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The SE remains an ambitious European project

The debate on the Ernst&Young study, initiated by the European Commission on 26 May 2010 with around 120 participants, has not confirmed the Study's findings related to the role of workers’ participation as a ‘negative driver’, particularly detrimental to the attractiveness of this European company form. The Study’s sweeping conclusions were revised and subjected to detailed examination in particular via the contributions of practitioners, from both the employers’ and the employees’ sides.

The Study on the operation and impacts of the Statute for a European Company (SE), prepared by the European Commission (published at the end of March 2010), contains proposals on, among other things, how the European Company could be made more attractive1 . The basic idea behind the proposals is to make this core component of European company law more flexible, simple and transparent for its users than hitherto. However, this aim misjudges the special character of the SE: it links rules on enterprise management in a European-scale company to the regular participation of its employees by means of an SE works council and to the possible presence of interest representatives in an SE’s management bodies. In this way the SE legislation reflects the policy compromise accepted hitherto in Europe, which enables the employees to participate in the corporate governance of the SE through information, consultation and codetermination rights. Until there are industrial relations at the European level and European harmonisation of forms of worker participation at the transnational level, and these remain largely confined to the national level, workers’ participation at the transnational level will continue to consist of a compromise. It has to be negotiated case by case, on the basis of standard rules which establish a fallback position if negotiations fail. It should also be noted that, as far as company law is concerned, the SE has to adapt itself to 27 legal regimes in the EU member states.

The SE, therefore, is and remains an extremely ambitious European project. In the meantime, pioneers have helped it to spread significantly. Instead of measuring these pioneering efforts by the standard of a desirable Europeanisation, the commissioners and authors of the SE study simplify matters too much in their efforts to determine what is likely to hinder the establishment of SEs and what is likely to promote it, based on which they formulate proposals to simplify the legal basis. The clear purpose is to adjust downwards the legal entitlements related to SEs in order to make the SE form more attractive by making it more flexible, and for all economic actors, regardless of their intentions. The danger is that in this way the opposite could be achieved: the reputation of the SE could suffer in the eyes of important European-scale companies, if any interested party can take advantage of this area of European law without further ado, regardless of motive: whether, for example, they wish to organise family assets more conveniently, shield the company from external control, ‘optimise’ taxation or simply do a good deal by selling SE shelf companies.

Such an approach, especially in times of crisis, in which there are calls for better quality and control with regard to enterprise management, is going in the wrong direction. This is illustrated particularly clearly by the way in which Ernst & Young’s study deals with the key element of workers in the SE. The statutory procedures and necessary negotiation processes related to workers’ participation are emphasised as a ‘negative driver’, particularly detrimental to the attractiveness of this European company form.

The debate on this study, initiated by the European Commission on 5 May 2010 with around 120 participants, has not confirmed these findings2 . The Study’s sweeping conclusions were revised and subjected to detailed examination in particular via the contributions of practitioners, from both the employers’ and the employees’ sides.

Leading managers of SEs (Elcoteq SE, Chubb Insurance International of Europe SE, SCOR SE and Allianz SE) took as their yardstick whether or not, and to what extent, the application of European legal forms allows them to pursue their business aims in the Single Market more easily and efficiently. In particular, the option of cross-border merger with subsequent transfer of seat (Chubb, Elcoteq); the freedom to maintain or change the company structure; and the simplification of the transnational restructuring of business and enterprise (SCOR, Allianz) were emphasised as reasons for making use of the SE. For the first time, the SE offers an opportunity to smoothly transfer the company seat within Europe. In the meantime, that has also become possible through the Directive on Cross-Border Mergers: many expressed the view that today they would take this route. The Statute on a European Private Company, as well as a further European directive on cross-border transfer of seat are already on Europe’s policy agenda.

Workers’ representatives from SE supervisory boards (BASF SE, Fresenius SE) pointed out the advantages which enterprises can derive from their close involvement via codetermination in the SE supervisory board and the transnational SE works council ‘at eye level’ with the company’s European decision-making centre: readier acceptance by the employees of changes in the interests of the company and the expansion or maintenance of jobs. However, enterprises would not have been able to achieve this positive development of their now transnational corporate culture without statutory safeguards on workers’ participation in the SE.

The practitioners also expressed themselves clearly, in accordance with their particular standpoint and circumstances, with regard to how Europe could help them better: for example, more binding accounting rules at the European level, a uniform European business tax, less reference to national company law and consequent bureaucratic procedures. The employer side talked about its statutory obligations with regard to the cost of workers’ participation procedures, which they believe could be reduced.

However, the participation of employees in the SE was regarded, from practical experience, as useful and not as a nuisance. In order that a discussion take place on adapting the law in this respect, it is urgently necessary that the European Commission invite the European social partners to a consultation on this topic. The ETUC representative made this point at the conference.

In general, the practitioners in particular were unwilling to be talked out of the benefits of the SE for enterprises, for all its faults – the SE was presented as a successful model, particularly for larger enterprises subject to reporting requirements. Telling in this respect was the proposal to develop a kind of special quality assurance certificate for SEs.

Against this background, the debate at the SE conference often became a rather abstruse academic talking shop for European company lawyers. Stimulated by the picture presented by the study of the utilisation of the SE legislation for a wide range of purposes, primarily reflected in the large number of so called UFO or shelf SEs, many aspects related to the greater flexibility of the SE legislation were depicted for all potential and interested users, including individuals who are only seeking a European label or tax saving vehicle for their primarily local business.

One participant identified himself as a prolific SE incubator from the Czech Republic, responsible for a large number of ‘ready made’ SEs. He described the success of his SE founding business model, for which there is clearly a market. More to the point, this is within the framework of the current SE legislation. Furthermore, as a side issue, these SE foundations are not for the specific purpose of circumventing employees’ rights. To aid clarification, it should be specified that the activation of a shelf SE amounts to a ‘structural change’. This would ensure that in such a case workers’ participation is to be negotiated, whether for the first time or once more.

The debate on the flexibilisation of European company law needs to be taken seriously. The discussion on providing the SE with a cousin, via the Statute for a European Private Company (SPE), split on whether to allow European companies to register officially in one EU member state, while maintaining or establishing their head office in another EU member state. Furthermore, it is still up for question whether entrepreneurs should be allowed to establish such European companies ‘ex nihilo’ and without a cross-border dimension to its business activities. Advocates emphasised the increased flexibility of such liberal regulations, permitting every enterprise to choose the legal form that suits it, also in response to the limitations of national company law. However, this brought the critics of this approach into the field: it is not only the representatives of national governments who worry that, in this way, the door is opened even wider for ‘regime shopping’. Standards under national law, including on workers’ participation at the enterprise level, would come under tremendous pressure to adapt themselves to the new flexibility from Europe. Companies could then freely decide where they establish themselves and where they pay their taxes. The consequences of a stronger European jurisdiction interpreted in this way, including for the social policy leeway of EU member states, would be grave and where they would lead cannot be foreseen. There is therefore a strong case for European policy to implement, on a priority basis, the evaluation of the social consequences of new European laws laid down in the new European Treaty, before such a step is taken, leading to further flexibility solely for enterprises.

If we can interpret the closing commentary of the new EU Single Market Commissioner Michel Barnier in this way, the debate on this special, but undoubtedly momentum-generating area of European legislation will have been worth it: the ‘great European market’ must offer something to all participants, not only for large companies, but also for citizens, consumers, workers and small businesses. This also applies to SEs and measures taken to increase their number. Barnier therefore understands and accepts the great vigilance of the European trade unions with regard to his proposals in the area of European company law.

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