Observations of the Government of the Netherlands on complaint no. 3398, VCP et al.
1.

Introduction

On 22 December 2020, the Trade Union Federation for Professionals (VCP), the Dutch Airline Pilots
Association (VNV) and the Dutch Association of Aviation Technicians (NVLT) submitted a complaint
to the ILO against the Government of the Netherlands for violating 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) in connection with the aid that the state allocated
to KLM in relation to the economic impact of the COVID-19 pandemic. The complaint is supported
by the International Federation of Air Line Pilots’ Associations (IFALPA) and the European Cockpit
Association (ECA).
2.

The complaint

The complaint lodged by VCP et al. concerns the following six alleged violations by the Dutch state
(‘the state’) of its obligations under ILO Convention No. 87 on the freedom of association and
protection of the right to organise and ILO Convention No. 98 on the right to organise and
collective bargaining.
1) The state did not consult with the social partners, or at any rate with the employees’
organisations VNV and NVLT, before setting conditions that would have consequences
for the collective labour agreements (CAOs) in force.
2) The state required KLM and the employees’ organisations (such as VNV and NVLT) to
alter the content of the then-current collective labour agreements, which had been
freely concluded by the parties. This is not in conformity with the principles of free
collective bargaining.
3) The state set conditions for KLM and the employees’ associations with respect to the
content of future collective labour agreements. This is inconsistent with the principles
of free collective bargaining. The state failed to respect the autonomy of the social
partners.
4) The state pursued political goals in attaching conditions to the state aid allocated to
KLM that affect the employment conditions laid down in collective agreements. The
state should have informed KLM and the unions of these goals and left it to KLM and
unions to decide whether and how these goals could be taken into account.
5) The state discriminated against the employees’ associations by not providing them
with the information it provided to the employer about the conditions which would be
attached to the state aid and would affect future changes in the employment
conditions. In doing so, the state undermined the right of the employer and
employees’ associations to negotiate freely. The complainants believe this is damaging
to industrial relations between the employer and employees’ associations such as VNV
and NVLT.
6) The state allegedly blocked the outcome of the collective negotiations and set and
imposed conditions which the workers’ organisations would be compelled to accept for
a long period, which is incompatible with the essence of free collective bargaining.
3.

Factual background

The complaint lodged by the trade union VCP and employees’ organisations VNV and NVLT must be
viewed in the light of the following.

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Since March 2020 the Dutch government has provided substantial financial aid in the public
interest due to the COVID-19 crisis. In most cases, the aid was general in nature, but in some
cases it was directed towards sectors that were barred from opening or provided to rescue a
specific company, such as KLM.
As in every other country, this aid was necessary to shield companies from going bankrupt as a
result of the lockdown measures imposed by the government in the interests of public health. One
of the general assistance packages introduced by the Dutch government in that period is the
Temporary Emergency Scheme for Job Retention (NOW), a contribution towards payroll costs
aimed at preserving employment. The scheme was (and remains) open to all companies. Besides
the general support packages, to prevent bankruptcy and mass job losses KLM needed an
additional individual support package in the form of a loan to be repaid and a guarantee on a
credit facility granted by a consortium of banks. To achieve a proper balance between preventing
job losses at KLM and ensuring the company’s long-term health and continuity, the state attached
conditions to the aid package, in the same way that other member states have done in similar
situations. It was necessary for KLM to reduce certain structural costs, including payroll costs, in
order to achieve a future-proof and economically balanced situation within the company. This was
the only way to avoid bankruptcy in the long run after the COVID-19 crisis.
Measure

Type of
government
support

Maximum
amounts

Amounts
drawn down
or paid out

1.0

0.277

2.4

0.665

Liquidity support 2020
-

A direct loan from the state

-

A private credit facility, with a 90%
guarantee provided by the state

Loan

NOW scheme

Grant

1.7

1.508

Deferred taxation (*)

Deferred
payment of
tax

1.37

n/a

6.47

2.45

Total (x billion Euro)

(*) On 1 October 2021 KLM began paying regular salaries tax and social insurance
contributions.

KLM’s operations have decreased sharply as a consequence of COVID-19. In comparison with the
forecast in KLM’s budget for 2020, the number of flights fell by around 50%, 90% and 80% in
March, April and May respectively. A return to the pre-crisis level of flight movements cannot be
expected in the short term. Owing to the sharp decrease in the number of flights, KLM’s financial
situation deteriorated rapidly, leading to a liquidity problem. Together with external, independent
advisers and the company, the government assessed the extent of KLM’s liquidity requirements
and in what form this need could best be met.
KLM’s comfortable cash position at the beginning of the crisis deteriorated due to a sharp reduction
in the airline’s income while expenditure remained largely unchanged. KLM tried to cut spending as
much as possible by, for example, making use of the general financial schemes and reducing its
variable expenditure. However, the ongoing fixed costs weighed heavily on the company. As it is
hard to predict precisely how the recovery of the aviation sector will proceed, various scenarios are
conceivable. That is why the government, together with the company and financial and legal
advisers, examined different scenarios and computed the financial implications in order to gauge

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KLM’s possible liquidity requirements. On the basis of the resulting information and forecasts,
calculations were carried out to determine the extra liquidity needed to enable KLM to maintain its
minimum required cash position. This scenario formed the basis for working out the details of the
selected support measures.
The government then examined with external lenders to what extent the necessary financing could
be provided by the market, and to what extent government support might be required. The
financing facilities were worked out in detail and the entire support package was approved by the
board of managing directors and supervisory board of KLM and by the board of directors of Air
France-KLM. Pre-notification contacts with the European Commission were completed in order to
test whether the intended support is in line with EU state aid rules. The formal notification was
submitted on 26 June 2020. The support package was approved by the European Commission
(see section 4, State aid). This constructive solution enabled the state to stabilise KLM’s acute
financial problems caused by the COVID-19 pandemic and mass job losses at KLM were averted in
the longer term. This also prevented economic harm to companies whose operations are related to
KLM and aviation and preserved employment in the broader sector.
The state recognises as essential and does not question the importance of the freedom of
association, the right to organise and the right of collective bargaining, as guaranteed by ILO
Conventions No. 87 and No. 98. ILO Convention No. 87 is about the right of employers and
employees to establish organisations without state interference. ILO Convention No. 98 is aimed
at, inter alia, promoting voluntary negotiation between employers’ organisations and workers’
organisations with a view to concluding collective labour agreements.
4. State aid
Like other airlines, KLM has been hit hard by the COVID-19 crisis. The airline is responsible for a
significant share of the network of intercontinental destinations served by Schiphol, the
Netherlands’ largest airport. This network is of immense importance to the Dutch economy and
employment. In this respect, KLM has an important position in society. Due to the highly
exceptional circumstances of the COVID-19 pandemic and KLM’s importance to the Dutch
economy, the government of the Netherlands decided to provide state aid to KLM in the form of a
loan to prevent an inevitable bankruptcy and mass job losses at KLM and other companies.
Conditions were attached to this state aid in order to ensure the general viability of KLM despite
the consequences of the COVID-19 crisis.
In June 2020 the Netherlands notified the European Commission of the support package for KLM.
The notified support package, totalling €3.4 billion, comprised a state guarantee for a €2.4 billion
loan to be issued by a consortium of banks and a €1 billion state loan. The state acts as guarantor
for 90% of the bank loan. KLM is obliged to repay the aid within 5.5 years.
With this support package the Netherlands aimed to provide temporary liquidity to KLM which it
needed to deal with the acute and adverse effects of the COVID‑19 pandemic so that the company
could continue operating and jobs would be spared. The Netherlands took the view that, given
KLM’s key role in the Dutch economy in terms of employment and air connectivity, bankruptcy
would lead to a serious disturbance in the Dutch economy.
The European Commission determined that the support package for KLM was aid within the
meaning of Article 107, paragraph 1, of the Treaty on the Functioning of the European Union
(TFEU) and assessed it in the light of the Temporary Framework for State Aid Measures to support
the economy in the current COVID-19 outbreak. In its decision of 13 July 2020 the Commission
declared the aid compatible with the internal market on the grounds of Article 107, paragraph 3
(b) TFEU (Decision SA.57116). Pursuant to that provision, aid that is intended to remedy a serious
disturbance in the economy of a member state can under certain conditions be deemed compatible
with the internal market.

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-See: European Commission decision Competition Policy (europa.eu)
On 19 May 2021, the General Court of the Court of Justice of the European Union annulled the
Commission’s decision approving the Netherlands’ financial aid for the airline KLM amid the
COVID-19 pandemic on the grounds of inadequate reasoning.
- See General Court, judgment of 19 May 2021 in case T-643/20, Ryanair DAC v. European
Commission, ECLI:EU:T:2021:286.
However, in view of the particularly damaging consequences of the pandemic for the Dutch
economy, the General Court suspended the effects of the annulment pending the adoption of a
new decision by the European Commission. On 19 July 2021 the Commission issued a decision reapproving the €3.4 billion in state aid for KLM and provided further reasoning in the light of the
General Court’s judgment of 19 May 2021.
In this regard, the Dutch government points out that in several other EU Member States, state aid
was granted to national airlines during the COVID-19 pandemic because of the threat of
bankruptcy. In these cases, the European Commission- and in some cases the General Courtapproved the support packages for these airlines. See for example:
-

Competition Policy (europa.eu) Lufthansa 1
Competition Policy (europa.eu) (FInnair) 2
Competition Policy (europa.eu) (Air France)
Competition Policy (europa.eu) (Air France) 3
Competition Policy (europa.eu) (Scandinavian airlines) 4

5. Support package conditions
The government can attach certain conditions to financial support, including requirements relating
to conditions of employment. One example (unrelated to state aid) is the ban on the termination
of employment contracts provided for by the NOW scheme. Without the conditions set by the
state, the support provided to KLM might have proved ineffectual as there is a considerable chance
that the company would have gone bankrupt anyway, possibly in the short term. Furthermore,
KLM would not have been able to repay the loans, which would also have been damaging to the
Dutch economy given that the state had issued a direct loan of €1 billion and provided a 90%
guarantee for the €2.4 billion bank loan.
The Dutch government would refer in this regard to the letter to parliament of 26 June 2020
(reference 2020-0000108071) which states the following:
‘As indicated in the letter to parliament of 24 April 2020, the support will be subject to conditions.
These conditions are intended to ensure effective use is made of taxpayers’ money, make the
company more competitive and achieve sustainability and quality-of-life goals. The underlying
principles were formulated in the government’s letters of 1 May and 19 June about conditions for
aid to individual companies. As outlined in those letters, the conditions will be tailored to the
circumstances of the company concerned. The following conditions have been set for KLM.
1 See General Court, 14 July 2021, judgment of 14 July 2021, in Case T-677/20, Ryanair and Laudamotion v

Commission, ECLI:EU:T:2021:465.

2 See General Court, judgment of 14 April 2021, in Case T-388/20, Ryanair DAC / Commission,

ECLI:EU:T:2021:196.

3 See General Court, judgment of 17 February 2021, in Case T-259/20, Ryanair DAC / Commission

ECLI:EU:T:2021:92

4 See General Court, judgment of 14 April 2021, in Cases T-378/20 Ryanair DAC v Commission and T-379/20

Ryanair DAC v Commission, ECLI:EU:T:2021:194: all judgments regarding the Scandinavian airlines.

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KLM will not pay dividends to the shareholders during the term of the support. In addition to the
agreed premiums and interest, it will pay an extra amount to the state upon repayment of the aid
(i.e. repayment of the direct loan and termination of the bank credit facility guaranteed by the
state) and when its financial position is sufficiently healthy. This amount will increase over the
term of the aid in order to provide an incentive for repayment by KLM at the earliest possible
opportunity (if this is a responsible course of action). Another condition is that KLM’s profitability
and competitiveness must improve. For example, KLM, together with external advisers, must, by 1
October 2020, draw up a restructuring plan that examines ways of improving its competitive
position, for example by cutting costs. KLM must achieve a 15% reduction in influenceable costs.
This plan also examines the role that KLM’s partners in the aviation industry can play in this.
Naturally, the measures described in the restructuring plan will not conflict with the other
conditions set for the company. Improving KLM’s competitiveness will also require a substantial
contribution from the staff through changes to the employment conditions. This is based on the
principle that the strongest shoulders should bear the heaviest burden. This means that employees
who earn at least three times the modal income must relinquish at least 20% of the value of their
employment conditions. Lower percentages apply to income from modal level upwards, rising
linearly to 20%. How this condition is met is a matter for the company and the trade unions.
One consequence is that bonuses for the board of managing directors and senior management are
suspended during the term of the aid.’
One of the conditions set by the state required KLM to draft an appropriate restructuring plan to
achieve a 15% reduction in influenceable costs in order to improve its competitiveness. This 15%
cost reduction is the main requirement that was assessed before the support package was finally
authorised. This condition was formulated in a way that would allow KLM to decide itself how to
meet the cost reduction requirement. In this regard, the state conveyed its view that improving
KLM’s competitiveness would require, inter alia, a substantial contribution from the staff through
changes to the employment conditions, based on the principle that the strongest shoulders should
bear the heaviest burden. It was proposed that compliance with this principle could achieved by
means of a graduated reduction in salaries. A 20% salary reduction was proposed for KLM staff
earning at least three times the modal income.
It was then up to KLM and the employees’ associations to decide how this contribution to the
required cost reduction would be fulfilled. That this graduated reduction was a proposal and not a
hard requirement is demonstrated by the fact that KLM and the trade unions did not apply a
graduated salary reduction for cockpit staff but instead, at the unions’ request according to KLM,
agreed to an equal contribution of more than 19% across the board. In this regard it should be
noted that the state has no involvement with the conflict between the employer (KLM) and the
employees (VCP et al.). After all, the state is not a party to negotiations between the employer
(KLM) and the employees (VCP et al.) with respect to the content of the collective agreements.
Given the threat of bankruptcy and the desire for certainty that all parties contribute to efforts to
avert it with the help of the state aid package, the Dutch government is of the opinion that the
condition set with regard to changes in employment conditions was justified. In the government’s
view, a review of the collective agreements in force was unavoidable. If the collective agreements
from before the COVID-19 outbreak, including the agreed salary increases, had been maintained in
full, this would have made it more difficult for KLM to meet the Dutch government’s conditions
aimed at saving the company in the period ahead and preserving employment. As stated earlier
these efforts were financed with public funds.
The state recognises as essential and does not question the importance of the right of parties
involved in the collective bargaining process to negotiate freely, as guaranteed by ILO Conventions
No. 87 and No. 98. As stated above, however, this is an exceptional situation in which state aid
was needed to avert the bankruptcy of an essential company. KLM is important for the network of
intercontinental destinations served by Schiphol Airport and, by extension, for employment in the
Netherlands, which is a public interest.

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The Dutch government would reiterate that the support package allocated to KLM is in line with
the state aid rules laid down in EU and national law. The government believes that the conditions
that the state aid is subject to do not conflict with the freedom of collective bargaining laid down in
the ILO conventions. KLM and the employees’ associations concerned were free to decide how a
contribution could be made to achieving the required structural cost reduction through changes to
the employment conditions.
-Cf. Compilation of decisions of the Committee on Freedom of Association, no. 1451 (371st Report,
Case No. 2947, para. 453).
6. General and specific salary measures
Because this case involves a specific, individual support package for a company (KLM), the
situation differs from that in many of the complaints assessed by the Committee on Freedom of
Association (CFA), which often concern general salary measures and therefore apply to all
collective labour agreements.
In regard to KLM, this is not a case of the government unilaterally imposing a general measure
that directly interferes with collective agreements that are in force. The support package is a twoway agreement between the state and KLM, which was discussed by the parties extensively and
which KLM accepted voluntarily. In a certain sense, it is comparable to the NOW scheme
introduced by the state during the COVID-19 crisis. Under this scheme, companies can apply for a
grant but must commit to a number of conditions, including a temporary ban on paying bonuses.
Another condition is the KLM must manage to reduce influenceable costs by 15% to improve its
competitiveness. To achieve this reduction and increase its competitiveness, it was necessary to,
inter alia, ask the staff to make a substantial contribution through changes to the employment
conditions, on the basis of the principle that the strongest shoulders should bear the heaviest
burden. It was up to KLM to decide how to fulfil the conditions and to consult with the trade
unions. The unions are free to refuse to accept a salary reduction, for example.
The Dutch government would point out that state aid was provided to KLM due to the highly
unexpected COVID-19 crisis, which has had a very serious impact on public health. It was
necessary to take immediate and far-reaching measures which had a major impact on the
economies of the EU member states and other countries outside Europe. This is clear from the
Temporary Framework for State Aid Measures to support the economy in the current COVID-19
outbreak, pursuant to which the state aid allocated to KLM was approved. Both the support
measures and the conditions attached to them had to be drafted and approved as quickly as
possible. The state believes that in view of the aim of ensuring the company’s long-term
continuity, and the obligation to repay the loans, it was entitled to set strict requirements for KLM.
As stated above, the support provided was not a general grant, but a very specific one, subject to
very specific conditions. In that sense, the state aid for KLM was similar in nature to the other
measures taken by the state in that all grants and support measures aimed at economic stability
or recovery were introduced to protect employment as much as possible.
On the basis of earlier assessments by the CFA, it can be concluded the CFA considers it
acceptable, in certain circumstances, for a state to set restrictions regarding the right to bargain
collectively. For example, measures of this kind can be taken at times of economic urgency,
comparable to the situation that arose during the COVID-19 crisis in connection with the pressing
financial situation that unfolded at KLM. The Dutch government would refer, for example, to 297th
Report, Case 1758, paragraph 225 :
‘225. In similar cases concerning limitations on the right to collective bargaining related to economic
stabilization measures, the Committee has recognized that when, for urgent reasons relating to national
economic interests and, in the framework of a stabilization policy, a government considers that wage rates

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cannot be settled freely through collective bargaining, such a restriction should be imposed as an exceptional
measure and only to the extent that is necessary, without exceeding a reasonable period, and it should be
accompanied by adequate safeguards to protect workers’ living standards, in particular those who are likely to
be the most affected. […] The Committee of Experts on the Application of Conventions and Recommendations
adopted the same approach in this respect. (General Survey on Freedom of Association and Collective
Bargaining, 1994, para. 260.)’

As stated above, the Dutch government is of the opinion that the ILO conventions were not
contravened. If the Committee would come to the conclusion that the situation involves a
unilateral government-imposed salary measure, the Dutch government is of the opinion that the
condition for the aforementioned exception was met given KLM’s acute financial problems caused
by the COVID-19 pandemic.
Where the effects of the aid allocated by the state to KLM have ramifications for the operation of
the collective labour agreement concluded by KLM employees and the employer prior to the
COVID-19 crisis and/or the possibility of concluding new agreements in a subsequent collective
agreement, the state believes that such effects are justified by the economic emergency at KLM
caused by the pandemic. The time frame of these effects was/is limited and directly related to the
economic situation resulting from the pandemic and the allocation of general public funds for the
purpose of, for a limited period of time, mitigating the economic impact and protecting jobs, not
just at KLM but also in related sectors. In addition, the effects are limited in scope, and do not
extend to all the matters that are normally addressed in the collective bargaining process.
Furthermore, not only were there adequate safeguards to protect workers’ living standards the aid
was allocated by the state precisely to provide this protection. It is also clear the effects of the
support measures do not extend to those in the company whose income position is most
vulnerable.
7. Defence against the complaints
In their submission, the unions have set out six complaints explaining how the Netherlands
allegedly acted contrary to their freedom of association and the right to collective bargaining
enshrined in ILO Conventions No. 87 and No. 98. For each complaint, an explanation of why the
state disagrees is given below.
1) Firstly, the complainants assert that the state did not consult with the social partners prior to
setting conditions that have consequences for the collective agreements on employment
conditions.
As explained in section 4 (State aid), the state may attach conditions to state aid. If this has
consequences for the employment conditions, it is up to the collective agreement partners to
determine how the conditions will be met, with due consideration for the crisis at hand and the
threat of bankruptcy. The state would point out that it was not under any obligation to consult with
the social partners, partly in view of the COVID-19 pandemic and the crisis situation that KLM was
in.
2) Secondly, the complainants assert that the state forced KLM and the employees’ associations to
modify the current negotiated collective agreement, in contravention of the principles of free
collective bargaining.
3) In the third complaint, the complainants allege that the State imposed boundaries on KLM and
the unions regarding future collective agreements, in contravention of the principles of free
collective bargaining.
The second and third complaints are addressed jointly below.

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As set out in section 4 (State aid), the cost-reduction condition was formulated in a way that
allowed KLM and the employees’ associations concerned to negotiate the contribution to be made
to achieving this required structural cost reduction. In this case too, the state did not interfere with
collective agreements. The condition requiring a structural cost reduction was linked to urgently
needed support measures in a highly exceptional situation. If the conditions had not been met, this
crucial support would not have been provided. Otherwise there would have been absolutely no
guarantee that the support would be effective and the taxpayer funds involved would be repaid.
The details of how this condition would be fulfilled should be viewed in that context: both the
continuity of KLM and the employment of KLM staff and personnel of many more companies
connected with it depended on that condition being fulfilled. This constituted an extremely serious
responsibility of an urgent nature for both the employer and the employees’ associations.
4) The fourth complaint alleges that the state pursued political goals in attaching conditions to the
state aid allocated to KLM which interfere with the employment conditions laid down in collective
agreements. The state should have informed KLM and the trade unions of these goals and left it to
KLM and the unions to decide whether and how these goals could be taken into account.
As laid out in this letter, the government has the authority to attach certain conditions to state aid.
In exceptional cases, requirements affecting employment conditions may be set. The state’s
motivation for setting these conditions was to prevent KLM from going bankrupt and to avert job
losses. In the state’s view, saving this company, and in doing so preventing repercussions that
would have affected broader national economic interests, preserving employment, and ultimately
protecting the income security of a large group of workers, was not a political goal but rather a
very social goal. It is in that context too that an agreement needed to be reached by the state and
the company, as well as by the employer and the employees’ associations (under pressure of
time).
5) In the fifth complaint, the complainants assert that the state undermined effective collective
negotiations between the employer and the unions by providing information about the state aid
conditions pertaining to employment conditions to the employer only and not to the unions. This,
they assert, was contrary to the principle of non-discrimination.
As explained in section 4 (State aid), the state attached conditions to the financial support for
KLM. The state discusses financial support and conditions with the recipient, in this case the
company, which is also the employer. Then it is up to the employer and the employees’
associations to discuss methods for and the feasibility of meeting the conditions attached to the
support package. It is not the state’s place to enter into negotiations on this matter with the
employees’ associations, nor to provide them with information about the support or the attached
conditions.
6) In the sixth complaint, the complainants allege that the state effectively blocked the outcome of
the collective negotiations and set and imposed conditions which the workers’ organisations would
be compelled to accept for a long period, which is incompatible with the essence of free collective
bargaining.
The state disputes this characterisation and refers to its response to complaints 1 to 5.
As regards the assertion that the conditions have a long time line, the Dutch government would
point out that the conditions for state aid are, of course, linked to the loan repayment obligations.
In determining the repayment term, account was taken of KLM’s viability, which is dependent on
compliance with the conditions attached to the support package, certainly during the term of the
loans. In addition, the Dutch government would note that the complainants’ assertion with respect
to the commitment clause is incorrect. KLM was required to draft a restructuring plan that included
measures to achieve a 15% reduction in costs. Reducing staff costs is one element of the plan. The

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Dutch government assessed the restructuring plan to verify whether the 15% cost reduction would
be achieved within a certain period of time.
8. Conclusion
The Dutch government requests that the ILO declare the six complaints unfounded given that
violation of Conventions No. 87 and No. 98 has not been demonstrated or must be deemed
acceptable given the exceptional circumstances described above.

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