The beginning of the new century was overshadowed by the Taff Vale Railway case that blew up in 1901, threatening the foundations of the whole trade union movement. The Taff Vale Railway Company sued the Amalgamated Society of Railway Servants (ASRS) for wrongs done by its agents, and sought an injunction against it. It had been thought that the Trade Union Act 1871 and the Trade Union Amendment Act 1876 afforded absolute protection to union funds, as trade unions were not incorporated. The company won the case and it was upheld on appeal to the House of Lords; the ASRS was forced to pay £42,000 in costs and damages. The Quinn v. Leatham case further weakened the position of the trade unions, holding that a strike or boycott, or the threat of such action, could in certain circumstances be held as a conspiracy, and unions could be sued for damages. The trade unions and their supporters, especially Charles Dilke, began to campaign for legislation to remedy the case law. Both Dilke, the radical Liberal Member for the coal mining constituency of the Forest of Dean, and David Shackleton brought in bills to secure protection of the trade unions, but they were heavily defeated.

The Prime Minister, A. J. Balfour, was of the opinion that a change in the law was not necessary, but in response to pressure from the trade unions he set up the Royal Commission on Trade Disputes and Trade Combinations in 1903.