Unions fighting the threat of cheap labour from migrant workers from new EU member states won the latest round of a legal battle over equal pay today.

An Advocate-General at the European Court of Justice said trade unions “motivated by objectives which are in the public interest” had the right to oblige firms supplying workers from other EU countries to apply domestic pay rates.

The advisory “opinion” will now be considered by the full court before a final verdict later this year in a landmark case affecting employees across Europe.

The test case is the first covering equal pay and conditions for workers from low-wage eastern European countries - now EU members - when working away from their home country.

It involves a dispute over Latvian company Laval, which supplied construction workers to refurbish a Swedish school - drastically undercutting Sweden’s own agreed basic pay rates.

Trouble flared when Swedish workers launched industrial action to protest against what they saw as unfair competition from cheap labourers from Latvia who were not covered by strict Swedish trade union agreements on pay and conditions.

The school construction site in Vaxholm was blockaded by Swedish workers when Laval refused to sign a collective agreement on terms of working in Sweden.

Finally, Laval withdrew its workforce and began legal action in Sweden’s labour courts.

The case was referred to the European Court of Justice in Luxembourg for a ruling on whether the Swedish industrial action - endorsed by the Swedish government - breached EU rules guaranteeing freedom to provide services and banning discrimination on nationality grounds.

Today the Advocate General declared: “Trade unions may, by collective action motivated by objectives which are in the public interest and are proportionate, compel a service provider from another member state to subscribe to a rate of pay laid down in a collective agreement.”

In a separate case at the European Court today, another Advocate-General backed union action to dissuade a company from relocating to another part of the EU to benefit from lower wage costs.

But he warned: “Collective action that has the effect of partitioning the labour market along national lines or prevents a relocated company from providing services in another member state is incompatible with Community law.”

That case involves Viking Line, a Finnish ferry company, which tried to re-register one of its Finnish-flagged vessels in Estonia so as to switch to cheaper Estonian crew members.

Both cases throw a spotlight on the pitfalls of opening EU national borders to workers from low-wage member states while trying to defend national collective bargaining agreements.

European Trade Union Confederation (ETUC) general secretary John Monks described the Laval case as of great political importance: “If Europe’s unions lose, there is a real risk of working people turning against free movement, the single market, and the EU itself.”

EU Commissioner Charlie McCreevy, in charge of the single market, angered trade unions and the Swedish government when he went to Stockholm during the dispute and supported the case for Laval workers to be paid at lower rates.

The ETUC says it is a basic principle of the EU that each member state has the right to regulate its own labour markets and industrial relations systems, according to its different economic, social and political circumstances.

When Romania and Bulgaria joined the EU at the start of this year, Sweden and Finland were the only member states to allow unfettered access to the domestic jobs market for their workers.

Others, including the UK, opted to delay full access, fearing the impact of the kind of pay rate clash which unions say goes beyond fair competition in a single European market.

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