In 2004, the Latvian-based construction company, Laval un Partneri, started work on a school refurbishment and rebuilding project in Vaxholm—the main town on an archipelago of islands in the Baltic Sea outside Stockholm. The contract, offered to the lowest bidder, was the latest in a series for the company’s Swedish subsidiary seeking to exploit the stark wage discrepancy between Sweden, with an average wage of around €1,900 per month, and its Baltic neighbours.
Laval’s subsidiary, L&P Baltic AB, paid its workers relatively high wages for Latvia, around €9 per hour, in addition to offering food and accommodation. But this is substantially below the rate agreed for construction workers with the main construction union in Sweden, Byggnad.
Byggnad, citing the longstanding practice in Sweden of minimum wages being set across industries through “collective agreements” with employers, unions and the state, demanded that Laval pay the Swedish rate of around €16 per hour. Collective agreements generally involve no-strike and no-lock-out deals between the unions and the employers in return for an agreed pay structure and dispute resolution procedures.
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Laval initially agreed to be bound by the agreement, but then changed its mind. Anxious to exploit lower pay levels in Latvia, the company claimed it already had an agreement with the Latvian Building Workers Union. Therefore there was no need for a Swedish-style collective agreement.
In response, Byggnad arranged for picketing of the site by up to 50 building workers, ensuring that supplies were not delivered. The electricians union called a one-day solidarity strike. Picketing was sustained for seven weeks.
The union was demanding a significantly higher rate of pay for the Latvian workers, but the underlying issue at stake for the union bureaucracy was the collective agreements on which the “Swedish model” of a corporatist alliance between capital and the trade unions is based. This is why the principal slogan on the picket line in Vaxholm was “Swedish laws in Sweden” and why the dispute was given tacit support by the Social Democratic government.
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The Swedish union took the unprecedented step of countering charges of xenophobia from Latvian employers by advertising in the Latvian press for recruits. Laval sued Byggnad in the Swedish Labour Court as a first step towards taking the case to the European Court of Justice.
