UK Presidency tables compromise proposal for European Company Statute

In March 1998, the UK Presidency of the EU issued a new proposal aimed at reinvigorating the stalled negotiations on the aspects of the European Company Statute relating to employee involvement rights.

The UK EU Presidency of the first half of 1998 has issued a proposal aimed at breaking the 25-year deadlock on European Commission proposals for the establishment of a European Company Statute. The Statute would enable European multinational undertakings to operate under rules governed by EU company law, rather than a diverse set of different regulations in different Member States. It is also envisaged that such companies should benefit from a special tax status, thus increasing their competitiveness in the world market. Although the fine details of the status of such a structure in company law are yet to be ironed out, most of the controversy which has stalled this proposal has centred around the issue of worker involvement in such a new structure. In 1996, a high-level expert group was set up by the Commission with the aim of developing solutions to this problem which would assist in breaking the deadlock, particularly in respect of those countries which feared that such legislation would undermine strong national involvement rights, as well as objections from those countries which currently have no legal mechanisms for ensuring employee involvement.

The so-called Davignon group reported in May 1997, recommending that priority should be given to free negotiations between management and employee representatives as to which system of worker involvement should apply in each European Company (EU9705128N). The report recommended that only if such negotiations fail should minimum requirements come into force - an approach similar to that taken by the 1994 European Works Council (EWC) Directive.

The Davignon report succeeded in restarting the debate on the European Company Statute, with the Luxembourg Presidency of the second half of 1997 producing a new compromise text of the Statute's involvement provisions, based heavily on the Davignon proposals. However, the discussions within the Council of Ministers once again ran into difficulties (EU9710158N).

The British Presidency's draft compromise text, addressed to the Council's social questions working party in March 1998, differs from the Luxembourg proposal in a number of ways. With regard to the "special negotiating body" (SNB) which will be charged with negotiating with management the form that employee involvement should take, the new text - like the Luxembourg proposal - follows the provisions of the EWC Directive in stipulating that one representative from each Member State which has an undertaking participating in the European Company will automatically be entitled to one seat. However, unlike the EWC Directive, there would also be a set formula for distributing extra seats on the SNB in the European Company. The new UK proposal has a different formula than its predecessor: one additional seat for each Member State in which 10% of the workers are employed; two extra seats for each country where 20% of the workers concerned are employed; and so on up to nine additional seats. The proposal also accords a role to European-level trade unions, which would be able to play an advisory role during negotiations. The SNB could decide by a majority not to open negotiations, and different configurations for achieving this majority are envisaged by the proposal. Should the decision be taken not to open negotiations, a two-year period has to elapse before SNB negotiations can be reopened.

All the recent European Company Statute proposals make a distinction under the general heading of employee involvement between arrangements for worker information and consultation (eg through works council-type bodies) on the one hand and worker participation on company administrative or supervisory boards on the other. The Luxembourg compromise had suggested that the "standard rules" to apply where no agreement on involvement is reached should contain both information and consultation provisions differing somewhat from those of the EWC Directive, and a minimum employee representation of one-fifth of the members of the European Company's relevant board. The UK Presidency's proposal instead suggests information and consultation provisions very close to those of the EWC Directive, and more flexible provisions on board-level worker participation: in the absence of agreement, the employee representation on the board will be equal to the highest level found in any of the participating companies (unless this is opposed by a certain proportion of SNB members).

This compromise proposal was due to be negotiated in the Council working groups prior to being tabled at the Labour and Social Affairs Council on 6 April.

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