The need for a supra national model which embraces and provides for social rights of individual Member States is becoming more apparent amidst the ever intensifying integration process within the EU and its involvement in areas which have been undermined by an economic model. This paper considers why, despite such a need for a supra national model, the “ordo liberal European polity” is favoured. It partly does so, by way of reference to two judgements from the European Court of Justice (ECJ) – namely, Laval un Partneri Ltd , and the Viking Cases.European Court of Justice (ECJ); integration; competition; regulation; ordo-liberalism; economic objectives; social rights; internal market; bank rescues

Ojo, Marianne

English

Research Papers in Economics

ABSTRACT
The need for a supra national model which embraces and provides for social rights of 
individual Member States is becoming more apparent amidst the ever intensifying integration 
process within the EU and its involvement in areas which have been undermined by an 
economic model. This paper considers why, despite such a need for a supra national model, 
the “ordo liberal European polity” is favoured. It partly does so, by way of reference to two 
judgements from the European Court of Justice (ECJ) – namely, Laval un Partneri Ltd , and 
the Viking Cases.
Key Words: European Court of Justice (ECJ); integration; competition; regulation; ordo-
liberalism; economic objectives; social rights; internal market; bank rescues
1Social Rights and Economic Objectives: The Importance of Competition at 
Supra National Level
Marianne Ojo
1
I. Introduction
Competition and Economic Regulation
Competition it has been argued, is so important that it should be elevated from its status as a 
principle of financial regulation to a statutory objective of financial regulation. This is the 
view shared by some regarding the statutory objectives and principles of financial regulation 
in the United Kingdom. The rise of conglomeration over the past two decades, as well as 
globalisation has resulted in changes to the structure of regulation in countries such as 
Germany, the UK, and Scandinavian countries such as Denmark, Norway and Sweden. With 
transnationalisation  of standard setting processes and increased harmonisation between 
countries such as the US, the UK and Germany, in these standard setting processes, this has 
resulted in less role for the State and a greater role for supra national bodies. The traditional 
tool of deregulation as a means of fostering competition has therefore become inconceivable. 
As a  result,  there is  even  greater  need  to  promote  measures   which  would  facilitate 
competition.
However the priority accorded to the objective of ensuring financial stability – over that of 
fostering competition (as well as the extent to which authorities, such as the European 
Commission, are prepared to facilitate measures aimed at fostering financial stability – even 
where these may still distort competition),
2 highlights the prominence accorded to financial 
stability as an economic objective. During the recent global financial crisis, it was widely 
accepted that “a serious disturbance in the economy of Member States had occurred and that 
measures supporting banks are appropriate to remedy this disturbance”.
3 Various rescue cases 
- such as those of Bradford and Bingley
4 and Hypo Real Estate
5 have confirmed how far the 
European Commission is willing to go in order to facilitate financial stability – even where 
competition may be distorted as a result.
6
As well as the attention drawn (by key findings published by the OECD) to the controversy 
generated by some who argue that competition rules should be suspended for the duration of 
financial crises - thus allowing regulators to focus only on the objective of safeguarding the 
stability of the financial system, these findings also conclude that, whether competition is 
1Researcher, Center for European Law and Politics (ZERP), University of Bremen, and Teaching Associate, 
Oxford Brookes University, Oxford.
2As evidenced by many rescue and State aid cases during the recent Financial Crisis.
3 “This having been confirmed in various Commission communications such as the Communication on the 
application of State aid rules to measures taken in relation to financial institutions in the context of the current 
global financial crisis(hereinafter "the Banking Communication"), its Communication on the re capitalisation of 
financial institutions in the current financial crisis: limitation of aid to the minimum necessary and safeguards 
against   undue   distortions   of   competition  (hereinafter   "the   Re   capitalisation   Communication"),   and   its 
Communication on the return to viability and the assessment of restructuring measures in the financial sector in 
the current crisis under the State aid rules (hereinafter "the Restructuring Communication").”
4European Commission, “State aid N 194/2009 –United Kingdom: Liquidation Aid to Bradford and Bingley Plc 
section 4 paragraph 44
5European Commission, „State aids n° C 15/2009 (ex N 196/2009), N 333/2009 & N 557/2009 - Germany Hypo 
Real Estate – Extension of formal investigation procedure, and temporary find capital injections compatible“
6However emphasis is still directed at the need to minimise or avoid distortions of competition.
2desirable at all when there is a systemic crisis, is a matter which generally, is in need of 
clarification.
7 
II. Addressing the Lack of a Socio-Economic Model at Supra National Level in the 
EU.
Social Rights and Economic Objectives
The facilitation of competition can be said to constitute one of the primary economic aims of 
the EU. According to Article 2 of the Treaty Establishing the European Community, the 
establishment of a common market should facilitate a high degree of competitiveness and 
convergence of economic performance. Article 3(g) of the EC Treaty lists activities of the 
Community which include inter alia a system ensuring that competition in the internal market 
is not distorted. 
“The theory of ordo-liberalism, which influences politics to a great extent in Germany, bases 
the European model on a dual polity which did not require democratic legitimacy: At supra 
national level, it aims to ensure a process of undistorted competition whilst sustaining 
economic rationality.
8 At national level, endeavours are to be made to further the development 
of social policies.”
However, the need for a supra national model which embraces and provides for social rights 
of individual Member States is becoming more apparent amidst the ever intensifying 
integration process within the EU and its involvement in areas which have been undermined 
by an economic model – namely, those involving social policies. The need for unity amidst 
increasing intensification of integration within the EU is also vital to ensure the administrative 
workability of functions within the EU. How is one to reconcile the aims of fostering 
competition and those social rights such as those aimed at ensuring minimum wage 
requirements? The issue regarding whether an introduction of minimum wages fosters or 
hinders competition could be complex and different results emanate according to whether it is 
viewed from a supra national level or from a national level. As regards social rights, these 
also depend on whose social rights are in question. To illustrate using Laval
9, whose rights 
carry more weight - those of the posted workers or those workers of the host state?
In Laval, the Court presented as a social right (of the posted workers), the universally 
guaranteed higher minimum wage in the host state. That unless, employers who are not 
threatened by collective actions agree voluntarily to pay more than the local minimum wage, 
then no action may be taken by a union of the host state in order to extract higher 
7“Others have instead emphasised the importance of applying strict competition rules in the recent crisis as a 
means of ensuring a level playing field and a coordinated reaction to the crisis – as well as avoiding a futile race 
for subsidies between countries to attract depositors and investors. Moreover, the long-term effects of relaxing 
competition policy can be serious. Mergers that lead to very concentrated markets in particular are almost 
impossible to reverse.”; See Organisation for Economic Cooperation and Development, “Competition and the 
Financial Crisis” at page 12
8 C Jörges and F Rödl, ‘ On De-formalisation in European Politics and Formalism in European Jurisprudence in 
Response to the “Social Deficit” of the European Integration Project, Reflections after the Judgments of the ECJ 
in Viking and Laval’ at page 5 <http://www.hanselawreview.org/pdf6/Vol4No1Art01.pdf> 
9 Case C-341/05, Laval un Partneri Ltd, of 18 December 2007 <http://eur-
lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62005J0341:EN:HTML>
3compensation  from employers.
10  However,  the  Posted  Workers  Directive  states  in  its 
preamble that where a conflict with established industrial relations occurs, the Directive must 
assume a subordinate position.
11
Should values of these social rights be weighed against the values of free market access at 
supranational level? What authority/ies should determine those social rights which do and do 
not conflict with European economic objectives?
In the Viking Case
12, the ECJ realigned the balance between economic freedoms at European 
level and social rights at national level with the pre-requisite that Member States comply with 
community law when exercising their authority in the field of labour law.
13
The problem however, is that the Community is not authorised to regulate national industrial 
relations.
14 The basic rights involved are not within the jurisdiction of the Community since 
Article 137 (5) EC expressly provides that “pay, the right of association, the right to strike or 
the right to impose lock-outs” are matters to be regulated by the Member States.
15 “Not only 
did the Court accord an extremely extensive interpretation of European primary law (Article 
137 (5) EC in Viking, it also did likewise in interpreting European secondary law ( Directive 
96/71/EC) in Laval.
16 Furthermore its interpretation of the Directive 96/71/EC in Laval, did 
not take into consideration vital elements of the Swedish social model.”
17
III. Conclusion
Social rights which exist at national level should be incorporated at EU level in so far as these 
do not severely impede or hinder competition. Those (social) rights which conflict with 
economic objectives of European economic integration should be determined according to the 
national laws of the Member State/s involved. EU legislation should stipulate (where 
possible) those rights which do and do not conflict with European economic objectives – 
hence matters to be decided upon by national courts and the ECJ respectively. This is 
however, a complicated task.
10 In effect, established systems of industrial relations where trade unions are able to demand concessions that are 
more favourable for workers than that stipulated under statutory minimal standards are deemed, in principle, to 
be incompatible with EU Law. For more on this see A Somek, Idealisation, De-politicisation and Economic Due 
Process: System Transition In The European Union ) in “The Law/Politics Distinction in Contemporary Public 
Law Adjudication.” Edited by B Iancu, March 2009.
11 ibid
12 Case C-438/05 International Transport Workers’ Federation and Finnish Seamen’s Union v Viking Line ABP 
and OÜ Viking Line Eesti 
<http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62005J0438:EN:HTML>
13 ibid 
14 ibid
15 ibid
16 See C Jörges and F Rödl, ‘ On De-formalisation in European Politics and Formalism in European 
Jurisprudence in Response to the “Social Deficit” of the European Integration Project, Reflections after the 
Judgments of the ECJ in Viking and Laval’ at page 5 
<http://www.hanselawreview.org/pdf6/Vol4No1Art01.pdf> 
17 ibid
4The ordo liberal European polity is therefore favoured in the sense that social rights which do 
not conflict with economic rationales and the aim of facilitating a system of undistorted 
competition should be recognised at supranational level. Furthermore it is administratively 
unworkable for the ECJ alone to take into account all vital elements of every Member State’s 
social model. 
5REFERENCES
Case   C-341/05,   Laval   un   Partneri   Ltd,   of   18   December   2007   <http://eur 
lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62005J0341:EN:HTML>
Case C-438/05 International Transport Workers’ Federation and Finnish Seamen’s Union v 
Viking Line ABP and OÜ Viking Line Eesti 
<http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:62005J0438:EN:HTML>
European Commission, „State aids n° C 15/2009 (ex N 196/2009), N 333/2009 & N 557/2009 
- Germany Hypo Real Estate – Extension of formal investigation procedure, and temporary 
find capital injections compatible“
European  Commission,  “State aid N 194/2009 –United  Kingdom:  Liquidation  Aid to 
Bradford and Bingley Plc”
Organisation for Economic Cooperation and Development, “Competition and the Financial 
Crisis”
<http://www.oecd.org/dataoecd/52/24/42538399.pdf>
Jörges C and Rödl F, ‘ On De-formalisation in European Politics and Formalism in European 
Jurisprudence in Response to the “Social Deficit” of the European Integration Project, 
Reflections   after   the   Judgments   of   the   ECJ   in   Viking   and   Laval’ 
<http://www.hanselawreview.org/pdf6/Vol4No1Art01.pdf> 
Somek A, Idealisation, De-politicisation and Economic Due Process: System Transition In 
The European Union  )  in “The Law/Politics Distinction in Contemporary Public Law 
Adjudication.” Edited by Iancu B, March 2009
6

Social rights and economic objectives: The importance of competition at supra national level

Abstract

Similar works

Full text

Available Versions

Research Papers in Economics