This case concerned which law should govern a group of seafarers' employment contracts. Superfast Ferries SA is a Greek shipping company whose subsidiaries operated the Superfast VII, the Superfast VIII and the Superfast IX between Hanko, Finland, and Rostock, Germany, from 2001-2006. The ships flew the Greek flag. On 21 March 2006, the vessels were sold to AS Tallink Grupp, which took the vessels into service via Cypriot management. The ships were flagged to Estonia after their purchase. The applicants were dismissed because the shipping companies were not in a position to provide them with employment after the ship transfers.

The case had previously been pending in Germany, but the German Labour Court (Bundesarbeitsgericht) ruled on 18 February 2010 that the German courts did not have jurisdiction. The applicants then brought proceedings in the Helsinki District Court. The defendants accepted the jurisdiction of the Helsinki District Court. The District Court held that the seafarers' claims should be governed by Finnish law, except in so far as the mandatory provisions of German law afforded the applicants better protection than Finnish law. The defendants appealed to the Court of Appeal.

Held: The application for a reference to the Court of Justice of the European Union for a preliminary ruling is rejected. Under the Rome Convention on the Law Applicable to Contractual Obligations 1980 (the Rome Convention), the law applicable to the contracts of employment is, in the absence of an express choice of law, German law.

According to the seafarers, their employment contracts should be governed by German law, in the absence of a choice of law, under art 6 of the Rome Convention. Accordingly, that law must be applied in the present dispute concerning the termination of an employment contract in so far as its mandatory provisions afford employees better protection than Finnish law.

The defendants, for their part, consider, first, that the United Nations Convention on the Law of the Sea 1982 (UNCLOS) takes precedence over the Rome Convention and that, under art 94 of UNCLOS, the law of the flag State applies to employment contracts unless otherwise agreed by the parties. In the present case, the defendants have expressly agreed that the mandatory provisions of Greek law must be applied in so far as they are more favorable to the employee than Finnish law. Consequently, German law cannot be applicable to the present dispute because of UNCLOS and the employment contract. Second, even if UNCLOS does not supersede the Rome Convention, it is a well-established principle of international law that seafarers are considered to be working at sea in the State whose flag the ship is flying. Consequently, even in accordance with the rules laid down in art 6 of the Rome Convention, it must be concluded that, in the absence of an express choice of law, the contract of employment should be governed by the law of the flag State. Greek law must therefore be applied in so far as its mandatory provisions give seafarers better protection than Finnish law. Third, the companies have argued that, in any event, the Rome Convention does not apply to a collective agreement, which must be applied as a higher-level rule. Based on the choice of law in the collective agreement binding on the parties, the collective agreement is governed by Finnish law, subject to the mandatory provisions of the law of the flag State, ie Greece. German law cannot therefore be applied on this basis either.

Under art 3.1 of the Rome Convention, a contract is governed by the law of the State agreed by the parties (ie an express choice of law). In an employment relationship, the parties may also agree on the law applicable to it. However, art 6 of the Convention contains a provision protecting the employee. Paragraph 1 provides that a reference to a contract of employment may not result in the worker losing the protection afforded to him or her by the mandatory provisions of the law which, in the absence of such a choice of law, would apply under art 6.2. According to para 2, in the absence of a choice of law, the employment contract will be governed: (a) by the law of the country in which the employee habitually carries out his or her work in performance of the contract, even if he or she is temporarily employed in another country; or (b) if the employee does not habitually carry out his or her work in any one country, by the law of the country in which the place of business through which he or she was engaged is situated; unless it is clear from all the circumstances that the contract of employment is more closely connected with another State, in which case the law of that other State shall apply.

The main purpose of UNCLOS is to codify, clarify, and develop the rules of general international law relating to the peaceful co-operation of the international community in the exploration, use and exploitation of the sea. Part VII of UNCLOS lays down the nationality of vessels (art 91) and the obligations of the flag State (art 94). Under art 91 of the Convention, each State is to determine the conditions under which ships may acquire the nationality, be registered in its territory and be entitled to fly its flag. Ships shall have the nationality of the State whose flag they are entitled to fly. There must be a real connection between the State and the ship. Under art 94.1 of the Convention, each State is to exercise effectively its jurisdiction and control over administrative, technical and social matters in respect of ships that fly its flag. In that regard, art 94.2.b of the Convention states that each State is to exercise, in particular, jurisdiction under its domestic law over each ship flying its flag, its master, other officers and crew in administrative, technical and social matters relating to the ship.

The provisions of UNCLOS relating to the high seas thus primarily govern the rights and obligations of States, including the flag State, on the high seas. It cannot be inferred from the purpose, scope and substance of the Convention that the obligations imposed on the State by art 94 of the Convention contain private international law rules which are directly binding on the parties to the contract of employment. It can be inferred from certain opinions of the Court of Justice of the European Union in Case C-308/06 Intertanko (Grand Chamber) of 3 June 2008 that UNCLOS cannot be relied on in relations between individuals, at least in EU law. The provisions of UNCLOS described above cannot be construed as precise conflict of law rules. Although the issue here is not the relationship of UNLCOS with EU law but with another international Convention, this statement also supports the fact that the provisions of UNCLOS are not directly applicable as conflict of law rules. In that connection, it should also be pointed out that, in Case C-384/10 Voogsgeerd, which concerned the maritime sector, the Court did not refer at all to the provisions of arts 91 and 94 of UNCLOS.

The seafarers also argued that the defendants cannot rely on art 94 of UNCLOS because Part VII does not apply and the case does not come within art 86 of the Convention. The vessels in question were not operated on the high seas due to the narrowness and geographical shape of the Baltic Sea. This has not been directly disputed by the companies. However, they stated that international maritime routes pass through the Baltic Sea and that, in any case, the law of the flag State must, as a general principle, apply to international maritime traffic, regardless of the limits of the scope of Title VII of the Convention. The Court has already held that art 94 of UNCLOS is not directly applicable as a conflict of laws rule. In that regard, it is not necessary for the Court to rule separately on the seafarers' argument that the provisions of Title VII of UNCLOS are inapplicable.

In Case C-29/10 Koelzsch, concerning an international road transport worker, the Court of Justice of the European Union held that the State in which the worker habitually carries out his or her work is the State in or from which the worker fulfils a substantial part of his obligations to his or her employer, taking into account all aspects relevant to the employee's activities. In Case C-384/10 Voogsgeerd, which concerned the maritime sector, the Court similarly held that the court hearing the dispute in the main proceedings must take into account all the factors which characterise an employee's conduct. If the facts mentioned by the Court are located in the same country, it may be regarded as a place within the meaning of art 6.2.a of the Rome Convention.

In assessing the place where the seafarers in this case have habitually worked, it is relevant, in the light of those connections, that the seafarers' shifts began in Germany and ended in Germany. If the shift ended elsewhere than in Germany, the sailors were provided with free transport to Germany. The administrative management of the vessels was also in Germany and the human resources of the vessels were co-ordinated there. On the basis of these factors, it can be considered that the seafarers performed their transport duties from Germany and, due to the location of the administrative management, also received instructions from Germany. In the light of the case law of the Court of Justice of the European Union described above, this situation falls within the scope of art 6.2.a of the Rome Convention. Moreover, on the basis of the statements made by the seafarers, it can be considered that the seafarers fulfiled a substantial part of their obligations to their employer in Germany, taking into account all the factors which characterise the worker's activities.

The seafarers signed their employment contracts with the German office of the Superfast companies. Thus, if, for any reason, art 6.2.a could not be applied, art 6.2.b would apply on the ground that the place of employment of the seafarers is in Germany.

The seafarers have also submitted statements showing that their employment contract is closely linked to Germany. They lived and lived in Germany, and all but one were German citizens; wages were paid into German bank accounts; and the employer had arranged health care services in Germany. The seafarers were also covered by a social security and pension scheme equivalent to the level of German legislation. In the light of these factors, the overall assessment under the last subpara of art 6.2 also refers closely to Germany.

All in all, the Court considers that there is no reason why the case law of the Court of Justice of the European Union described above should not be taken into account in this case. The Court therefore considers that, in the absence of a choice of law, the employment contracts of the seafarers should be governed by German law.

The question also arises as to the significance to be attached to the choice of law provision of the collective agreement between Superfast Ferries SA and the German and Finnish seafarers' associations. The defendants argued that the provisions of the collective agreement take precedence over the provisions of the employment agreements. The governing law should therefore be determined on the basis of the provisions of the collective agreement. The seafarers, for their part, submitted that the provisions of the Rome Convention are mandatory and that a collective agreement cannot agree on the applicable law in a manner contrary to the provisions of the Rome Convention.

The Court of Appeal states that art 6 of the Rome Convention applies to employment contracts, but not to collective agreements. The law applicable to collective agreements is determined by the general conflict of law rules in arts 3 and 4 of the Rome Convention. The significance to be attached to the provisions of the collective agreement will be assessed at a later stage, only in the light of the mandatory provisions of German law.