PES welcomes crackdown on fraudulent 'letterbox companies'

08/02/2018

European Court of Justice

The Party of European Socialists has welcomed a court ruling which will help close legal loopholes allowing fraudulent companies to dodge their social security obligations.

The judgement from the European Court of Justice, handed down this week, clarifies that EU countries are free to disregard administrative documents from other countries if those documents appear to have been fraudulently obtained for the purposes of avoiding proper regulation.

This decision strengthens the ability of governments to tackle so-called 'letterbox companies', which exploit loopholes in EU free movement rules to register in a country where they have no real operations, in order to avoid fulfilling regulatory requirements in their true home country.

PES president Sergei Stanishev said:

"The dishonest and deceitful practice of setting up 'letterbox companies' is bad for at least three reasons.

"First, it strips employees of the protections to which they are legally entitled, putting their welfare at risk. Secondly, it allows companies to avoid contributing to social security systems, thus weakening those systems for everyone. And thirdly, it distorts competition, because companies who use these schemes gain an unfair competitive advantage over those who act responsibly.

"At PES, we are determined to combat such fraud and exploitation of workers. Rather than undermining citizens' rights to freedom of movement, we want to make sure that the system provides strong protection for everyone, wherever they work.

"We fought hard for a revision of the posting of workers directive that closes the loopholes used by letter box companies to abuse workers. The process is in its final stage, and we call for a swift completion of the talks between Parliament and Council. We look forward too to the creation of an effective European labour Authority, which, if given the means and adequate mandate, can become an instrumental tool in detecting and addressing fraud and abuse across borders.

"In the meantime, this judgement is another weapon in the arsenal of national governments in tackling labour market abuses."