferential treatment." 

Seen the tremendous impact an opposing ruling would have in Dutch labour immigration law, not to say for the outstanding fines worth of millions of Euro against employers of Romanian and Bulgarian workers, the Counsel probably was well aware of the political controversy that could have been ignited after a wider interpretation of the preference clause.

Principle of effectiveness

In my opinion the present motivation of the Counsel is disappointingly inconclusive, especially if the guiding principle of effectiveness is taken into consideration that the EU Court in many cases has reiterated: national law and procedures should enforce the rights derived from EU law and should respect more than only the semantic meaning but also the  purpose lying beneath of the right. And obviously paragraph 14 has been implemented to ban labour market protectionism of member states against new EU-citizens, when apparently they feel no urge to limit the access of third country workers...

The scope of this case is far more stretching than the Netherlands alone and I would not be too surprised if this highly debatable opinion of the Counsel would attract the attention of the European Commission that could trigger an infringement procedure. For time being the Minister of Social Affairs has made an almost miraculous escape from a hazardous position...

Relieved

On the other side, Japanese citizens may feel relieved with this outcome, tearing their favourite position, based on a treaty of more than 100 years old, away from the political arena that has developed hefty allergic reactions to any wild card that is issued to immigrants. The consequence that the treaty will be terminated promptly by an alarmed Dutch government will be off the table for a while, although I am certain that this debate will be fired up, every time another bilateral treaty with third countries is subject of a critical court review. And there are quite a lot of these shining  jewels of jurisprudence. For long put away on dusty shelves, but now conveniently accessible from the internet. Citizens of, for instance, Ethiopia, Liberia, and Colombia might have gold in their hands ...