Up until now, only German companies operating in German districts with high unemployment rates have been allowed to subcontract Polish workers. This option was not available to foreign companies based in Germany. However, this restriction is discriminatory and cannot be justified, says a verdict issued by the EU Court of Justice, on 21 January.

The European Commission brought the case (C-546-07, EC versus Germany) before the court and said that by preventing foreign companies from EU countries other than Germany to hire Polish workers, Germany failed to fulfil its obligation to ensure the freedom to provide services. The Commission, supported by Poland, also said that Germany breached the ‘standstill’ clause laid down in the 2003 Accession Treaty by extending the regional restrictions on access to labour markets.

Following the EU’s 2004 enlargement, some member states, including Germany, put in place transitional arrangements for workers from the new member states. These restrictions may be kept so long as Germany applies national measures or measures resulting from bilateral agreements to ensure the free movement of Polish workers. Furthermore, the transitional arrangements “may not result in conditions for the temporary movement of workers [...] which are more restrictive than those in force on the date on which the Treaty of Accession was signed (‘standstill’ clause)”.

The 1990 German-Polish agreement stipulates that work permits are, in principle, to be issued to Polish workers who are detached for temporary work on a contract between a Polish employer and an German company (Germany is referred to as ‘from the other side’ in the agreement), regardless of the situation and trends of the labour market. The German Federal Employment Agency, however, adopted, the rule that foreign workers may not be hired for work in districts where the average unemployment rate for the previous six months has been at least 30% higher than the unemployment rate for Germany as a whole.

The court argues that the freedom to provide services implies the ending of any discrimination against a service provider by reason of nationality or place of establishment. Consequently, says the ECJ, the requirement that a company must set up a permanent undertaking in the member state where the service is provided runs counter to the freedom to provide services.

The court also found that the interpretation of the term ‘undertaking from the other side’ as referring only to German undertakings implies direct discrimination, contrary to the EC Treaty, against service providers from other member states wishing to hire workers from a Polish undertaking. The ECJ says that Germany has failed to provide any convincing argument to justify restrictions on a fundamental EU freedom. Lastly, the ECJ judges that the adding of new districts to the list where Polish workers could not be hired, as happened every three months in Germany, contradicts the ‘standstill’ clause.