Definitive Report - Report No 392, October 2020

Case No 3211 (Costa Rica) - Complaint date: 21-MAR-16 - Closed

Allegations: Interference by the public service regulatory authority in the application of collective agreements concluded by public enterprises

1. 519. The complaint is submitted in communications sent by the Juanito Mora Trade Union Confederation (CSJMP), the Rerum Novarum Confederation of Workers (CTRN), the Costa Rican Workers’ Movement Confederation (CMTC) and the Unitary Confederation of Workers (CUT) dated 21 March and 28 April 2016.
2. 520. The Government provided its observations in communications dated 11 November 2016, 7 August 2017, as well as 31 January and 27 September 2019.
3. 521. Costa Rica has ratified the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87), and the Right to Organise and Collective Bargaining Convention, 1949 (No. 98).

A. The complainants’allegations

1. 522. In their communications of 21 March and 28 April 2016, the CSJMP, the CTRN, the CMTC and the CUT state that there are public enterprises and institutions in the country providing paying services regulated by the Public Service Regulatory Authority (ARESEP). Those include: the Atlantic Coast Port Administration and Economic Development Board (hereafter the “Port Services Enterprise”); the Costa Rican Oil Refinery (hereafter the “Refinery”); and the National Power and Light Company (hereafter the “Electrical Enterprise”). The complainant organizations state that those enterprises, which operate on the basis of approved tariffs paid by consumers and fixed by ARESEP, have concluded collective agreements respectively with the Workers’ Union of the Atlantic Coast Port Administration and Economic Development Board (SITRAJAP), the Oil, Chemical and Allied Industries Workers’ Union (SITRAPEQUIA) and the Electrical and Telecommunications Workers’ Union (SITET), agreements which accord economic benefits covered by the tariffs charged.
2. 523. The complainants state that on 9 October 2003, following a tariff adjustment requested by the port services enterprise, ARESEP issued resolution No. 3223, which ruled that certain costs payable under the collective agreement signed with SINTRAJAP, including the payment of leave of absence, were contrary to the principle of paying services and had no direct relation to the provision of service, and could not therefore be covered by the tariffs. The complainants state that the enterprise initiated administrative proceedings against the ARESEP resolution, but that that action was overruled on the basis of Law No. 7593 (the law establishing ARESEP), which provides that ARESEP may exclude costs contrary to the principle of a paying service, which have no direct relation with the provision of service, or which are disproportionate and excessive. The complainants included a copy of a letter sent on 18 January 2016 by the Executive Director of the enterprise to the President of SINTRAJAP, stating that by virtue of the above ruling and of ARESEP resolution No. 3223, payment of the leave of absence envisaged under the collective agreement was not possible.
3. 524. The complainants indicate that although the Port Services Enterprise’s previous history had given rise to considerable concern because of the negative impact it could have on the right to bargain collectively, the country’s union movement had taken it to be an isolated event. So much so that, in all years between 2003 and 2015, ARESEP issued no further resolution when making adjustments to tariffs that would imply a failure to recognize costs arising from collective agreements in force in regulated enterprises or institutions. The complainants state that up until 2015, ARESEP covered all costs payable under the collective labour agreements without hesitation, thus recognizing that such costs were part of the production costs of enterprises and institutions providing paying services.
4. 525. However, the complainants state that in 2015, following a tariff adjustment requested by the Refinery and the Electrical Enterprise, ARESEP issued a series of resolutions ruling that the costs arising from collective agreements could no longer be covered by tariffs paid by consumers (resolution No. 91 of 21 August 2015 in respect of the Refinery and resolutions Nos 113, 114 and 115 of 20 November 2015 in respect of the Electrical Enterprise). The complainants indicate that ARESEP cites Law No. 7593 in the resolutions, which provides that it may exclude costs that are contrary to the principle of a paying service, which have no direct relation with the provision of service, or which are disproportionate and excessive; and that although collective agreements are legally valid texts, the collective agreements in question contain clauses that are clearly contrary to the principle of a paying service and to the principle of financial equilibrium as understood in the cited law. The complainants indicate that because ARESEP’s tariff resolutions are binding, the enterprises were no longer able to honour their obligations under the collective agreements, thus removing all economic content from the agreements. The complainants state that the enterprises cannot legally generate profits through their business activities and that the only means available to them to cover the costs of collective agreements is through the tariffs that they charge, which are fixed by ARESEP.
5. 526. The complainants allege that ARESEP’s intervention amounts to interference in exercising the right to bargain collectively. They further state that, as a result of the ARESEP resolutions, the Office of the Comptroller-General of the Republic had not approved the budget lines relating to the recognition and payment of economic rights under collective agreements, thus rendering it legally impossible for public enterprises to include budget lines required for compliance with collective agreements. The complainants explain that the SITET filed for the protection of their constitutional rights (filed an amparo appeal) before the Constitutional Chamber of the Supreme Court of Justice against ARESEP resolutions Nos 113, 114 and 115 of 2015 in respect of the electrical Enterprise, on the grounds that they were in breach of article 62 of the Constitution (under which collective agreements have force of law) and of Convention No. 98. According to the complainants, the Constitutional Chamber rejected the appeal on the grounds that it concerned questions that should be dealt with in an administrative or common law court, and not by a constitutional court.
6. 527. The complainants claim that the ARESEP authorities have announced that the decision to exclude costs arising from collective agreements from adjustments to tariffs will apply to all future tariff requests, and as such form part of an institutional policy designed to promote the principle of a “paying service”. The complainants maintain that would imply that the policy of ARESEP, a state institution, is not aimed solely at the organizations mentioned above, but at all other enterprises in which collective agreements have been concluded and whose tariffs for the sale of services are subject to ARESEP approval.

B. The Government’s reply

1. 528. In its communication of 11 November 2016, the Government notes that the issues raised in the present complaint also feature in a representation submitted by the same complainants under article 24 of the Constitution of the ILO (that representation has not yet been examined and contains additional allegations). The Government therefore requests that the allegations made in respect of ARESEP in this complaint be considered as a single case.
2. 529. In its communications of 11 November 2016, 7 August 2017 and 31 January and 27 September 2019, the Government transmits its own observations, those of ARESEP and of the enterprises concerned. ARESEP indicates that Law No. 7593 provides that it may exclude costs contrary to the principle of a paying service which have no direct relation to the provision of the service and that one of the criteria that ARESEP is obliged to take into consideration when fixing prices, tariffs or rates, was economic efficiency (article 31). Article 32(b) and (c) explicitly sets out that the following cannot be accepted as costs of regulated enterprises: “expenditures that are unnecessary for, or unconnected to, the provision of a public Service” and “contributions, costs, investments and debts incurred for activities unconnected to the administration, operation or maintenance of the regulated activity”. By virtue of the above, ARESEP maintains that benefits which have no direct relation to the provision of a public service cannot be covered by tariffs and ultimately passed on to users.
3. 530. The Port Services Enterprise indicates, on the basis of a detailed technical analysis, that ARESEP reconsidered its position with regard to the expenses included under the collective agreement and, via resolution No. 780 of 2012, had approved inclusion within the tariffs of a range of expenses listed in the collective agreement.
4. 531. For its part, the Refinery states that ARESEP resolution No. 91 created an internal problem in the enterprise, as it made it impossible to honour the payment of certain benefits acquired under the collective agreement. The Refinery indicates that: (i) it filed an appeal against resolution No. 91 before ARESEP’s Executive Board and that on 31 August 2015 a group of lawyers from the Refinery, acting in a personal capacity, filed amparo proceedings before the Constitutional Chamber of the Supreme Court of Justice; and (ii) on 10 June 2016 the Constitutional Chamber upheld the amparo appeal by Vote No. 7998-2016 and declared null the content of resolution No. 91 with respect to the exclusion from the calculation of tariffs of the costs arising from the benefits provided by the collective agreement. The Government stresses that Constitutional Chamber Vote No. 7998-2016 had again shown that the institution of collective bargaining in the country was protected under the law and by the authorities who safeguard the fundamental rights of workers.
5. 532. The Refinery also states that: (i) with regard to the appeal it had filed with the ARESEP Executive Board, on 23 June 2017 the board had issued resolution No. 155 indicating that it was awaiting judgments on two actions challenging the constitutionality of the collective agreement filed on 18 June 2016 by Mr Otto Guevara Guth, Member of Parliament, and by Mr Enrique Egloff, representative of the Chamber of Industries; and (ii) with regard to compliance with Constitutional Chamber Vote No. 7998-2016, on 18 October 2017, ARESEP had informed the Refinery by letter that it was still reviewing the information received from the Refinery regarding the inclusion in its accounting of costs arising from the collective agreement that needed to be added to the tariffs.
6. 533. The Electrical Enterprise states that as a result of ARESEP’s action, it was unable to comply with its obligations under the agreement, and consequently all economic content in the collective agreement was lost.

C. The Committee’s conclusions

1. 534. The Committee notes that in this case the complainants allege interference by the Public Service Regulatory Authority (ARESEP) in the application of collective agreements concluded by public enterprises. Specifically, the complainants refer to resolutions issued by ARESEP in 2003 and 2015, which do not authorize three public enterprises to include as part of their production costs, and thus in the final tariffs that they charge for the services they provide, costs which ARESEP considers unrelated to the provision of a public service, including the costs arising from fulfilling the obligations of collective agreements.
2. 535. The Committee takes note of the complainants’ allegations that (i) ARESEP, in a resolution issued in 2003, excluded from the Port Service Enterprise’s requested tariff adjustment costs related to various benefits granted by the collective agreement concluded with SINTRAJAP; (ii) in 2015, ARESEP issued a series of resolutions which excluded from the Refinery’s and from the Electrical Enterprise’s requested tariff adjustments costs related to collective agreements concluded with SITRAPEQUIA and SITET respectively; (iii) in those resolutions, ARESEP indicated that the law provides for the exclusion of costs contrary to the principle of a paying service, which have no direct relation to the provision of the service, or which are disproportionate and excessive; (iv) as a result of the ARESEP resolutions, the Office of the Comptroller-General of the Republic had not approved the budget lines relating to the recognition and payment of economic rights under collective agreements; and (v) The Electrical Enterprise initiated administrative proceedings against ARESEP resolution No. 3223 of 2003 but the action was rejected (the administrative tribunal considered that the law allowed ARESEP to exclude costs which had no direct relation with the provision of service) and SITET lodged an amparo appeal against ARESEP resolutions Nos 113, 114 and 115 of 2015, which was also rejected (the Constitutional Chamber of the Supreme Court of Justice ruled that the issues raised should be dealt with by an administrative or common law court, and not under an amparo procedure).
3. 536. The Committee further notes that: (i) ARESEP states that Law No. 7593 provides that it may exclude costs contrary to the principle of a paying service which have no direct relation to the provision of the service; (ii) the Port Services Enterprise indicates that ARESEP reconsidered its position with regard to expenses related to the collective agreement and that, in resolution No. 780 of 2012, ARESEP accepted the inclusion within tariffs of a number of expenses arising from the collective agreement; (iii) the Refinery and the Electrical Enterprise indicate that the ARESEP resolutions create internal problems as they prevent them from complying with the collective agreements; (iv) the Refinery lodged an appeal with the ARESEP Executive Board against ARESEP resolution No. 91 of 2015; and a group of lawyers from the Refinery, acting in a personal capacity, filed an amparo appeal in respect of that resolution before the Constitutional Chamber; (v) the amparo appeal was upheld by Vote No. 7998-2016 and as a result ARESEP resolution 91 of 2015 was nullified; (vi) some days after the amparo appeal had been upheld, a Member of Parliament and representative of the Chamber of Industries filed two actions challenging the constitutionality of the refinery’s collective agreement; and (vii) the ARESEP Executive Board decided to await judgment on the two actions challenging constitutionality before ruling on the appeal that had been lodged by the Refinery against resolution No. 91 of 2015.
4. 537. The Committee observes that appeals were filed against the ARESEP resolutions by the public enterprises and/or by trade union organizations. As regards the Port Services Enterprise, the information provided shows that: (i) the administrative proceedings initiated by the enterprise against resolution No. 3223 of 2003 were rejected; and (ii) although ARESEP agreed in 2012 to include coverage of various expenses arising from collective agreement within the tariffs, certain other expenses, such as leave of absence, were still excluded.
5. 538. As regards the Electrical Enterprise, the Committee observes that the amparo appeal lodged by SITET against resolutions Nos 113, 114 and 115 of 2015 was rejected by the Constitutional Chamber on the grounds that the issues raised should be dealt with by the administrative courts or judiciary and not via an amparo appeal. The Committee has no further information in that connection.
6. 539. On the other hand, the Committee observes that, according to the Government and to the Refinery, the amparo appeal against ARESEP resolution No. 91 of 2015, lodged by a group of lawyers from the enterprise, had been upheld by Vote No. 7998-2016 and the ARESEP resolution nullified. The committee notes that in that decision, the Constitutional Chamber indicates that ARESEP had exceeded its mandate and functions in refusing to recognize a collective agreement in force and registered by the Ministry of Labour. The Constitutional Chamber also stressed that the benefits accorded under the collective agreement had been excluded by ARESEP on the basis of a tariff analysis, rather than a budgetary analysis, and that ARESEP had ignored the fact that the excluded costs were written into a collective agreement which, under the Constitution, had force of law.
7. 540. From information made available on the web portal of the Supreme Court, the Committee observes that: (i) in a resolution of 18 December 2017, the Constitutional Chamber ruled that ARESEP postpone implementation of Vote No. 7998-2016 until judgment had been handed down in respect of the actions challenging the constitutionality of the Refinery’s collective agreement; (ii) on 22 May 2019, the Constitutional Chamber issued Vote No. 9226-2019 in respect of those actions, thereby cancelling eleven clauses from the Refinery collective agreement 2011–2012, on grounds of their unconstitutionality; and (iii) the benefits declared unconstitutional include food and transport allowances as well as dental care for the worker’s immediate family. The Committee notes that in decision 9226-2019, the Constitutional Chamber indicates that the abovementioned benefits are contrary to the principles of reasonableness, equality, legality and austerity in the use of public funds. The Constitutional Chamber also indicates that certain of the benefits that had been declared unconstitutional had already been removed from the collective agreement when it was renegotiated for 2016–19.
8. 541. The Committee recalls that it is acceptable that in the bargaining process the employer side representing the public administration seek the opinion of the Ministry of Finances or an economic and financial body that verifies the financial impact of draft collective agreements.. The Committee has also considered that the exercise of financial powers by the public authorities in a manner that prevents or limits compliance with collective agreements already entered into by public bodies is not consistent with the principle of free collective bargaining. [see Compilation of decisions of the Committee on Freedom of Association, sixth edition, 2018, paras 1491 and 1484].
9. 542. It would appear from the above that while the Constitutional Chamber upheld the amparo appeal filed by the Refinery lawyers and annulled ARESEP resolution No. 91 of 2015, a number of articles of the collective agreement were cancelled by the Constitutional Chamber as a result of the two actions challenging constitutionality. On that basis, the Committee again requests the Government, as it did recently in Case No. 3243, examined in October 2019 [see report No. 391, paras 171–190], to take the necessary steps, including legislative measures if necessary, to ensure that in the future the authorities give preference as far as possible to collective bargaining mechanisms in assessing matters of public interest in relation to economic benefits in clauses of public sector collective agreements.
10. 543. The Committee draws the Government’s attention to the availability of the technical assistance of the Office in this respect should it so desire.

The Committee’s recommendation

1. 544. In light of its foregoing conclusions, the Committee invites the Governing Body to approve the following recommendation:
   • The Committee again requests the Government to take the necessary steps, including legislative measures if necessary, to ensure that in the future the authorities give preference as far as possible to collective bargaining mechanisms in assessing matters of public interest in relation to economic benefits in clauses of public sector collective agreements. The Committee draws the Government’s attention to the availability of the technical assistance of the Office in this respect should it so desire.