European Company Statute in focus

During 2002, the governments of the EU Member States and the social partners are examining the implementation of the European Company Statute – the recent EU measure which allows for the creation of a new type of company incorporated at European level and regulates the employee involvement arrangements to apply in such firms.

On 8 October 2001, the Employment and Social Policy Council of Ministers adopted Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (or Societas Europaea, SE) and Council Directive 2001/86/EC supplementing the Statute for a European Company with regard to the involvement of employees (both were published in the Official Journal of the European Communities on 10 November 2001) (EU0110203N). Member States must adopt the laws, regulations and administrative provisions necessary to comply with the Directive by 8 October 2004 (the date that the ECS Regulation, which is directly applicable in the Member States, comes into force), or ensure by then that management and labour introduce the required provisions by agreement.

The ECS Regulation gives companies the option of forming a European Company (SE) which can operate on a Europe-wide basis and be governed by Community law directly applicable in all Member States (rather than national law). The Directive lays down the employee involvement provisions to apply to SEs – providing for negotiations between management and employee representatives in each SE on the arrangements to apply, with a set of back-up statutory 'standard rules' where no agreement is reached. Involvement constitutes the information and consultation of employees and, in some cases, board-level participation.

Key points

Very briefly, the main provisions on worker involvement in European Companies are as follows.

  • SEs may be set up by two or more EU-based companies from different Member States (or with operations in another Member State, in some cases) by merger, or by creation of a joint holding company or subsidiary. A single EU-based company may transform itself into an SE, if for at least two years it has had a subsidiary governed by the law of another Member State. A company based outside the EU may (if individual Member States so decide) participate in the formation of an SE, provided that it is formed under the law of a Member State, has its registered office in that Member State and has 'a real and continuous link' with a Member State's economy.
  • Employee involvement arrangements – information and consultation, along with board-level employee participation in some circumstances – must generally apply in all types of SE (though some aspects differ according to the way the SE was created).
  • Companies participating in the formation of an SE must hold negotiations over the employee involvement arrangements with a special negotiating body (SNB) made up of employee representatives. The SNB is composed of elected or appointed members, with seats allocated in proportion to the number of employees employed in each Member State by the participating companies. The basic rule is that Member States have one seat for every 10%, or fraction thereof, of the total EU workforce of the participating companies employed there.
  • The negotiations should lead to a written agreement on the employee involvement arrangements. If these arrangements involve a reduction of existing board-level participation rights which cover a certain proportion of employees (25% of the total workforce of the participating companies in the case of SEs established by merger, and 50% in the case of SEs established by creating a holding company or subsidiary), this must be approved by a special two-thirds majority of SNB members (from at least two Member States).
  • The SNB may decide (again by a special two-thirds majority) not to open talks, or to terminate talks in progress – in which case existing national information and consultation rules (including those transposing the European Works Councils Directive (94/45/EC) will apply (this option does not apply to some SEs formed by transformation).
  • Where the SNB and management reach an agreement, this should essentially set up a 'representative body' (RB) similar to a European Works Council (EWC) or an information and consultation procedure. If the parties so decide (and compulsorily in some cases), the agreement may also set out the rules for board-level participation. In SEs established by transformation, the agreement must provide for at least the same level of all elements of employee involvement as existing within the company to be transformed.
  • SNB negotiations must be completed within six months, which may be extended to a total of one year by agreement. If no agreement is reached, or the parties so decide, a statutory set of 'standard rules' will apply, providing for a standard RB – similar to the statutory EWC laid down in the EWCs Directive's subsidiary requirements. The standard rules also provide for board-level participation in certain circumstances where this existed in the participating companies.
  • The Directive also lays down rules on issues such as confidentiality, protection of employee representatives, its relationship with other provisions and compliance.


As stated above, the Directive on worker involvement in SEs must be implemented in the EU Member States by October 2004. Moreover, the European Economic Area (EEA) joint committee is expected to extend the Directive and Regulation to the other three countries of the EEA – Iceland, Liechtenstein and Norway. The Commission has convened a group of national experts to draw up guidelines for the transposition of the Directive, similar to the working party which helped coordinate transposition of the EWCs Directive. The group has met on several occasions and is considering issues such as: the necessity for all Member States to implement the Directive simultaneously; the distinction between implementing provisions with transnational and national scope; concepts such as 'employees', 'employees' representatives', 'information' and 'consultation'; and the relationship of the Directive with other provisions.

European-level social partner organisations have started to prepare for the implementation of the ECS, with trade unions especially seeking to develop a strategy to deal with the new worker involvement opportunities. For example, the European Trade Union Confederation (ETUC) held a seminar on worker involvement in the European Company in January 2002, examining issues such as: the composition and rights of the SNB; employers' likely strategies; and trade union demands in negotiations. ETUC plans to use the period until the ECS comes into force in 2004 to prepare its members for negotiations and identify the practical challenges. It has published a series of papers on various aspects of the ECS. The ETUC-linked European Trade Union College (ETUCO) is holding a workshop in December 2002 on the impact of the ECS and workers' input into the involvement arrangements, as well as the training needs of employee representatives.

At European sectoral level, UNI-Europa, the European regional organisation of Union Network International (which groups white-collar and service sector unions) is also developing its policy on the ECS, with the aim of building up a structure to support affiliated unions and workers in negotiations. The European Metalworkers' Federation (EMF) has adopted a policy of seeking to achieve the highest possible level of participation and co-determination in SEs and to ensure a coordinated European approach by its affiliates.

National-level debate on the ECS seems to have been slow to get under way, but there are indications that it is now starting in some countries. For example, on 9-10 April 2002, two Austrian trade unions - the Union of Salaried Employees (Gewerkschaft der Privatangestellten, GPA) and the Metalworking and Textile Union (Gewerkschaft Metall-Textil, GMT) - held a seminar in Vienna on the ECS, examining issues including: the role of unions in the process of transposition into national law; preparing for future negotiations on involvement in SEs; and the support that should be given to employee representatives.


The adoption of the ECS after some 30 years of debate was doubtless a highly significant development in both EU company law and social policy. Along with the EWCs Directive and the new Directive (2002/14/EC) on national information and consultation rules (EU0204207F), the ECS involvement Directive constitutes part of what is now a quite comprehensive framework of EU law on employee involvement arrangements at both European and national levels.

The information and consultation provisions of the ECS involvement Directive are broadly similar to those of the EWCs Directive, though with some important differences. For example, the ECS involvement Directive:

  • provides a stronger definition of consultation and (unlike the EWCs Directive) defines information;
  • lays down rules on the composition of the SNB and statutory RB (based on the standard rules) which are more clearly based on the number of employees in the various countries than the provisions of the EWCs Directive;
  • provides for briefer SNB negotiations – six months (or one year by agreement), compared with three years under the EWCs Directive – and places the responsibility on management to initiate the talks;
  • explicitly allows external trade union officials to act as SNB members and experts (unions are not mentioned in the EWCs Directive); and
  • gives stronger information and consultation rights to statutory RBs than those granted to statutory EWCs.

It is possible that these differences may indicate the direction of amendments to the EWCs Directive that the European Commission is due to propose in 2002.

Aside from information and consultation, the possibility opened up by the ECS involvement Directive of European-level employee participation on company boards is entirely novel. It may thus allow for the development of unprecedented forms of transnational employee involvement.

Attention now turns to the transposition of the involvement Directive in the Member States over the two years or so up to the October 2004 implementation deadline. Furthermore, the key factor in whether SEs – and their specific transnational worker involvement arrangements - will become widespread is the extent to which companies decide to take up the option to incorporate at EU level. As yet, there is no indication of the level of corporate interest in becoming a European Company. (Andrea Broughton, IRS)

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