Case No: 70397 Event No: 658853 Dec. No: 83ll3lCOL EFTA SURVEILLANCE AUTHORITY DECISION of 27 February 2013 closing a complaint case arising from an alleged failure by Norway to comply with its obligations arising from Article 28 ofthe EEA Agreement in relation to nationality quotas for airline pilots at SAS THE EFTA SURVEILLANCE AUTHORITY Having regard to the Agreement between the EFTA States on the Establishment of a Surveillance Authority and a Court of Justice, in particular Article 109 thereof, Whereas: On27 July 2011, a complaint was lodged with the EFTA Surveillance Authority ('the Authority'') against Norway. The complainants are on the one hand 33 Swedish pilots who are or, in some cases, used to be employed by Scandinavian Airlines ("SAS"), and, on the other hand, their Swedish trade union Pilotforbundet, a trade union for airline pilots within SAS. The complainants submit that the conditions of employment in SAS result in ongoing direct or indirect discrimination on grounds of nationality contrary to Article 28 of the EEA Agreement, Articles 7(1) and 7() of Regulation (EEC) No 1612168 on freedom of movement for t workers ("Regulation 1612168"). In the alternative, they submit that they are subject to an ongoing restriction of their right to free movement, which is incompatible with Article 28 ofthe EEA Agreement.' Introduction SAS was founded n lg46when the three flag carriers of Denmark, Norway and Sweden3 formed a partnership to handle intercontinental traffic to Scandinavia. The companies merged to form the SAS Consortium in 1951 owned by SAS Danmark A/S (2i7)' SAS Norge AS (217) and SAS Sverige AB (3/7). The Consortium Agreement lays down the common objective of the founding members to carry out commercial air traffic which I Act referred to at point 2 in Annex V to the EEA Agreem ent (Council Regulation (EEC) No I 61 2/68 of I 5 October 1968 on freedom of movement for workers within the Community) as adapted to the EEA Agreement by Protocol I thereto. 2 A complaint concerning the same issue was lodged with the European Commission against Sweden and Denmark. 3 Det Dattske Luftfartselskab A/S (DDL), Det Norske Luftfartselskab A/S (DNL) and Svensk Interkontinental Luftrafik AB (SILA). Rue Belliard 35' B-1040 Brussels, tel: (+32X0)2 286 18 l l' fax: (+32)(0)2 286 18 00' www'eftasurv'int Page2 shall be governed by sound business considerations, practice and policy. The Consortium Agreement was followed by an Agreement of 20 December 1951 between Denmark Norway and Sweden on cooperation within the field of aviation. The Consortium Agreement has been amended several times, the last amendment dating from 30 September 2010. Currently, the agreement is valid until 30 September 2020. The Agreement provides that every effort shall be made towards allocating in a reasonable way the business activities of the Consortium between the three countries. It states furthermore that when appointing personnel, the Board and the Managing Director shall make every effort to achieve an organization which is rational and efficient as possible. MorL specifically, it provides that the selection of management, as well as the appointment and training of flight personnel, shall be made with due considerations oi achievins a reasonable proportion between Danes, Norwegians and Swedes. An Aide Mdmoire was annexed to the Consortium Agreement which states, inter alia, that the daily leadership of the Consortium shall be in the hands of a managing director and two assistant directors bearing the nationality of one of the three founding members. Additionally, it is noted that the term "a reasonable proportion" referred to in the agreement lays down the division ratio of 3:2:2 as the standard norm. Hiring of applicants shall therefore be done with due regard of their nationality for the prr.po."r of i<eeping within that norm. In 1961, in connection with the refinancing of SAS, the Danish, Swedish and Norwegian Governments declared the Aide Mdmoire null and void. Input of new capital into SAS was made dependent on SAS pursuing strictly business objectives. Sound business considerations should therefore take priority over national interests, including in the field of employment. In 2001, the ownership of the constituent companies in the SAS Consortium was transferred to SAS AB which is headquartered in Sweden and listed on the Stockholm Stock exchange, with secondary listings in Copenhagen and Oslo. 50 o/o of the shares in jointly SAS AB are owned by the governments of Denmark (14.3%),Norway ea3%) and Sweden (21.4%). The remainng50% are owned by private share holderr.o S".tio.r 3 of its Articles of Association states that questions of amending or terminating the Consortium Agreement shall be dealt with by the Company's General Meeting and decisions in this regard require the consent of shareholders with two-thirds of the votes cast as well as of the shares represented at the General Meeting. The complaint The background to the complaint is the takeover by SAS n lgg2 of the Swedish airline Linjeflyg and the subsequent transfer of its pilots to SAS. In November of 1992, the predominant Danish, Norwegian and Swedish pilot unions and SAS entered into a collective agreement which laid down the conditions according to which the Linjeflyg pilots would be employed by SAS. The agreement provided that five years of ,"nlo.ity earned with Linjeflyg was deducted when determining the pilot's position on the SAS seniority list. This resulted in the Linjeflyg pilots being placed at the bottom or close to the bottom of the list. According to the complaint the purpose of this arrangement was to ensure that the new pilots would not upset the balance in terms of 3-2-2 quota rule among a See further, the SAS Group Annual report 201l. Page 3 Flight Captains and, in the event of redundancies, that the former Linjeflyg pilots would be made redundant before the Norwegian, Danish and Swedish SAS pilots. According to the complaint, the 3-2-2 quota rule follows from the SAS Consortium Agreement, ttre Aide Memoire annexed to it, as well as from a number of consecutive collective agreements for pilots. Furthermore, according to an arbitration ruling from 1959, this principle also determines promotions to Flight Captain. This arbitration ruling has since been codified in the successive collective agreements SAS has concluded with the predominant SwedistU Danish and Norwegian pilot unions. As an example of this, the complaint refers to the collective agreement for pilots applicable as of I April 1993 which provided that in case SAS employs pilots that are not nationals of a Scandinavian country, these shall be employed without the Scandinavian nationality distribution applicable to employment of pilots being affected and the traditional distribution shall be aimed for at the three Scandinavian bases. Similar wordings are found in the Collective Agreements for pilots of I April 2004 and2007. The complaint maintains that the 3-2-2 quota rule due to its origins in the SAS Consortium Agreement which has been subject to parliamentary approval in Sweden, Denmark, and Norway, and the Aide Mdmoire, forms part of binding public international law to which Norway is bound by. Therefore, the abolition of the rule in the SAS Consortium Agreement by the General Assembly of SAS AB requires a prior agteement under public international law between Norway, Denmark and Sweden. Correspondence The Norwegian Government was informed of the complaint by letter dated 4 August 2011. The matter was discussed with representatives of the Norwegian Government in a meeting held on 10 November 2011. Furthermore, on 6 February 2012, a joint meeting was held with services of the European Commission and the complainant, as the complainant had referred the same issue to the Commission in relation to Denmark and Sweden. Legal Assessment The free movement of workers is one of the fundamental freedoms guaranteed by EEA law. As laid down in Article 28 EEA, this freedom entails the right to seek work in another EEA State, the right to work in another EEA State, the right to reside there for that pu{pose, and the right to equal treatment in respect of access to employment and working conditions. The scope of this freedom is further laid down in Regulation (EU) 49212011 on freedom of movement for workers. Article 7 of that regulation states that a worker who is a national of an EEA State may not, in the territory of another EEA State, be treated difterently from national workers by reason of his nationality in respect of any conditions of employment and work, in particular as regards remuneration, dismissal and reinstatement. The prohibition against discrimination based on nationality applies irrespective ofwhether the measure originates in legislation or in collective agreements. Page 4 The prohibition of discrimination on grounds of nationality in Article 28 EEA, which is drafted in general terms and is not specifically addressed to the EEA States, applies also to conditions of employment fixed by private persons.s In view of the Authority, the 3-2-2 rule governing the requirement of pilots within SAS constitutes a breach of the prohibition of discrimination on grounds of nationality as it provides for direct discrimination based on nationality for access of migrant workers to posts with SAS. This applies also in relation to the fact that working periods acquired by pilots in other EEA States appear not to be taken into account for the purposes of determining their seniority within SAS.6 The Authority observes that the Aide Memoire annexed to the Consortium Agreement appears to have given the management of SAS and the relevant pilots unions the incentive to lay down in their collective agreements further and more specific provisions regarding the nationality quotas.