The next step will be to agree on what action the ETUC and its affiliate organisations will have to take. Because on first analysis we are very worried about the potential impact. It is hard to overestimate the significance of the issues at stake.

The judgement relates to trade unions' right to protect workers moving around within Europe, when their interests come into conflict with the EU's free market rules – an issue crucial to the future of Europe's labour market. The Laval case centres on a Latvian construction company, which imported Latvian labourers on lower (Latvian) wages to work on a Stockholm building site. The ECJ found that Swedish unions acted unlawfully when they took industrial action in an effort to force Laval to respect pay and conditions agreed nationally through collective bargaining.

What the ECJ is saying in effect is that the EU Treaty provisions for the free movement of goods and services take precedence over rights for workers. Although the court recognises the right to take collective action as a “fundamental right” that forms part of Community law, it is only fundamental up to the point where it gets in the way of companies benefiting from cross-border business by using the cheapest labour available. Then it suddenly becomes “subject to certain restrictions”. European citizens might be excused for wondering just how secure any of their fundamental rights are, regardless of the new status for the Charter alongside the Lisbon Treaty.

What does this mean for industrial relations, especially in Nordic countries, where the social partners have a well functioning system of collective bargaining that maintains high standards in open labour markets? In 2004, Sweden was the only EU-15 country not applying any 'transitional measures' to limit access of immigrant workers from the new Member States, but Swedish politicians have already talked of imposing restrictions or changing the laws governing the activities of foreign companies. Given that the Commission has of late been so anxious to promote the Nordic system of flexicurity in the labour market as a model for other EU Member States to follow, it is no wonder the Swedish government was “surprised and disappointed” by the ruling. Concerns have also surfaced in Denmark, which operates a similar system.

Indeed the outcome has caused widespread dismay. The President of the Party of European Socialists Poul Nyrup Rasmussen accused the EU of “shooting itself in the foot”, and the European Parliament's Employment and Social Affairs Committee is holding a special hearing to analyse the outcome.

One element of the court's decision rests on the fact that Sweden has no legal or collectively agreed minimum wage for Laval to refer to in setting pay rates for its Latvian workers, and that the company was “forced” to the negotiating table. Yet the fact is that Sweden's model of a strong, flexible and decentralised collective bargaining system functions to the satisfaction of both unions and employers and has been key to the development of one of the EU's most dynamic and successful economies. Other countries where collective bargaining also has an important role, or without a legal minimum wage, such as Ireland and Italy, are now asking where the ruling leaves them in trying to counter social dumping and unequal pay rates in the EU.

Of course, the ETUC welcomes the recognition of the right to collective action to protect workers against social dumping as a fundamental right, confirming the ECJ's ruling earlier in December on a similar case concerning the Finnish Viking shipping company. But in that case the court also restricted the exercise of this right, meaning that trade unions have to justify their actions and show that they have acted within the limits of “proportionality”.

As Europe heads for an integrated market for goods and services it must take full account of the impact on workers – the very people who keep that market going – and safeguard their interests as well. The EU makes much play of the rights of consumers, but consumers are workers too, and they will have little to gain if cheaper prices come at the expense of jobs and wages. The ETUC is now focusing on how to bring that message home.