Bid to end company statute deadlock

Date: 05/09/1996

By Michael Mann

SOCIAL Affairs Commissioner Pádraig Flynn is looking to Ireland's EU presidency to break the 26-year deadlock which has prevented agreement on general Union guidelines for establishing “European companies”.

But efforts to forge a deal could founder on major philosophical differences between Germany and the UK.

Flynn will report to ministers later this month on recent talks aimed at bringing the warring parties closer to a compromise to unblock the long-delayed proposal for a European Company Statute.

This would allow multinationals to operate as a single unit across the Union rather than having to set up individual holding companies in each of the 15 member states.

Along with three sister proposals, the plan has been held up by a bitter dispute between Bonn and London over the extent to which workers should be consulted by management.

Governments have also expressed concern that firms would be tempted to establish their head offices in member states with the lowest corporate tax rates.

The Commission estimates its proposed measures could save European business several billion ecu a year and believes the company statute directive is crucial if private capital is to be attracted to a number of Trans-European Network (TENs) projects.

Commission President Jacques Santer made agreement on the statutes proposal one of the priorities of his much-vaunted “confidence pact” for employment.

Officials from Directorate-General V (social affairs) and DGXV (internal market) have been talking extensively to those countries with particular difficulties over the worker participation provisions of the draft legislation.

Discussions have been based around last November's report which suggested removing the consultation provisions from the blocked statutes on European firms, associations, cooperative societies and mutual societies, and establishing instead general EU rules on worker consultation in national undertakings.

Accepting that attempts to agree the proposals as they stand “seem to offer little hope of progress”, Flynn is looking to build on the precedent set by the agreement in 1994 on the Works Council Directive.

The Commission's latest initiative called on business and the social partners to consider the possibility of extending the works council model to new national enterprises.

In a proposal which caused fury in London, it also aired the possibility of barring European companies from establishing themselves in member states which have not adopted the works council directive.

This would have singled out the UK, with its opt-out from the Social Protocol.

But few are sticking their necks out so far as to forecast a successful conclusion by the end of the Irish presidency in December.

Germany still wants its system of “co-determination” to be adopted by the EU as a whole. Bonn was far from satisfied with the Commission's text because it only talked about “consultation” rather than full “participation” for workers, something which is complete anathema to the British government.

In recent speeches, Flynn has made it clear that he feels the potential for a successful outcome lies in the proposals for information and consultation of employee representatives rather than full worker participation.

He is also clear about what is at stake. “Good worker involvement is fundamental to a successful single market,” he said, adding ominously that “without a breakthrough, we will have to admit that the debate has reached an insurmountable impasse”.

German People's Party MEP Winfried Menrad, the European Parliament's rapporteur on the Commission communication, is sceptical that a general EU-wide framework on consultation can be hammered out in the short-term.

Warning of the danger that businesses will be forced to relocate their headquarters, Menrad suggests using works councils as the model for all forms of worker consultation, rather than supporting demands for Germany's system to be imposed on other member states with less of a tradition of worker involvement.