Delays in implementing the EU company law regulation

Slovenia, along with some other EU Member States, did not meet the transposition deadline of 8 October 2004 for the Statute for a European Company Directive (SE Directive) or make the necessary changes to comply with the SE Regulation by that date. The implementation of the SE Directive has made no visible progress until 6 October 2005 when the government adopted a draft of a new Law on Companies (draft new LC) and submitted it to the parliament for the first reading. Slovenia received a warning earlier this year from the European Commission to speed up the implementation process. The draft LC implements the SE Regulation and foresees a one-tier management structure for all Slovenian joint stock companies alongside the existing two-tier structure now compulsory for larger joint stock companies. This enables the implementation of the SE employee involvement Directive by adopting a special law. However, some experts claim that a one-tier management structure will destroy the board-level employee representation.

EU Council Regulation (EC) No. 2157/2001 on the Statute for a European Company (hereinafter the SE Regulation) gives companies the option of forming a European Company (Societas Europaea, 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). It came directly into force across the EU on 8 October 2004.

By the same date, Member States had to transpose into national law Council Directive 2001/86/EC supplementing the Statute for a European Company with regard to the involvement of employees (hereinafter the SE Directive) (EU0206202F), or ensure that by then management and labour had introduced the required provisions by agreement. The Directive lays down the employee involvement provisions to apply the SEs - providing for negotiations between the 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.

Slovenia, along with some other EU Member States, did not meet the transposition deadline of 8 October 2004 for the SE Directive or make the necessary changes to comply with the SE Regulation by that date (SI0501303F). The implementation of the SE Directive has made no visible progress so far. Slovenia is now one of the slowest EU Member States as regards implementation of the SE Regulation and the accompanying Directive and was warned earlier this year by the European Commission to speed up the process.

On 6 October 2005 the government adopted a draft new Law on Companies (draft new LC), which implements the SE Regulation, and submitted it to the parliament for the first reading. The draft new LC thus forms a basis and is therefore a prerequisite for the drafting of a special law, which will implement the SE Directive.

Implementation process

The implementation process of the SE Regulation and the SE Directive has been examined by Janja Bedrac of the Faculty of Law at the University of Maribor (Pravna fakulteta, Univerza v Mariboru, PFUM) in a country report on Slovenia for the SEEUROPE project on 'Workers participation at board level in the European Company (SE)', conducted by the European Trade Union Institute (ETUI) and co-funded by the Hans Böckler Foundation.

The update of the report states that the implementation process of the SE Regulation in Slovenia began in November 2004 when the government announced amendments to the Law on Companies (LC). However, in December 2004 the amending law was passed without any provisions on the SE. The implementation of the SE Regulation had made no visible progress until the beginning of October 2005. The reasons for this delay lie in the major impact of the SE Regulation and the SE Directive on Slovenian law because the LC has so far not allowed one-tier management structure in larger joint stock companies.

On 6 October 2005 the government adopted a draft new LC and submitted it to the parliament for the first reading. The existing LC has been in force for 12 years already and has been amended eight times during this period. The Ministry of the Economy (Ministrstvo za gospodarstvo, MG) is of the opinion that the existing LC is therefore not transparent and calls for comprehensive renovation.

The draft new LC brings two main innovations to the corporate legislation. The first one implements the SE Regulation. The second one foresees a one-tier management structure for all Slovenian joint stock companies alongside the existing two-tier structure now compulsory for larger joint stock companies (those having the average yearly number of employees greater than 500 etc.). In this way the companies will have the possibility of choosing between the two-tier and the new one-tier structure.

The SE Directive will be implemented by enacting a special law, similar to the way the Law on European Works Councils (SI0409102F) (SI0208103F) transposed the requirements of the EU Directive (94/45/EC). The Ministry of Labour, Family and Social Affairs (Ministrstvo za delo, druzino in socialne zadeve, MDDSZ) is preparing a draft of this special law. It is currently in the final stages of preparation and has not yet been adopted by the government and submitted to the parliament for the first reading. However, its content depends on the new LC, and therefore the MDDSZ must wait to complete the draft until the content of the new LC is determined by the parliament.

Trade union reaction

Some experts argue that the introduction of the one-tier structure is necessary in order to implement the SE Regulation, which is not true (this is not required by the SE Regulation). The MG states that the regulation of management in SE makes it possible to choose between the one-tier and the two-tier structure. The SE shareholders will determine their choice of either of the two structures by a statute. In this way the dogma that the legislator must select and determine the management system of a company and the structure and competences of the bodies has fallen. Therefore, there is also no need that the legislator should determine the one-tier or two-tier system for domestic companies.

Trade unions are of the opinion that the introduction of the one-tier structure is in fact an attempt to demolish the board-level employee representation in Slovenia (SI0312101F) through the new LC. The draft new LC also includes changes concerning the board-level employee representation. These changes should instead be dealt with by amending the Law on the Participation of Workers in Management (LPWM), which was adopted in 1993 and is the key law on employee participation in Slovenia. In contrast to the draft new LC, the existing LC includes no provisions on employee participation.

These changes were deliberately not submitted for discussion to the Economic and Social Council of Slovenia (Ekonomsko socialni svet Slovenije, ESSS), the country's central body for tripartite cooperation (SI0207103F) and no relevant social actors such as trade unions were consulted before 6 October 2005 when the government adopted the draft new LC and submitted it to the parliament for the first reading. The draft new LC was only discussed at the 138th session of the ESSS held on 4 November 2005. No trade union’s critical comments and proposals were taken into account. Gregor Miklic, Executive Secretary of the Union of Free Trade Unions of Slovenia (Zveza svobodnih sindikatov Slovenije, ZSSS) (SI0210102F) responsible for labour law and employment policy issues, said that the ZSSS is not against the one-tier system. However, the ZSSS is against the reduction of workers’ codetermination (participation in management). ZSSS therefore demands the transfer of the provisions on board-level employee representation from the draft LC to the LPWM.

According to the Delo daily newspaper, Mato Gostisa, President of the Association of Employees’ Councils of Slovenian Companies (Združenje svetov delavcev slovenskih podjetij, ZSDSP) said that Germany and Austria enacted only those elements of the one-tier structure that are necessary for the functioning of the SE and the two-tier structure still applies for domestic companies.

Commentary

The introduction of a one-tier management structure for all Slovenian joint stock companies alongside the existing two-tier structure will significantly affect the current regulation and practice of board-level employee representation in Slovenia. The potentially affected actors, trade unions and the ZSDSP, have reacted strongly against the described changes. Therefore, further delays in the implementation of the SE Regulation and the accompanying directive are possible (this issue will be discussed fully in the forthcoming contributions) (Stefan Skledar, Institute of Macroeconomic Analysis and Development).

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