1. Introduction
Recognition of labour rights as human rights has been discussed in legal scholarship,Footnote 1 including the recognition of the fundamental status of collective rights.Footnote 2 Nevertheless, this scholarship has not extended to the constitutional status of collective action against privatisation. Nor does existing literature discuss the economic considerations and justification for recognising a constitutional right to strike beyond the realm of labour rights as human rights. This article aims to address that gap and discuss constitutionalism as it relates to the specific issue of privatisation. It explores the connection between constitutionalism and the recognition of strike action against privatisation. The article also explores the implications of a constitutional right to strike in times of privatisation for the public interest in enhancing efficiency and economic goals.Footnote 3
The research question which the article explores is the following. What is the suggested approach that courts should embrace regarding the application of constitutionalism in relation to strikes against privatisation? The article presents the concept of the anti-privatisation strike (APS), which is a union strike by employees against the privatisation process. Strike action is an important tool in strengthening the ability of workers to negotiate working terms and conditions and in defending labour rights. Nevertheless, the APS bears negative ramifications for the economy as a result of the potential for preventing privatisations which are needed in order to reduce product prices and improve the supply of services. Hence, the APS might undermine the public interest in performing essential reforms and interfere with free competition goals of the privatisation process.Footnote 4 It therefore raises conflicts between workers’ rights, which may be affected by privatisation, and the improvement of economic conditions through privatisation. Collective action involving legislation or regulators’ decisions to promote privatisations are also a challenge to governmental public policy.Footnote 5
The article compares two main constitutional approaches to the APS: the economic approach and the collective approach. The economic approach emphasises the interest in economic growth, achieving effectiveness, free competition and the free movement of capital. It denies the constitutional status of the right to strike in the context of privatisation and rejects recognition of the APS. In contrast, the collective approach recognises the constitutional status of collective rights and applies collective constitutionalism, which can be defined as the application of the constitutional right to collective action as a basis for recognising the APS.
The article presents the jurisprudence of Israel and the United Kingdom as two distinct examples of the application of constitutionalism. The collective and economic approaches presented by the Israeli and UK cases are not always dichotomous, but they provide a range of responses. Certain courts tend to be closer to adopting one outlook while others may be characterised by the other approach. The article claims that neither approach is practical by itself and presents an eclectic model, which merges both approaches and which courts should embrace. The eclectic model resolves the problems raised by the current application of constitutionalism in different judiciaries. The article argues that the basic approach should be collective constitutionalism, but that because of its flaws it should be modified with various elements of the economic approach. That is, in principle a constitutional right to strike should be recognised but, given the problems raised by the collective approach, economic considerations should be incorporated into the model. Hence, the eclectic model will be characterised by a somewhat restrained form of constitutionalism.
The selection of the specific judicial systems is based on the common law characteristics that they share, so that comparisons may be made.Footnote 6 The Israeli and UK systems share the absence of formal recognition of a constitutional right to strike. Hence, the article will examine the issue of applying a constitutional right to strike in jurisdictions in which such a right is not explicitly recognised in constitutional documents.
The new eclectic model which the article advocates is based on New Institutional Economics (NIE).Footnote 7 The NIE theory aims to increase efficiencyFootnote 8 by optimising transaction costs.Footnote 9 Transaction costs are the costs that are incidental to every market transaction, which in our case relate to incidental costs of carrying out the privatisation reform.Footnote 10According to the NIE approach, institutional arrangements matter and we should distinguish between different kinds of labour market setting,Footnote 11 service and privatised function.Footnote 12
The eclectic model should be implemented in accordance with the following eight criteria and judicial tests:
• whether the APS involves working conditions;
• where it does, whether union power (and mainly union density) has declined in a given labour market;
• involvement of governmental prerogative, coercive power or policy design is a factor, where special governmental skills are required for operating the public service and in supervising privatised services;
• whether core functions of the public organisation are outsourced, especially when permanent core functions are contracted out;
• whether the APS occurs in a monopolistic market in which unions enjoy special power and reforms are of special importance to the public;
• whether the APS involves opening markets to competition and introducing new private competitors into the market, and the collective action is aimed against a third party – a private competitor;
• whether the APS involves either essential services or utility services where unions enjoy considerable strength and privatisation reforms are especially needed;
• whether the collective action prevents the privatisation process from taking place (for instance, by withholding necessary data or reports that are vital for carrying out the privatisation process).
Courts should examine these criteria within the application of the eclectic approach and consider their implications for transaction costs.
The article is structured as follows. Section 2 discusses constitutionalism in the context of the APS and existing approaches to constitutionalism. It starts with a discussion of the state of collective rights in a globalised-privatised world as a background to the question of recognising a constitutional right to strike, and then presents the controversy over the status of strike action as a fundamental right. It then discusses the collective and the economic approaches, and considers the linkage between the adoption of collective constitutionalism and the protection of a specific right to strike against privatisation. This is followed by the justification for rejecting collective constitutionalism and the economic approach as stand-alone approaches, and the need to develop a third model of restrained constitutionalism.
Section 3 discusses developments regarding the APS in the jurisprudence of Israel and the United Kingdom and the application of the two different approaches of constitutionalism. It starts with a discussion of the Israeli position and the adoption of collective constitutionalism in recent years. It then discusses the jurisprudence of the UK, which embraced the economic approach and rejected the application of a constitutional right to strike against privatisation. This is followed by a comparison of the Israeli and British jurisprudence and consideration of the weaknesses of both systems. It concludes with the need to embrace a new model that offers a solution to the problems arising from the existing approaches. Section 4 of the article introduces the eclectic model, presenting a new theory for the partial application of constitutionalism in the context of the APS, in accordance with the NIE approach. It first discusses embracing the eclectic model based on the NIE theory and its rationale, the logic of the eclectic model and its aim of reducing transaction costs. Guidelines are then suggested for putting the eclectic model into practice, presenting eight judicial tests to be used within the eclectic model. The section concludes with a discussion of potential critiques of the proposed eclectic model.
2. Constitutionalism and the APS
2.1. The State of Collective Rights in a Globalised-Privatised World
In the age of globalisation, political actors such as executive branches, regulators and parliaments have embraced neoliberal agendas and privatisation practices.Footnote 13 Privatisation – which is derived from the notion of raising private capital, improving public services and reducing costs to the state – leads to reductions in tax for citizens. Yet privatisation can also affect the labour force and labour rights, and may cause a reduction in wages and possible lay-offs. Employees may also lose special working conditions, such as consistency and tenured positions, which are common within the public sector. Nevertheless, working within the private sector following privatisation sometimes might offer job and promotion opportunities for individual employees who perform well.
Increasing globalisation together with socio-economic changes that have occurred over the past few decades threaten labour rights, the state of individual employees and collective labour power.Footnote 14 The technological changes and the creation of a hyper-capitalist mode of production have all affected labour, and labour-organisational capacity has declined worldwide, along with organisational density. For instance, the global post-Fordist mode of production includes the development of atypical occupations such as freelancers, teleworkers and outsourced employees. These phenomena have all weakened the capacities of workers to organise. Globalisation therefore affects collective rights beyond the ramifications of privatisation itself. Alongside the effect of privatisation on trade unions and on union density, there is also an impact on individual employees who, in a non-traditional work environment, still need an organisation that can represent their interests and protest on their behalf.
Nevertheless, even though collective action against privatisation is often aimed at protecting employee interests, it has the potential to interfere with the economic goals of privatisation, thus inhibiting free competition. Furthermore, in situations where a market once dominated by a public monopoly opens up to competition, collective action may prevent private corporations from successfully entering the market – for example, if a union uses its monopolistic power in order to place obstacles in the path of rival private firms wishing to enter the market.Footnote 15
The status of collective rights in the globalised privatised world raises the issue of the scope of strike action in cases of privatisation. The next section will present the controversy over the status of the right to strike and the question of its recognition as a fundamental right.
2.2. Labour Collective Rights and the Question of a Fundamental Status
Labour-related rights include freedoms relating to the right to act as part of a collective, such as freedom of association, the right of collective bargaining and the right to strike. These collective rights are listed in the International Covenant on Economic, Social and Cultural Rights (ICESCR).Footnote 16 Article 8 of the Covenant includes the ‘right of everyone to form trade unions and join the trade union of his choice’, the ‘right of trade unions to function freely’, and the right to strike. The Covenant states that it does not prevent the imposition of lawful restrictions on the exercise of these rights.Footnote 17 The right to organise is also included in international treaties, such as the International Labour Organization (ILO) Convention concerning Freedom of Association and Protection of the Right to OrganiseFootnote 18 and the ILO Convention concerning the Application of the Principles of the Right to Organise and Bargain Collectively.Footnote 19
According to the ILO committees, the right to strike is one of the essential means through which workers may protect their economic interests, and a means to fulfil their right to organise.Footnote 20 According to the ILO 1998 Declaration, freedom of association is binding on all member states, even if they have decided not to ratify these conventions.Footnote 21 Member states obligate themselves by virtue of ILO membership to respect and realise certain fundamental principles,Footnote 22 including freedom of association.Footnote 23
The right to strike is not included directly in the ILO Conventions and there is doubt as to its status as a fundamental right.Footnote 24 The doubt arises also from the controversy regarding the authority of the ILO's committees to interpret freedom of association as including the right to strike.Footnote 25 Some claim that the right to strike should not be considered a fundamental right included in the right to organise.Footnote 26
Indeed, one of the issues with which legal systems are faced is the question of the recognition of collective rights as fundamental rights.Footnote 27 The recognition of the right to strike as a fundamental right and its scope and boundaries in international law often influence the human rights discourseFootnote 28 in local law.Footnote 29
Even though collective rights have not yet been included in constitutional documents in some countries, during the last few years some courts have been willing to consider collective labour rights as constitutional rights derived from other constitutional rights while other courts have declined to do so.Footnote 30 The next section will discuss the different views on the matter.
2.3. The Collective and Economic Approaches
2.3.1. The Economic Approach
According to the economic approach, privatisation is a process of replacing the state. Public functions are transferred to private actors, which are subject to market mechanisms that may enhance efficiency. The economic approach is based on the liberal neoclassical idea, according to which individuals should be free, and state intervention in individual autonomy should be minimal.Footnote 31 This approach supports a laissez faire Footnote 32 policy.Footnote 33 The liberal neoclassical doctrine claims that the price of goods can be lowered only by competition, and that the state should therefore refrain from intensive regulation of market activity.Footnote 34 This approach posits that legal intervention in the private sphere and the economic market should be limited.Footnote 35 Embracing an economic approach based on the liberal neoclassical doctrine could mean then that courts will hesitate to intervene in the markets, and will tend to promote privatisation. Conversely, a denial of the liberal neoclassical idea may result in extensive intervention in privatisation policy and a rejection of privatisation. According to the economic doctrine, regulation should be minor with the application mainly of liberal rights and economic freedoms. The economic approach thus would be hesitant in limiting constitutional economic freedoms related to privatisation, such as freedom to establish businesses and freedom of movement. The approach also emphasises freedom of occupation, as exemplified by the freedom for new competitors to enter the market.
The economic approach rejects a constitutional status to strike.Footnote 36 It argues that constitutionalising labour rights would affect the efficiency of the privatisation process and raise the price of privatised public services, while shifting the cost to consumers.Footnote 37 Constitutionalism of labour rights would be considered to be in accordance with the liberal neoclassical theory as a factor in strengthening the capability of unions to demand higher salaries and better economic conditions in situations of privatisation as a precondition for union cooperation with the privatisation process.Footnote 38
2.3.2. The Collective Approach
According to the collective approach, in the privatisation era regulators and political actors abandon their responsibilities towards employees and service recipients, while adopting a neoliberal ideology.Footnote 39 The collective approach concentrates on implementing collective constitutional rights as a means of counter-balancing the effects of the privatisation processes and the neoliberal agenda of parliaments and regulators. Therefore, embracing the collective approach suggests that courts must take upon themselves the role of protecting employee rights in privatisations. The collective approach imposes new duties regarding strike action. This emphasises the concern that privatisation would affect the interests of employees.
The collective constitutional method is a social approach based on the notion of socio-economic equality and Thomas Hamphrey Marshall's ‘social citizenship’.Footnote 40 Social citizenship refers to a right to economic welfare and the right to live the life of civilised beings, according to the standards prevailing in a society. It aims to reduce inequality in society and within the labour market by ensuring the interests of employees and unions. Ensuring those interests as opposed to those of holders of capital and private corporations requires recognition of collective rights as constitutional rights. Enforcement of constitutional labour rights requires imposing obligations on the state and a horizontal application of constitutional collective rights on public employers.Footnote 41 Within this model, courts apply judicial review of legislation and of decisions of regulators in privatisations. Hence, the collective doctrine requires the state to take positive action in fulfilling labour rights and imposing duties on employers to respect them. Negligence on the part of the state in so doing is considered a breach of labour rights.Footnote 42
2.3.3. The Connection between Collective Constitutionalism and Protecting the APS and the Distinction between the Approaches
One could claim that the supposed dichotomy between the economic and the collective approaches is superficial, and that even when the right to strike is constitutionally protected it is never absolute, as courts can accept limitations on the right. One could also claim the opposite, namely that even when the right is not constitutionally protected, the legal system can still allow and protect strike action against privatisation.
Indeed, in reality the two approaches are not dichotomous but follow a continuum. Nevertheless, certain courts may follow one approach and be closer to it, while other courts follow the other approach.
Furthermore, there is a real distinction between the two approaches. The application of collective constitutionalism requires courts to ignore the particular economic interests involved in the privatisation process. Even though they may perform a balancing of interests, in applying the collective approach they do not actually take into account economic liberal rights. Courts, therefore, deny the application of liberal rights, such as the right to establish businesses and the right of third parties to enter the market.Footnote 43 Courts do not take into account freedom of occupation as it pertains to the right to free competition within the markets.
As for the claim that courts can recognise a right to strike that is not constitutional, we should bear in mind that the very recognition of the freedom to strike as a fundamental right enables a special protection of this right. Hence, the claim is false as it does not appreciate the significance of a constitutional status of the right to strike. Protection of a specific right against privatisation is in fact derived from the way in which collective action as a human right with a fundamental status is applied in local jurisprudence. We will consider several implications of the status of collective rights – and mainly the right to strike – as a constitutional right.
First, even though rights are never absolute, the violation of a fundamental right requires justification.Footnote 44
Secondly, as Langille claims, the important Hohfeldian distinction between freedoms and rights reflects the obligation to protect the right.Footnote 45 Whereas freedoms focus on a person's own actions and place no responsibility on others, rights are different in nature. Recognising a human right implies the likelihood of imposing a duty on others to respect that right. Hence, recognition of the authority, as opposed to the liberty, to strike against a privatisation implies the imposition of a burden on others to protect that right. To regard strike action as a right, rather than merely a freedom, means that others, including public employers and the state itself, have a corresponding duty to take positive action to fulfil the right to strike against privatisation.
Thirdly, a constitutional right is considered superior to governmental decisions and legislationFootnote 46 that introduces the privatisation process.Footnote 47 Hence, the very recognition of the constitutional status of the freedom to strike might enable the judicial system to overturn legislation or executive decisions to privatise.
Fourth, recognition of the constitutional status of the freedom to strike enables the recognition of the APS as legitimate when it is proportionate. Recognition of a constitutional right means that even though legislation or a decision to privatise is introduced in accordance with due process, in principle it cannot violate a constitutional right unless it is justified in specific circumstances. Therefore, even if a political decision to privatise is made by elected officials, it is still subject to a right to strike against the privatisation.Footnote 48
Fifth, the fundamental status of a human right means that a right cannot be denied in its entirety but is only limited. Hence, regarding the right to strike as fundamental would no longer enable depriving all employees of the ability to strike in certain situations.Footnote 49 The minimal core of constitutional protection of the fundamental right to strike prevents total restriction of strike action. This line of reasoning could, for instance, prevent the placing of a general ban on strike action in essential services, back-to-work orders, or the imposition of collective agreements that render strikes illegal. The total prohibition of strike action, once perceived as a constitutional right, would then be considered unlawful.
The same line of reasoning applies to the issue of the APS. Classifying industrial action as an illegitimate type of strike and therefore forbidden altogether, on the basis of involving government policy to privatise, is problematic once a constitutional right to strike is acknowledged. The application of collective constitutionalism in privatisations means, therefore, that courts may no longer consider all collective action regarding privatisation as illegitimate per se.Footnote 50
As we see, largely applying a constitutional right to strike – while embracing collective constitutionalism – leads to broad protection of the APS.
2.4. The Need for a Third Model
This section discusses the claim that collective constitutionalism allows overprotection of the right to strike. It lays the foundation for rejecting the application of either of the two existing approaches described above and the need to develop a third model of restrained constitutionalism.
In spite of the benefits of the APS as a fundamental right, expressed in the previous section, there are several difficulties in the application of collective constitutionalism (some of which derive from the economic approach). The first is the claim that human rights frameworks are often not suitable for the protection of workers’ interests. The claim is based on the perception of the right to strike as a collective right that is given to unions as opposed to other rights of employees as individuals. The application of constitutionalism in some jurisdictions is based on individual human rights discourse, and therefore does not fit as a basis for advancing collective labour interests.Footnote 51 In cases where the constitutional order of a certain jurisdiction includes individual discourse, a broad application of constitutional labour rights is problematic, as it could lead to extensive judicial intervention in the legislator's work without a stable constitutional basis.Footnote 52 In Israel the constitutional norms include individual characteristics. Basic Law: Human Dignity and Liberty includes civil-political rights only and reflects an individual human rights discourse. The Human Rights Act (HRA) in the United Kingdom also includes an individual human rights discourse.Footnote 53 Yet, in other constitutions that include social rights such a problem does not occur.
Second, in general, a human rights discourse potentially undermines labour's capacity for class-based collective struggles within the public sphere.Footnote 54 In the age of globalisation, the constitutionalisation of collective rights has shifted from legislative politics and the struggle of unions within the political arena to rights litigation and the human rights discourse. This shift has been precipitated largely by political actors and governments which have adopted a neoliberal ideology and an economic liberal public policy. The rise of neoliberalism in most western countries and the general decline of labour partiesFootnote 55 makes it difficult to fulfil the interests of labour unions within the political process.Footnote 56 Thus, applying collective constitutionalism will result in unions taking the path of litigation over a public struggle against privatisation schemes,Footnote 57 leading to the possible further weakening of unions.
Third, it is contended that the argument of the collective approach about the broad role of the courts and their essential involvement in the privatisation arena is an activist claim, and courts should refrain from this kind of intervention. Thus, it has been suggested that courts should not write entire labour codes when they create derivative rights.Footnote 58 Such judicial intervention also raises difficulties in that it imposes an additional burden on the state to consider labour rights. In privatisations, therefore, constitutional collective rights cannot be enforced primarily by the courts because their enforcement requires the courts to make decisions that may have major repercussionsFootnote 59 on government policy.Footnote 60 Scholars assert that collective disputes involve reconciling conflicting ideologies and values and that relevant political, social and economic considerationsFootnote 61 lie beyond the area of expertise of the courts.Footnote 62 Scholars also emphasise the inability of courts to adjudicate in respect of economic interests.Footnote 63
Nevertheless, the economic approach, which denies recognition of a constitutional status of a right to strike altogether, should also be rejected for several reasons.
First, in response to the argument that human rights frameworks are not suitable for the protection of workers’ interests, it should be noted that an individual human rights discourse could be seen as giving individuals rights that then become collective in nature once employees join together to operate in parallel.
Second, as for the claim that a human rights discourse potentially undermines the capacity of labour for class-based collective struggles within the public sphere, it should be noted that the economic approach disregards the dwindling number of organised employees. It also ignores the fact that the retreat of the welfare state and the decline of union power might create a need for some judicial involvement.Footnote 64 Furthermore, changed realities have also led to changed needs in the political arena, and the political power of unions through political channels is no longer as important as it once was. The economic approach indeed ignores these considerations, which could motivate some courts to put labour rights beyond the reach of governmental action.Footnote 65
Third, as for the claim that courts should refrain from this kind of activist intervention, it should be taken into account that even though labour realities may be characterised as essentially political, courts should play a roleFootnote 66 in the area of socio-economic policy.Footnote 67 Although the primary decision whether to privatise certain fields of economic activity is not to be taken by the judiciary, courts should supervise the privatisation process and its implications.Footnote 68 There is a difference between involvement in the initial decision to privatise, which is a political issue, and supervision of the process of implementing the decision and its implications for the labour market and strikes, which can be carried out by the courts.
Furthermore, constitutional duties that are imposed on governments are not fixed and static.Footnote 69 When constitutionalising a fundamental collective right the government is still left with discretion on how to realise that right and how to regulate labour relations.Footnote 70 Judicial involvement does not deny governments and legislatures this flexibility. Even though constitutionalisation means that governments should protect the right to strike in cases of privatisation, many specific terms of the privatisation scheme may be left to state discretion.
As for the claim that judges lack the professional skills and capacity to settle economic matters, it should be noted that judges are not expected to determine economic-arithmetic issues. The application of constitutionalism requires judges to be involved in the privatisation arena by merely applying a constitutional right to strike when necessary. Judicial review is perceived as the normal role of the courts.Footnote 71
Hence, the base approach should be that a constitutional status of the right to strike should be recognised; yet a collective approach, which includes a far-reaching and dominant judicial role in replacing political actors and regulators that have adopted a neoliberal ideology, is indeed hard to justify. Accordingly, it should be modified with elements of the economic perspective. A third model, which requires only restrained intervention by the courts, should be developed. The legitimacy of the somewhat moderate role of the courts, which this article advances within the eclectic model, is based on the dynamic aspects of the economic analysis and on the strive for increasing efficiency for the public benefit, as will be explained in the next part. Courts should indeed recognise the special characteristics of labour rights,Footnote 72 and the limitations of the judiciary when applying constitutionalism in privatisation. There is a need to develop a third way, which applies only partial constitutionalism and suggests the application of a constitutional right to strike in some cases only.
3. Approaches to the APS in Israeli and UK Jurisprudence
3.1. The Implementation of Collective Constitutionalism in Israeli Labour Markets
3.1.1. Traditional Jurisdiction and Constitutional Background
At the beginning of the 1990s two Basic Laws of human rights were constituted,Footnote 73 which, according to the Supreme Court, enjoyed a constitutional status.Footnote 74
Even though social rights were not included in the Israeli Basic Laws, the courts, over the years, have recognised several additional rights as constitutional and derived from statutory rights.Footnote 75 These include several social rights included in the Basic Law of Dignity, such as the right to an adequate standard of living.Footnote 76 Nevertheless, even though the existence of social rights in most cases is not in dispute, their scope is unknown.
Over the years, Israeli courts have dealt with the questions of whether a constitutional right to strike should be recognised and, if so, the extent of its scope and its beneficiaries.Footnote 77 These questions arise also with regard to strike action involving privatisations. Israel has been engaged in the process of privatisation since the 1980s.Footnote 78 During this period the court has changed its approach and has embraced collective constitutionalism, despite the generally neoliberal wave.Footnote 79 Earlier writing on the issues of social rights, the Israeli jurisdiction and privatisation in Israel emphasised that Israeli courts had rarely applied constitutionalism regarding social and labour rights.Footnote 80 Until the middle of the first decade of the millennium, the Israeli judiciary did not consider collective action to be a fundamental right,Footnote 81 The courts’ deliberations on strike action and the issuing of injunctions against striking workers were related to compliance with the rule of law.Footnote 82
The constitutional status of the right to strike in Israel was associated in privatisation cases with the issue of recognition of a political strike, namely a strike against government or political policy.Footnote 83 The Israeli judiciary ruled that such strikes are illegal, while regular economic strikes (revolving around salary and working conditions) are legitimate and are protected by the law.Footnote 84 Privatisations raise the question of whether collective action against a privatisation policy would be considered an illegal political strike.Footnote 85
The case of Bezeq, which dealt with a strike against opening the markets to competition, demonstrates the traditional Israeli jurisprudence.Footnote 86 The case involved the privatisation of the international calls market, which until then had been supplied solely by Bezeq as a monopolistic governmental corporation. The privatisation programme was also included in an amendment to the Bezeq Act 1982. The Supreme Court ruled in Bezeq that collective action involving a privatisation process could not be considered the same as a regular economic strike connected to economic issues. Furthermore, a strike against the privatisation process itself, in principle, should be classified as a political strike, which is unlawful.Footnote 87 In this case the majority ruled that collective action was not considered a fundamental right. Justice Dov Levin expressed in a separate opinion that collective action should be considered a constitutional right. The Supreme Court held that the democratic process itself requires the rejection of collective action against a governmental programme as such a strike is aimed at elected democratic institutions.
3.1.2. Collective Constitutionalism in Israel in Recent Years
Jurisprudence since the early 2000s has been characterised by the acceptance of collective constitutionalism in cases in which the courts traditionally would not have recognised the right to strike.Footnote 88 This is a response to a change in labour market realities and in the political arena and the rise of neoliberalism.Footnote 89 Since its establishment, Israel has been characterised as a corporatist welfare state with strong unions and high union density.Footnote 90 The loss of the 1977 elections by the Labour party saw the rise of a neoliberal ideology and the decline of collective-social beliefs.Footnote 91 Unions have lost their political clout and their ability to preserve labour interests via political channels.Footnote 92 Union density has also declined sharply.Footnote 93 Since the middle of the 1980s, and mainly since the 1990s, Israel has undergone structural reforms which include massive privatisation and outsourcing.Footnote 94 These processes have driven courts to take upon themselves a dominant role in applying collective constitutionalism as a basis for recognising the right to collective action in privatisations.
Developments in the jurisprudence occurred when the courts recognised the legitimacy of the APS against the privatisation of governmental corporations and contracting out of former governmental functions. This line of ruling can be seen, for instance, in the Train case,Footnote 95 which involved an APS against the outsourcing of maintenance work for the public train service. The court ruled that collective action, although involving a governmental decision to privatise, was not a political strike and, as a strike with major economic characteristics, was therefore legal. The court held that the constitutional status of the right to strike should enable a wide use of collective action.Footnote 96 The President of the National Labour Court, Nilly Arad, referred to the fundamental status of the right to strike as justification for the recognition of the APS. The court eventually issued an injunction on the ground that the strike was considered disproportionateFootnote 97 because of the prospect of major harm to passengers, regardless of the cause of the strike.Footnote 98
Furthermore, in recent years Israeli courts have ruled that employees could take collective measures in order to protest against privatisation, even though these collective measures involved or violated decisions to privatise made by the government or regulators.Footnote 99 In some cases over the past few years, courts have recognised the legitimacy of an APS based on collective constitutionalism.Footnote 100 These cases involved opening the field previously dominated by governmental monopolistic corporations to new private service suppliers.Footnote 101 The collective action was against the decisions of regulators to privatise and the legislation that introduced the privatisation process.
The Private Harbours case presents the first occasion on which an APS was recognised purely on the merit of opposing the privatisation itself and opposing competition.Footnote 102 In such cases the courts have abandoned the traditional ruling of the Supreme Court. In the traditional case of Bezeq, it was determined that collective action involving a privatisation could not be classified as a regular strike.Footnote 103 The fact that the court refrained from classifying collective action as a political strike was a declaration that strike action against privatisation was legitimate. The Private Harbours caseFootnote 104 involved the workers of the Ashdod public harbour, which is a governmental corporation. Contrary to the Bezeq case, the court ruled that collective action involving privatisation was not a political strikeFootnote 105 and therefore was not prohibited.Footnote 106 Using collective constitutionalism, the court held that the workers had a right to collective action involving the addition of new private harbours that would operate alongside the current public harbour. The court's reasoning was based on the recognition of the legitimacy of the APS as a regular strike. The President of the Labour Court, Judge Yigal Flitman, noted that the right to strike is a constitutional right derived from the right to dignity, which is included in Basic Law: Human Dignity and Liberty. The recognition of the fundamental status of the right to strike creates a parallel obligation to enable collective action, even when it is aimed against privatisation reforms.Footnote 107
The Dorad case,Footnote 108 concerning a strike against the decisions of a regulator to add new private competitors to the electricity monopolistic market, is another case in point.Footnote 109 Electricity in Israel is produced and supplied by governmental electricity corporations, which were part of a monopoly prior to the current privatisation wave.Footnote 110 The new entrants could only use the current infrastructure of wiring and power lines of the public monopoly. In the Dorad case the regulatory agency instructed the electricity corporation that Dorad, a new private manufacturer, would be connected to the existing electricity system and power grid. Despite the decision of the regulator, employees of the governmental electricity corporation initiated collective action which included a refusal to connect the private manufacturer to the public corporation's infrastructure. The court held that as long as the government does not negotiate with the public monopoly employees, they have the right to strike as it is a constitutional right. Applying collective constitutionalism, the court ruled that the employees were entitled, in principle, to refuse to connect the private manufacturers to the electric infrastructure.
In Dorad Footnote 111 the court allowed the collective action, ignoring the fact that the union's refusal to connect the new private manufacturers to the power grid prevented the privatisation process from taking place.
Even though, in some of the recent cases, strikes should have been considered disproportionate, the court often ignored the proportionality issues. This limits the rights of new private service suppliers or manufacturers to enter the market and ignores the public interest in free competition and continuity in the supply of services. It also violates Basic Law: Freedom of Occupation, in that the collective action infringes the right of occupation. The right of occupation, in this case, is the right of the new private manufacturers to enter the market and supply public services. The collective action in Dorad Footnote 112 would have been classified in the past as disproportionate according to the traditional jurisprudence, as the means of collective action did not match the legitimate purpose of labour law.Footnote 113 The court held that the collective action in this case was proportionate, even though a refusal to connect the new private manufacturers to the current electricity infrastructure prevented the privatisation process itself. In fact, the Dorad case demonstrates the National Labour Court's disregard for the Supreme Court's definition of ‘political strike’ in the traditional Bezeq case. The very fact that a strike was classified as political should have influenced the proportionality tests and led to a tendency for the courts to classify the strike as disproportionate.Footnote 114
In May 2017 the National Labour Court ruled, in an appeal in the Dorad case,Footnote 115 that the government electricity corporation employees had a right to strike against the privatisation reform itself, apart from the issue of working conditions.Footnote 116
3.2. United Kingdom: Adopting an Economic Approach
3.2.1. The Jurisprudence of British Courts
The judicial system of the UK has adopted an economic doctrine and has not applied the constitutional right to strike against privatisation. The traditional British common law did not consider strike action as a human right or having a special status, but rather as a tool for granting employees statutory immunity against legal action.Footnote 117
British law, unlike Israeli law, appears to have been designed to prevent unions from exercising collective action on technical grounds, rather than recognising an effective right to strike.Footnote 118 Hence, the law imposes obligations on trade unions in relation to strike ballots and special notices that are unparallelled in Israel. Immunity from civil liability in tort, which would otherwise arise under common law, might be granted only if the employees comply with the requirements of the Trade Union and Labour Relations (Consolidation) Act 1992 (TULRCA 1992). Nevertheless, the scope of the legislative entitlement to immunityFootnote 119 is limited.Footnote 120
The constitutional background to the UK jurisprudence is based on the European Convention on Human Rights and Fundamental Freedoms (ECHR), which has been incorporated into UK law through the HRA. The courts must consider in their judgments the freedoms and rights contained in the ECHR.Footnote 121 Article 11 of the ECHR, on freedom of association, has been interpreted by the European Court of Human Rights (ECtHR) in Strasbourg as including the right to strike as a fundamental right.Footnote 122 Nonetheless, the jurisprudence has not adopted a fundamental right to strike against privatisation.
In fact, British jurisprudence has not changed much with regard to strike action against privatisation since the era of Margaret Thatcher in the 1980s, when courts adopted a liberal jurisprudence and a pro-privatisation line of rulings. It could be claimed that this line of rulings ignores constitutional obligations (mainly Article 11 of the ECHR, freedom of association) to which the courts are subject.Footnote 123
Thus, the 1983 Mercury case involved a collective dispute over the liberalisation of telecommunications by allowing a private company to offer an alternative service to that of the nationalised provider, British Telecom.Footnote 124 The Court of Appeal held that the strike was related mainly to the union's opposition to privatisation and liberalisation itself. Since the court perceived the goal of the collective dispute to be a rejection of the privatisation process and a dispute with political objectives, it classified the strike as unlawful, not having been recognised as a regular trade dispute.Footnote 125 Employees were therefore not granted statutory immunity protection against lawsuits.Footnote 126
Since the adoption of the HRA, which mandates freedom of association, jurisprudence has refrained from embracing collective constitutionalism. In the 2000 University College case the Court of Appeal ruled that strike action in connection with privatisation was not legitimate.Footnote 127 The case involved the privatisation of public services, including health services, in a public–private partnership. It was held that the statutory immunity of workers in a collective dispute did not include a dispute that related to terms and conditions of employment of either the workers after they had been transferred to a new employer or the workers who would be employed by the new private employer.Footnote 128
The case demonstrates that UK law has been very restrictive on trade unionism in generalFootnote 129 and in relation to the APS in particular. Even though the court acknowledged that the strike was aimed at preserving employee working conditions in the privatisation process and during the period after privatisation was to take place, it considered the strike illegal.Footnote 130
In the 2001 Westminster case, the Court of Appeal ruled that once privatisation of the service is being opposed, a strike that involves public policy should not be permitted. The case dealt with the privatisation of the Assessment and Advice Unit of Westminster Council, which intended to transfer the functions performed by the unit to a private company. The court held that if strike action was taken in the hope of changing the privatisation policy, an injunction against the strike should be granted.Footnote 131 Nevertheless, the strike in Westminster was not concerned with the privatisation process itself as the employees of the privatised unit merely wished to remain employed by the Council in other units and performing other duties. The union accepted the privatisation policy. As the strike did not involve the privatisation process itself, an injunction against the strike was denied. The court emphasised that even if the employees had succeeded in their demands, it would have made no difference to the privatisation operation. This ruling is a slight diversion from the University College case.
The British liberal common law tradition is also reflected in the perception of the right to strike. The Viking case before the European Court of Justice (ECJ) dealt with the issue of recognition of the fundamental right to strike in Article 11 of the ECHR.Footnote 132 The UK denied any community right to strike in the hearing before the ECJ.Footnote 133
Unlike Israeli jurisprudence, UK law does not recognise the right to strike beyond the employer–employee relationship. In order for a strike to be regarded as legitimate and for unions to enjoy immunity from lawsuits, the strike must be connected with a dispute between workers and their employer, and must relate to specific issues – primarily the terms and conditions of employment. The APS, which is a protest strike against the government, is beyond the realm of employer–employee disputes.Footnote 134
The trend in the UK jurisprudence can be seen also in the fact that the courts have held that the right to exercise a sympathy strike is not included in Article 11. In the 2016 Govia case before the Court of Appeal, which concerned a strike in the railway services,Footnote 135 the appellant suggested that strike action was designed in part to pursue political goals and to help the National Union of Rail, Maritime and Transport Workers (RMT), a fellow union, in its struggle for the cancellation of the privatisation of the railway. The appellant claimed that the union was hostile to private providers of railway services, such as the employer, Southern Rail. It was claimed that the strike action was intended partially to support the maintenance of the national railway service and the cancellation of its privatisation. The Court of Appeal noted that apart from the fact that sympathy strikes were forbidden, strikes with political objectives aimed at cancelling privatisation and nationalisation were illegitimate and not protected by the law.Footnote 136
Unlike the UK position, Israeli courts have recognised the legitimacy of strikes beyond the relationship of employer and employee. Hence, the legitimacy of secondary strikes has been recognised.Footnote 137 The same line of reasoning is used with regard to the APS, which affects the public interest in reform, interferes with economic recovery and growth, and affects the rights of citizens in respect of the supply of public services.
As for the ECtHR, even though it has held that the right to strike is a fundamental right, its scope was narrowed. It is recognised only when it concerns a regular economic strike and the relationship between employer and employee. Hence, in the Enerji case the ECtHR ruled that the right of collective action is recognised only for as long as it relates to enhancing collective bargaining on economic conditions in the workplace.Footnote 138 The limited interpretation of Article 11, as referring only to strikes concerning pure organisational and economic issues between employer and employee, was the background to the narrow interpretation of Article 11 also by the UK courts. Hence, UK judicial policy can also be explained in light of the jurisprudence of the ECtHR, which perceives strike action against privatisation to be beyond the scope of Article 11.
The ECtHR itself regards strikes with the aim of better protection for workers after the privatisation as not protected under Article 11 of the ECHR.Footnote 139 This is apparent from the University College case, which was brought before the ECtHR.Footnote 140 The ECtHR rejected the claim that freedom of association under Article 11 included an obligation to enable strike action in cases of privatisation. The Court noted that even though Article 11 included freedom of association, the provision did not secure specific treatment for trade unions according to the state. The Court emphasised that there was no express inclusion of a right to strike in privatisations or an obligation on the part of employers to engage in collective bargaining under these circumstances. The ECtHR noted that Article 11 may be regarded as safeguarding the freedom of trade unions to protect the occupational interests of their members. Nevertheless, while the ability to strike represented one of the most important means by which trade unions could fulfil this function in privatisations, it was not the only one. The Court held that the restriction was justified by Article 11(2) as necessary in a democratic society, for the protection of the economic interests involved.Footnote 141
The UK position was also upheld by the Strasbourg court in the RMT case in 2014.Footnote 142 The UK government argued before the ECtHR that the pressing social need for maintaining the statutory ban was to shield the domestic economy from the effects of such a strike, which concerned third parties beyond the employer–employee relationship.Footnote 143 The ECtHR rejected the complainant's claim that the ban on secondary strike action violated the right to strike as protected by Article 11.
3.3. Differences between Developments in the Two Jurisdictions and the Implications of the Various Approaches regarding Constitutionalism
The UK and Israeli legal systems are similar in that in neither does the labour legislation (the UK TULRCA 1992 and the Israeli Settling Labour Disputes Law, 1957) expressly provide for a right to strike. Nor do they have formal rigid constitutions, and in both systems existing constitutional documents do not include a specific right to strike. While in various respects the starting points of the two jurisdictions are similar, their jurisprudence has evolved very differently. There are reasons for these differences in the perception of the right to strike against privatisation, as follows.
First, the diverging approaches of the two jurisdictions are as a result of the different characteristics of the judicial systems in their addressing of labour rights. They differ in the power granted to the courts in undertaking judicial review in the protection of rights, specifically of primary legislation. Whereas in Israel the judiciary may declare legislation invalid when it violates a Basic Law, the situation in the UK is different. The HRA provides that a law must be interpreted in a manner to comply with the ECHR. Nevertheless, the HRA cannot be perceived as handing over supremacy for rights adjudication to the courts:Footnote 144 the traditional concept of parliamentary supremacy still prevails, despite the special status granted to rights via the HRA. The HRA maintains parliamentary scrutiny of rights and sovereignty of Parliament over the courts in determining rights-based judicial review. It creates a weak model of judicial review, according to which the court may only declare that legislation violates human rights but it is then up to Parliament to decide whether to confirm it. Thus, Section 4 of the HRA,Footnote 145 which allows the court to issue a declaration of incompatibility with ECHR rights, has been drafted so as to maintain parliamentary supremacy, as such declarations do not change the relevant legislation.Footnote 146 This weakness in the UK model of judicial review compared with that of Israel, especially with regard to human rights protection, might also reflect on its ability to protect a right to strike, as opposed to the ability of the Israeli courts to do so.
Second, even though the two jurisdictions are similar in not including the right to strike in constitutional documents, there have been differences over the years in the tendency to consider labour rights as human rights. In the tradition of British common law, strike action has never been recognised specifically as a human right. The initial aim of legislation relating to strike action was mainly to create immunity against lawsuits initiated by an employer.Footnote 147 In contrast, Israeli courts have always recognised the right to strike as a human right, although its superior normative status and constitutional status has only recently been recognised.
Third, even though neither legal system recognises specifically a right to strike, the perception of strike action is different in each system. The economic approach of British courts is derived from the narrow perception of strike action in the traditional common law. Contrary to the Israeli jurisprudence, where a strike has always been perceived as suspending the working contract, according to British common law the contract is not suspended and a strike is considered a breach of the employment contract.Footnote 148 As the contract is not suspended, but is regarded as having been breached by a failure to perform contractual obligations, the scope of the freedom to strike has been narrower in the UK than it has in Israel. In contrast to Israel, under British common law the employer was able to prevent a return to work of employees after a strike and could eventually dismiss them. According to TULRCA 1992, protection against dismissal might be granted only if the workers comply with the requirements of this statute. Nevertheless, protection from dismissal in cases of strike action under British law is very limited. In contrast, in Israel a strike is not perceived as a breach of contract at allFootnote 149 and dismissal of employees based on participating in a strike is strictly forbidden.Footnote 150 Strike action has been perceived over the years as an integral part of labour relations in Israel, and not as breach of contract. Therefore, strike action in Israel has always enjoyed special protection and a higher status.
Fourth, Israel has a combination of a strong judicial system and a tradition of over-jurisprudence, an extensive role for the courts and an extremely judicialised environment, which allows the courts to develop the lawFootnote 151 with a relatively wide latitude to create new rights.Footnote 152 The law itself hardly addresses the issue of collective rights and strike action, and these issues have been developed by the courts themselves. The Israeli courts that deal with collective action are specialised labour courts; they were established in the 1960s in order to deal with strikes in the first place, and therefore tend to be activist in these matters.Footnote 153 Another purpose of establishing Israeli labour courts as specialised courts was to provide a more familiar arena for labour organisations. Labour unions have special status in these courts, and are able to represent employees, in addition to representation by lawyers. The unions were involved in the discussions before the establishment of the courts in the 1960s, having expressed their consent to their establishment. Hence, Israeli judges are likely to take upon themselves a dominant role within the socio-economic arena, creating new forms of protection for employee rights and intervening in labour policy design.
British courts have not been characterised with a similar activist tradition. As noted by Davies, the traditional approach to the regulation of strike action seeks to avoid politicising the courts and to avoid involvement in socio-economic issues and labour policy.Footnote 154 Therefore, British courts tend to refrain from being involved in more politically sensitive cases, such as those regarding strikes against privatisation.
Fifth, the different approaches of Israeli and British courts also reflect the various realities and developments within their respective labour markets. The reality of the Israeli labour market has pushed judges to develop new forms of workplace protection via the application of collective constitutionalism. In response to the rise of neoliberalism and privatisation since the 1990s, and even more so in the new millennium, courts have exercised judicial review, which attempted to preserve the social rights enacted in the 1960s–80s during the period in which Israel could be defined as having a positivist-corporatist welfare state regime.Footnote 155 The constitutionalism of labour rights is oriented towards the protection of participants in the labour market. Thus, it attempts to enhance the empowerment of employees and preserve the values of the welfare state. Historically, Israel was also characterised by high union density, corporatism and strong collective bargaining. Since the 1980s there has been a sharp decline in union density, and also in the corporatist regime.Footnote 156 The rise of a neoliberal agenda of political actors and regulators, and the widespread phenomenon of privatisation have affected labour interests and created the need for the protection of labour rights.Footnote 157
As opposed to the Israeli labour system, which was characterised originally by corporatism, the British system is based on a tradition of voluntarism. Voluntarism emphasises the importance of individual contracts over collective agreements and union representation.Footnote 158 British common law legal history is associated with the liberal values of freedom of contract and the right to property. As Hyman notes, the tradition of voluntarism was associated with individualist free-market presumptions.Footnote 159 Unlike the Israeli system of corporatism, in which the state was a major participant in collective bargaining, within the British system the state had very little involvement with labour relations.Footnote 160 Furthermore, contrary to the Israeli system in which the courts have been dominant actors in the creation and enforcement of collective norms, in the British tradition of voluntarism courts have played only a minor role in these matters. As Novitz notes, collective bargaining and conflicts came to be known as an autonomous source of norms. Hence, collective rights and interests and collective agreements were not intended to be enforced in the courts, but rather by the parties outside the judicial system.Footnote 161
Thus, the British system, which has embraced an economically liberal tactic, is quite different from the Israeli model. The historical background to the British jurisdiction, its development and its special characteristics can explain the differences in the approaches. In the British jurisprudence the tradition of voluntarism and individualism has pushed judges to follow a neoliberal path and refrain from protecting collective rights. Even though its courts are subject to Article 11 of the ECHR, it has been interpreted in a narrow way, so that the APS is excluded from the scope of the protection of the article.
In the eyes of the British courts, the right to strike could not be recognised as more than an essential element of regular collective bargaining. Therefore, strike action cannot be considered to be included in Article 11 when it concerns issues beyond the regular bargaining process between employers and employees.Footnote 162
The ECtHR itself had also held that a fundamental right to strike in Article 11 was recognised only for as long as it related to a typical economic strike. Thus, contrary to the Israeli position, applying the right to strike as a fundamental right is possible only when it is connected with an economic dispute between employees and employer over collective agreements.Footnote 163 Therefore, the new Israeli jurisprudence, which holds that strikes should be possible for political and socio-economic objectives associated with privatisation, goes beyond the scope of Article 11 as interpreted by UK courts and the ECtHR.
Each of the above approaches – the collective approach, embraced by the Israeli courts, and the economic approach of the British courts – has weaknesses. These weaknesses are considered below.
3.4. The Weaknesses of Israeli and British Jurisprudence
3.4.1. The Weakness of the Collective Approach of Israeli Courts
The jurisprudence of the Israeli courts demonstrates the weaknesses of the collective approach. First, it could be claimed that in Israel the interests of different groups are balanced, and courts do not favour one group but try to maintain equilibrium between the needs of the state and the obligation to protect employees. In reality, however, by embracing the collective approach, courts tend to ignore the public interest in achieving free competition in the markets and the desire of new private entrants to the market. Thus, none of the Israeli court rulings have taken into account the right to establish businesses and supply services, freedom of movement within the markets, and freedom of occupation.Footnote 164 This is especially apparent from the cases of Dorad and Private Harbours, where such considerations were not thoroughly reviewed.
Furthermore, since the collective approach enables collective action against privatisation, even if it is not directed at preserving employees’ working conditions, the governmental interests and the public interest in establishing reforms, in particular, are hardly addressed. Thus, the weakness of the collective model is that when the privatisation does not affect wages or working conditions directly, granting employees with a constitutional right to strike will raise transaction costs. Hence, in the Train Footnote 165 case the courts should have denied the application of a constitutional right to strike and classified the collective action (which was directed against the privatisation process itself) as an illegitimate political strike. Recognising a right to strike in such cases enables employees to demand an increase in pay – which would not have been affected by the reform in any event – and therefore the result will be an unnecessary increase in remuneration for employees and high transaction costs.
Second, the collective approach ignores the institutional settings of the labour market and the issue of monopolistic governmental industries. Israeli courts that embraced the collective approach have never taken into account the issue of monopolies among public services and corporations. They apply the same parameters to all employers, regardless of monopolistic status. Nor have these courts taken into account the unique status of strong unions in monopolistic governmental enterprises, which often enjoy extraordinary power.Footnote 166 As a result, the collective approach enables the placing of far-reaching demands and exerts pressure on the government to accept the unions’ agendas.
Thus, in the Dorad caseFootnote 167 the court should have taken into consideration the monopolistic settings of the market, the competition goals and the rights of new private manufacturers to enter the market, as well as the interests of consumers. The rights and needs of new manufacturers to establish businesses should be balanced with collective rights. These aspects of the public interest in privatisation goals should be taken into account.
Another example is the Metrodan case,Footnote 168 in which the Israeli court should have refrained from applying constitutional labour rights as the strike involved the public transportation system, which was a monopoly. Following the privatisation of the transportation services in the city of Be'er-Sheva, the drivers of the private bus company began strike action, which led the transportation minister to grant a temporary licence to another bus company to operate bus services. The court ruled that the minister's decision was void as it violated collective constitutional rights.Footnote 169 The lack of any alternative public transportation in the city of Be'er-Sheva should have led the court to declare the strike to be unjustified. Whenever an employer enjoys monopolistic status, strikes should not be considered legitimate. Even if the strike is aimed at preserving employee rights, the monopolistic status of the corporation should lead the courts to consider the strike illegitimate. In these cases, courts should refrain from applying the constitutional right to strike.
A further weakness of the collective approach lies in ignoring the institutional settings of markets that involve either essential or utility services. Unions enjoy special status in these markets, and an application of collective constitutionalism leads to high demands for salary increases by the unions and high transaction costs. In the Train caseFootnote 170 the court should have refrained from applying a constitutional right to strike, as it involved the utility market of train services in which the union enjoyed a powerful status.
3.4.2. The Weakness of the Economic Approach of British Courts
Embracing an economic model in situations of privatisation has its flaws. First, in the University College caseFootnote 171 the framing of the trade dispute as an illegitimate strike created difficulties as the strike involved employment conditions in the post-privatisation era. Such a strike, involving employee working conditions, should have been perceived as legitimate. Refraining from recognising a fundamental right to strike in cases like University College would result in employers trying to avoid the necessary steps of making cuts in managerial and administrative costs and instead rely on reducing wages. The eclectic model is also advantageous in taking into account a decline in union power and, in particular, union density. In University College a decline in union density should have led to the application of a constitutional right to strike, recognising the APS that concerned working conditions.Footnote 172
Second, the weakness of the economic model can be seen also in the privatisation either of functions of governmental prerogative (such as coercive power) or of policy design. In such cases the approach of British courts in refraining from applying a constitutional right to strike in privatisations is problematic, whereas applying a fundamental right to strike in these cases leads to the prevention of unsuccessful privatisations and reduces transaction costs.
Third, the application of a constitutional right to strike in contracting-out core functions of a public organisation has advantages. In these cases, the special knowledge and skills of the internal employees create an advantage, and collective struggles might lead to the prevention of unsuccessful privatisations and a reduction in transaction costs.
4. An Eclectic Model
4.1. The Rationale of the Eclectic Model according to the NIE Theory
The eclectic model suggests a partial application of a constitutional right to strike in the context of privatisation. It claims that constitutionalism in privatisations could be justified in some cases, when unions and collective action have an economically beneficial impact. Hence, regulation of the labour market through constitutionalisation of labour rights should take place when it can enhance efficiency.Footnote 173 The NIE theory provides the rationale and sketches the contours of the eclectic modelFootnote 174 with regard to the constitutionalisation of collective rights in privatisations. The NIE theory is aimed at increasing efficiency by optimising the transaction costsFootnote 175 of negotiating, securing and completing transactions in a market economy.Footnote 176 In our case, transaction costs include bargaining costs, the costs of gathering information and finalising agreements, compensation paid to employees for their approval of the privatisation process, wage increases, and external costs imposed on the public. Yet constitutionalism should be rejected when it results in high transaction costs.Footnote 177
Whereas the collective approach suggests the universal implementation of constitutionalising labour rights, the eclectic model limits its application and emphasises the public interest in privatisation reforms as a means of reducing the costs of services and products.Footnote 178 Contrary to the collective approach, within the eclectic model courts must take into consideration the anti-competitive effects of an APS. Unions and collective action are exempt from anti-trust legislationFootnote 179 in most jurisdictions. Although this exemption is important,Footnote 180 courts should consider the effects of collective action on privatisation objectives, as well as the fact that privatisation is aimed at improving the quality of public services and the general public welfare.
The NIE approach acknowledges that in most circumstances privatisation is intended to eliminate bureaucracy and increase the flexibility and efficiency of public hierarchies in the supply of public services, including improved labour flexibility.Footnote 181 Mostly, the NIE approach suggests creating markets by dismantling public holdings of services and vertically integrated state-owned firmsFootnote 182 and replacing them with competitive mechanisms,Footnote 183 unless there are high transaction cost considerations that prevent this.
The NIE approach differs from the neoclassical theory in the perception of the public/private distinction, as it relates to the extent of the regulation of private activities and the tendency to reject privatisation. The neoclassical theory sees current changes as a process of deregulation, according to which the state passes various functions – including the supply of public services, policy design and implementation – to the market through privatisation. As a result, the state should avoid its own regulation and policy making.Footnote 184 Whereas the neoclassical theory supports a large process of privatisation, the NIE theory suggests that in certain public services bureaucratic hierarchies are better than private firms, and in some cases privatisation should be denied or followed by a special regulation process and implementation of new duties on employers.Footnote 185
Furthermore, the neoclassical theory denies legal protection and a fundamental status of the right to strike altogether, and portrays it as an obstacle to the free market. It claims that recognising such fundamental collective rights would be an obstacle to raising living standards of the working class as a whole and will cause unemployment.Footnote 186 In contrast, the NIE theory recognises that protection of collective action could lead to enhanced efficiency in some circumstances.
Thus, constitutionalisation of labour rights in privatisations could be justified partially in accordance with the NIE theory. In some cases, privatisation should be followed by re-regulation of the markets, including re-regulation with regard to setting up labour-related obligations relating to human rights.Footnote 187 The suggested eclectic approach, based on NIE, therefore rejects the neoclassical idea that denying recognition of a fundamental right to strike in privatisation cases necessarily enhances efficiency.
Furthermore, according to the NIE theory, institutional settings matter, and consideration should be given to the implications for transaction costs of the various types of labour market setting and different services and functions that are privatised.
There are a few cases in which constitutionalism reduces transaction costs as well as reasons for enhanced efficiency in recognising collective rights in these cases. There are also cases in which constitutionalism causes high transaction costs and therefore it should be rejected. Both of these cases, along with guidelines for putting the eclectic model into practice, are described below.
4.2. The Eclectic Model and Guidelines for Putting It into Practice
Drawing on the above arguments, there are several principles of the eclectic approach and some guidelines that courts should follow in its application. According to the eclectic model, inhibiting free competition by imposing new obligations is justified only when it reduces transaction costs. Hence, there are some cases in which courts should apply a constitutional right to strike as its application will reduce such costs. There are also eight judicial tests which should be used by courts in determining whether to apply a constitutional right to strike.
The first judicial test is whether the strike involves working conditions. Collective action could reduce transaction costs when a strike is aimed at preserving employee working conditions in the post-privatisation era and during the privatisation process. Here, the eclectic model has an advantage in allowing the application of constitutionalism when working conditions are involved, as opposed to the general denial of constitutionalism by the economic approach.
One reason for this is that decentralisation of a collective struggle increases transaction costs by replacing a single centralised conflict and bargaining process with multiple conflicts.Footnote 188 Therefore recognition of a right to strike supports central representation by the union in a privatisation. Without collective action, each employee – facing an expected reduction in salary and deterioration in working conditions as a result of the privatisation – will be forced to negotiate individually, or alternatively be dissatisfied with the outcomeFootnote 189 and therefore neglect his or her work.Footnote 190
The second reason for adopting this test is that, without recognising a right to strike, privatised firms would tend to reduce wages in order to promote efficiency in the post-privatisation phase. Efficiency is the aim of the privatisation process in the first place and commercial corporations in the post-privatisation period will try to increase efficiency by weakening employment terms.Footnote 191 Low wages may allow an inefficient business to hide its managerial, organisational and other inadequacies, by relying on low salaries and increasing the dependency of workers on social security, thus imposing costs on society in general.Footnote 192 Privatisation could also lower the standard of living of employees and the working class in general as a result of salary reductions. Therefore, recognising a right to strike when collective action involves the effect of privatisation on wages and working conditions enhances efficiency. It forces managers to adopt a more productive system, rather than try to become competitive at the expense of their employees.Footnote 193
The employer in such a situation is a free rider on society in general. These employers – being reluctant to take upon themselves the costs of the privatisation process – refuse to take the necessary investment-oriented managerial and organisational measures needed to enhance productivity. Hence, the employer lays the burden on the employees and society in general. The free-rider effect may cause high transaction costs and justify the application of constitutional duties.Footnote 194
The third reason is that in a strike aimed at preserving working conditions it is economically more efficient to enable collective action for other reasons. Attempts to reduce the prices of public services through privatisation often lead to employee dismissals and the frequent hiring and firing of temporary employees, which again lay the costs of supporting the unemployed on society in general.Footnote 195 Labour regulation in applying collective duties in these cases is intended to avoid the tendency of employers to shift costs onto employees, their families, and society as a form of social cost.Footnote 196
Privatisations also often lead to the weakening of union densityFootnote 197 and to a transfer to unorganised private working environments.Footnote 198 Therefore the struggle of unions to preserve the rights of workers may also contribute to publicFootnote 199 general welfare.Footnote 200
Furthermore, the advantage of the suggested eclectic model, compared with the collective model, is in allowing the application of a constitutional right to strike only in cases of strike action involving working conditions. Hence, it includes a solution to one of the problems of the collective approach, which allows a universal application of constitutionalism even when working conditions are not involved. Granting employees the right to strike, when there is no direct and specific connection with working conditions, will result in unnecessary and high demands for wage increases and will therefore result in high transaction costs.
In the case of an APS that involves working conditions, the second judicial test should ask whether union power (and, in particular, union density) has declined compared with previous years. A considerable decrease in union power and union density suggests the need to apply constitutionalism if the strike involves working conditions. This is because the weakness of unions makes it even more difficult to demand that reducing costs should be based on reorganisation steps within the management itself and production methods, rather than through wage reductions.
In contrast, where there is a considerable increase in union power and, in particular, union density compared with previous years, constitutionalism should be rejected. In such cases the stronger position of unions strengthens their ability to demand wage increases or excessive compensation as a precondition for their approval of the process.
The third judicial test relates to the kind of working place and function that is being privatised. It focuses on the question of whether privatisation involves functions of governmental prerogative, coercive power or policy design. A constitutional right to strike should be applied when the strike is against privatisation of functions of governmental prerogative, such as security or foreign affairs, or in cases of privatising policy design and regulation, and functions of coercive power, even if the strike undermines the privatisation process itself. Here the eclectic model has an advantage compared with the economic approach, which denies applying a constitutional right to strike altogether. The application of constitutionalism in these cases reduces transaction costs.
When privatisation relates to services which are governmental functions in nature, carrying out such functions by the government is more efficient, and unions strive to avoid these unsuccessful privatisations. Specialised governmental skills are required for such services, rendering privatisation problematic and costly and often resulting in lower service quality. For instance, designing educational programmes for public schools requires special governmental expertise as well as special oversight. They are more difficult to monitor and supervise, once privatised.Footnote 201
In cases of unsuccessful privatisation in which public bureaucracies are more suited for the supply of public services, the NIE approach calls for a rejection of the privatisation process.Footnote 202 Hence, a constitutional right to strike should be granted to employees whenever strike action is associated with the privatisation of core governmental services. It is also the case in the privatisation of coercive power institutions, such as prisons, police and fire departments, and prosecution proceedings. In these cases, collective action relates to increasing the general public good, as the struggle of employees as a group is efficient in achieving social goals in the privatisation era.Footnote 203
When applied to these specific public functions, privatisation may lead to lower service quality as a result of attempts by private corporations to cut post-privatisation costs.Footnote 204 Prior to these privatisations, unions sought to avoid the negative consequences of unsuccessful privatisations in a bid to enhance general public welfare. It should be noted that many privatisations are derived from the interests of strong corporations and elite groups that support privatisation processes out of capitalistic interests and at the expense of neglecting employee rights.Footnote 205 The influence of strong elite groups on policy making affects policy choices and, as a result, affects the interests of workers and of service recipients; it may also result in an unsuccessful privatisation process.Footnote 206
Even though it could be claimed that administrative law is a more appropriate tool to deal with unsuccessful privatisations, in fact employees who are familiar with the flows and reality of the workplace are more equipped to resist the consequences of a bad privatisation. For instance, teachers are more suited to fight against an unsuccessful privatisation of a school, having the required inside knowledge and professional skills, and being familiar with the problems of the education system. Hence, their struggle against unsuccessful reforms through strikes and the tools of labour law is more efficient in the attempt to prevent the undesired results of privatisation than the use of other legal instruments.
The fourth judicial test asks whether a core function of a public organisation is being outsourced, as opposed to a marginal function only, and whether permanent duties of the public organisation are being privatised. A constitutional right to strike should be applied when core functions are outsourced. The advantage of the eclectic model, compared with the economic approach, is also prominent in a privatisation of core functions of a public organisation where the application of constitutionalism improves economic factors.
In these cases, the special knowledge and skills of the internal employees create an advantage. Contracting out in these circumstances might lead to unsuccessful privatisation and create high transaction costs for the public organisation. This is especially true when privatisation involves permanent duties. The resistance of unions in these cases prevents an unsuccessful privatisation.
There are cases in which courts should reject the application of a constitutional right to strike in order to avoid high transaction costs. One such case is that of monopolistic public industries and services.
Thus, the fifth judicial test should ask whether the relevant markets are competitive or monopolistic, and whether a public employer enjoys monopolistic status. According to the NIE, since institutions and institutional settings matter,Footnote 207 we should take into account the fact that privatisations in monopolistic markets are different from those in competitive markets. In markets where governmental corporations enjoy monopolistic power, unions have a unique status and strong bargaining power at the outset. In such situations, the application of a constitutional right to strike should be rejected, even if the strike concerns working conditions.Footnote 208 Here, an advantage of the eclectic model, compared with the collective approach, is in distinguishing between the different institutional settings and in considering the exaggerated power of unions in monopolistic markets and their ability to demand increases in salary and working conditions. The influence that strong unions have on political actors in these situations indeed affects transaction costs and influences the decisions of policy makers. In these situations, negotiations with strong unions over privatisation reforms are complicated and costly. When unions use a right to strike in order to demand higher salaries as a preliminary condition for approval of the reform, the increase in salaries and labour costs will lead to a rise in prices and the costs of services, which the public will ultimately have to bear, and therefore to high transaction costs. Government decision making in these matters is often affected by government unions – interest groups that have traditionally benefited from a government monopoly.Footnote 209 Denial of the right to strike in situations that involve unions in monopolistic public industries reduces transaction costs.
The sixth judicial test relates to whether the strike involves opening markets to competition with new private companies. Rejection of a constitutional right to strike prevents high transaction costs when strikes involve opening markets to competition by new private actors. Here also the institutional settings of the market are of the essence. Collective action aimed at a third party, such as a private manufacturer that wishes to enter the market rather than against the privatisation, should be considered unjustified, and the application of constitutionalism should be denied.Footnote 210 Such strikes interfere with the public interest in maintaining free competition.
The seventh judicial test asks whether the right to strike involves essential services or basic utility services (including public transportation services and ports).Footnote 211 A constitutional right to strike should be denied in either case, even if the strike concerns working conditions. Here, an advantage of the eclectic model, compared with the collective model, is in considering the institutional settings in markets of either essential or basic utility services. In these markets, unions enjoy special power prior to the privatisation process, and hence constitutionalism should be rejected. In such markets and institutional settings unions hold great power in that interruption of these services in the event of strike action causes severe damage.Footnote 212 Furthermore, privatisation and a reduction in the price of services are especially needed as these services are of particular importance to the public. The strong position and the influence that unions hold over political actors – either in essential services or basic governmental utilities – must also be considered. The special status of such powerful unions might cause high transaction costs and unions might demand high salary increases as a precondition for their approval of the reforms. Hence, in such cases the application of a constitutional right to strike should be rejected.
The eighth judicial test asks whether the collective action actually prevents the privatisation process from taking place in practice. This situation occurs when a union takes action that can hinder the privatisation process on technical grounds, for instance, by withholding data or failing to prepare reports that are vital for the privatisation process. In such situations the application of constitutionalism should be denied.
Several critical arguments can be raised against the eclectic model. These are described below, along with a justification for applying this model.
4.3. Critical Analysis of the Eclectic Approach and Its Justification
One critique of the proposed eclectic model is that establishing the proper rules regarding the APS should be decided by the legislature rather than through judicial review. Another critique is that presenting a uniform approach for the application of a right to strike in privatisation cases is problematic. In this respect, it could be argued that there is a need for a flexible approach, given the differences in the labour market characteristics of different countries and fields. Third, it could be argued that the eclectic approach focuses on economic factors and therefore raises concern over the possible omission of human rights considerations. Such an approach, motivated by financial concerns, might violate employees’ rights just by virtue of focusing on economic interests. The focus on financial interests might also fail to consider other issues of the public interest, such as public welfare.
In response to the first critique, based on the theory of ‘democratic ossification’, a greater role for the courts could be justified as, in a neoliberal world, alternative democratic channels, such as legislation, are often opposed to the public interest – including the interests of citizens, consumers and workers – because of the influence of corporations and strong capitalist interest groups.Footnote 213 This calls for ratification of the problem. Hence, when strong corporations and interest groups lobby governments and legislatures in the development of public policy regarding privatisation, it is often left to the courts to protect the public general interest.Footnote 214 This is especially true in countries where non-governmental organisations (NGOs), consumer organisations and unions have very little influence on, or participation in, the design of privatisation programmes. In Israel, for instance, privatisation processes are often presented without the proper involvement of civil society and the public, and sometimes are advanced via very swift legislative procedures.Footnote 215
Although judges might be influenced by the same lobbying and have even less knowledge than regulators in coping with the complexity of these matters, the characteristics of judiciaries make them more resistant to such influences. Judiciaries, being inherently designed to protect the rule of law and safeguard citizens from violations of the law, are different from regulators, economists and political actors, and hence should be more equipped to deal with such influences.Footnote 216 In addition, legislation is of a general and static nature, whereas judicial review is more dynamic and can more easily adapt the rules regarding strike action against privatisation to specific circumstances and changing realities.
With regard to the second critique, the eclectic model, as opposed to the current approaches, is more flexible. The consideration of various factors – from either the collective or the economic approach – is inherent in the eclectic model, it being a mixture of both methods. The eclectic approach also takes into consideration diverse factors and several judicial tests, creating a flexible approach. It can therefore be adapted for different situations and various market settings. Contrary to the economic approach, which in practice is rigid, the eclectic model does not deny the application of a constitutional right to strike altogether. Thus, in deciding whether to apply a constitutional right to strike, the eclectic model in practice is flexible by taking into account the specific circumstances, including the types of function and services involved and the concrete characteristics of the market in question.
A response to the third critique is that although the eclectic approach is based on economic factors, in principle it advances the recognition of a constitutional right to strike and its application, when appropriate. It also claims that the application of collective action is justified in certain circumstances, according to economic factors. Accordingly, in reality this approach also protects the collective rights of employees.
Despite the fact that the eclectic model is based on financial considerations, it aims to enhance the public common good. The very improvement of efficiency goals and the reduction of transaction costs has a beneficial impact on the public interest and therefore improves the general welfare of the public.
Judiciaries differ in their willingness to embrace the collective constitutional doctrine. Two different judiciaries are considered above. This discussion demonstrates the weaknesses of the economic and collective approaches compared with the proposed eclectic model, as well as the need to embrace an eclectic model to address these weaknesses.
5. Summary
The article introduced an eclectic model for the constitutionalism of collective rights in cases of strike action against privatisation. The eclectic model suggests the partial application of a constitutional right to strike in privatisation cases, according to which constitutionalism is justified when it advances efficiency. The article suggests a basic distinction between the existing collective and economic approaches. In the latter approach, liberal constitutional rights primarily are embraced; in the former approach the right to strike is emphasised while ignoring the public interest in competition within the markets. Contrary to the economic approach, which rejects recognition of a constitutional right to strike, the collective approach suggests a broad universal application of constitutionalism as a basis for recognising strikes against privatisation. The collective approach embraces collective constitutionalism in order to counter-balance the neoliberal practices of regulators and political actors.
The Israeli and British jurisprudences were used as test cases to examine the application of the two approaches. Hence, British courts have embraced an economic approach, while the Israeli jurisprudence over the last few years has applied collective constitutionalism. The examination of the British and Israeli systems reveals the weaknesses of each of the current extreme approaches – collective and economic – compared with the eclectic model. The weaknesses of both approaches suggest the need for the judicial systems to embrace an eclectic model.
The eclectic model introduced here offers a cure for the defects in the existing approaches. It includes a new theory for the application of constitutionalism in cases of strike action against privatisation. Based on New Institutional Economics, it suggests the application of a constitutional right to strike where it will reduce transaction costs. In such cases, implementing constitutionalism as a basis for recognising the APS is justified, as it advances efficiency and economic goals.
