KKO:2018:61

Diary number: S 2016/986
Issue date: 10 October 2018
ECLI:FI:KKO:2018:61

The Finnish Seamen's Union SMU (the Seamen’s Union) had imposed a blockade on a Vietnamese merchant vessel, preventing final loading of the vessel and its departure from the harbour. The owner of the vessel considered the blockade to be unlawful and requested the court, as an interim measure, to order the blockade terminated, with the threat of a fine if the order is not followed.

The Supreme Court held that the shipping company had demonstrated that the objective of the blockade was, with a high degree of probability, unlawful, since the collective agreement sought with the blockade would not be binding under Vietnamese law, which was applicable to employment contracts on the ship, and thus could not have produced the legal effect intended in the agreement. Consequently, the District Court, as an interim measure, could have ordered the Seamen's Union to terminate the blockade.

Background and the issues to be decided

The Seamen's Union had imposed a blockade on a Vietnamese merchant vessel in order to pressure the shipping company to enter into a collective agreement with the Vietnamese crew on the basis of the International Transport Workers’ Federation (ITF) Standard Collective Agreement. The vessel was being used in international shipping, and the vessel had not previously stopped in Finland.

The shipping company had filed an application for interim relief with the District Court requesting that the blockade be ordered to be terminated with the threat of a fine if the order is not followed. The District Court had accepted the application, after which the Seamen’s Union had terminated the blockade and the ship was loaded and had left Finland.

Following the appeal of the Seamen’s Union, the question before the Supreme Court was whether the termination of the blockade imposed by the Seamen’s Union could be ordered as an interim measure.

Provisions on general interim measures

Chapter 7, section 3 of the Code of Judicial Procedure contains provisions on the so-called general grounds for interim measures. According to subsection 1 of this provision, the court may, inter alia, prohibit the opposing party from doing something or order the party to do, with the threat of a fine if the order is not followed. The requirement is that the applicant presents probable cause that he or she holds a right in respect of the opposing party that could be the basis for an enforceable judgment (as the principal claim) and there is a risk that the opposing party would in some way obstruct or detract from the enforcement of the applicant's right or substantially reduce its value or significance. According to subsection 2 of the same provision, when deciding to issue a prohibition or an order, the court shall consider whether the opposing party would incur unreasonable inconvenience in comparison with the benefit that is to be secured.

Consideration of an interim measure is done in summary proceedings, and in this the principal claim is not decided. Instead, in accordance with Chapter 7, section 6 of the Code of Judicial Procedure, the applicant shall bring an action for the principal claim within a specified period.

Assessment by the Supreme Court

The Supreme Court noted that an industrial action undertaken in Finland by a Finnish labour union is governed by Finnish law. A blockade is, in principle, a form of industrial action approved by the Finnish legal order, and as such enjoys a constitutional right to protection as part of the freedom of association enshrined in section 13 of the Constitution Act. The right to industrial action has been recognized as a human right also in several international treaties binding on Finland.

According to Finnish law, however, a blockade may be forbidden as an industrial action for example if it is directed, in a manner prohibited by Finnish law, against a collective bargaining agreement already binding on the labour union, if it is contrary to European Union law, or if it is otherwise unlawful.

The Supreme Court noted that prohibition of the blockade, as an interim measure, would mean that the shipowner already at this stage would have secured a right which was to be clarified only in proceedings concerning the principal claim. In such a situation, the applicant requesting the interim measure has a heightened obligation to demonstrate that the industrial action was unlawful. Prohibition of the blockade imposed by the Seamen’s Union as an interim measure had therefore required that the shipowner in its application would have demonstrated very probable grounds that the blockade, due to its manner of implementation, its objectives or its consequences, was in breach of the law or good practice, or was unreasonable.

The way in which the blockade was implemented and its consequences

The blockade had been implemented in the manner that was standard in the field, and one of its characteristic features was an attempt to affect the financial position of opposing party. Economic losses incurred by the party subjected to the blockade or even by third parties would not in themselves constitute sufficient grounds for limiting constitutional rights. The Supreme Court held that neither the manner in which the blockade was implemented or its consequences could be deemed contrary to law or good practice or unreasonable.

The objectives of the blockade

The Seamen’s Union had sought to pressure the shipping company to conclude a collective agreement in accordance with the international standard. The shipping company had stated that a valid Vietnamese collective agreement was in force on board the vessel. According to the shipping company, the company would be violating the existing collective agreement and compulsory Vietnamese legislation on trade unions if it were to sign a collective agreement in accordance with the demands of the Seamen’s Union. A collective agreement signed with the Seaman's Union would be null and void under Vietnamese law and in violation of the fundamental legal order of Vietnam.

The Supreme Court noted that the objective of an industrial conflict can be deemed unlawful if it seeks the conclusion of an agreement or performance that is prohibited, null and void, or manifestly invalid. The legal binding nature and effective impact of the new collective agreement sought by the Seamen’s Union, in turn, was largely dependent on whether Vietnamese law or the law of another state applied to the terms of employment of the members of the ship's crew.

According to the conventional rules on the conflict of laws, the law applicable to ships operating in international waters is determined by the flag of the ship. This is reflected, inter alia, in the 1982 United Nations Convention on the Law of the Sea. However, according to Article 91 of the Convention, there must be a genuine link between the state and the ship. The significance of the flag state and the state of registration of the ship also in respect of the law applicable to employment relationships has been disputed in the case of so-called flags of convenience, in which the state of registration of the ship is unable or unwilling to meet the obligations concerning safety of the ship and protection of the members of the crew.

According to European Union law, the law applicable to employment contracts is governed by European Parliament and Council Regulation (EC) No 593/2008 of the European Parliament and of the Council on the law applicable to contractual obligations (Rome I) also in the case of the crew on a vessel that is registered outside of a Member State. In accordance with Article 8 (1), in principle an individual employment contract shall be governed by the law chosen by the employee and the employer. To the extent that the law applicable to the individual employment contract has not been chosen by the parties, Article 2 of the Regulation provides that the contract shall be governed by the law of the country in which, or, failing that, from which the employee habitually carries out his or her work in performance of the contract. Where the applicable law cannot be determined pursuant to paragraph 2, paragraph 3 provides that the contract shall be governed by the law of the country where the place of business through which the employee was engaged is situated. Paragraph 4 further provides that, where it appears from the circumstances as a whole that the contract is more closely connected with a country other than that indicated in paragraphs 2 or 3, the law of that other country shall apply.

The present case does not involve a vessel flying a flag of convenience, but a Vietnamese merchant vessel with a Vietnamese crew. The vessel had been operating in international tramp shipping and had stopped to load goods in Finland only by chance. It had not been demonstrated in the case that the employment contracts would have provided for the applicable law. The employment contracts did not define where the work was to be performed or where the employee was recruited, nor were there other factors that would connect the employment contract to Finland. Nothing that has been demonstrated in the case had shown a connection with any country other than Vietnam.

In the light of the facts known in the determination of interim measures, it had thus been evident that the employment contracts on board the ship were subject to Vietnamese law. According to the shipping company, the international Standard Collective Agreement required by the Seamen’s Union would have been void under Vietnamese law. It was apparent from the correspondence between the shipping company and the Seamen's Union annexed to the application for an interim measure that the Seamen's Union had known already before embarking on the blockade that the proposed collective agreement would be regarded as contrary to Vietnamese law. Also subsequently during the consideration of the interim measures the Seamen’s Union had not questioned the view of the shipping company of the content of Vietnamese law. For these reasons, it had been highly probable that the Seamen's Union, in pressuring the shipping company, had sought a collective agreement which, according to the law applicable to it, would not have been binding and could not have produced the legal effects intended in the agreement. The shipping company had therefore demonstrated with a high degree of probability that the demand of the Seamen's Union for an international Standard Collective Agreement was to be deemed unlawful.

The Supreme Court further stated that, in accordance with Article 9 (2) of the Rome I Regulation, the provisions of said Regulation did not restrict the application of the overriding internationally mandatory provisions of the law of the forum. At the time that the blockade had been implemented, Vietnam had not undertaken to be bound by ILO Recommendation No. 187 concerning seafarers’ wages, hours of work and the manning of ships, to which the Seamen's Union had referred in the case. However, according to what had been demonstrated in the case, the wages paid to the crew of the vessel had not been at such a level that these wages would have been deemed to be in violation of internationally mandatory provisions applicable in Finland, had the matter been submitted to the consideration of a Finnish court. Although in Finland the question of whether or not something is internationally mandatory is generally assessed narrowly, the prerequisites for applying certain national provisions as internationally mandatory provisions could have been fulfilled for reasons related to the protection of workers, since part of the crew had been on board for long periods without the benefit of holidays. In this case, however, the claims of the Seamen's Union had essentially related to the conclusion of an international collective agreement, and to compliance with the wage terms established in such agreement.

On the basis of the foregoing, the Supreme Court held that the shipowner had demonstrated with a high degree of probability that the objectives of the blockade imposed by the Seamen's Union had been unlawful. The termination of the blockade could therefore be ordered through interim measures. Ending the blockade had not caused the Seamen’s Union inconvenience that would have been unreasonable in the light of the benefit to be secured.