Judgment;Abstract — ECLI:EU:C:2022:800
Date: 2022-10-18
Language of the case: German
Court formation: Grand Chamber
Subject matter: Right of establishment;Freedom to provide services
Procedure: Reference for a preliminary ruling
Origin: Germany

Translation C-677/20 – 1 
Case C-677/20 
Request for a preliminary ruling 
Date lodged: 
11 December 2020 
Referring court or tribunal: 
Bundesarbeitsgericht (Germany) 
Date of the decision to refer: 
18 August 2020 
Applicants: 
Industriegewerkschaft Metall (IG Metall) 
ver.di – Vereinte Dienstleistungsgewerkschaft 
Other parties concerned: 
SAP SE 
SE-Betriebsrat der SAP SE  
  
BUNDESARBEITSGERICHT (FEDERAL LABOUR COURT) 
[…] 
ORDER 
[…] 
In the court-order proceedings with the parties concerned 
1. Industriegewerkschaft Metall, […] 
[…] Frankfurt am Main, 
Applicant, appellant and appellant on a point of law 
2. ver.di – Vereinte Dienstleistungsgewerkschaft, […] Berlin, 
EN 
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Applicant, appellant and appellant on a point of law, […] 
3. SAP SE, […] Walldorf, 
[…] 
4. SE-Betriebsrat der SAP SE (SAP SE Works Council), […] Walldorf, 
[…] [Or. 2] 
5. Konzernbetriebsrat der SAP SE (SAP SE Group Works Council), […] 
Walldorf, 
[…] 
6. Deutscher Bankangestellten-Verband e. V., […] Düsseldorf, 
7. Christliche Gewerkschaft Metall (CGM), […] Stuttgart, 
8. Verband angestellter Akademiker und leitender Angestellter der 
chemischen Industrie e. V., […] 
[…] Cologne, 
the First Chamber of the Federal Labour Court […] ordered as follows: 
I. The Court of Justice of the European Union is requested pursuant to 
Article 267 TFEU to provide an answer to the following question: 
Is Paragraph 21(6) of the Gesetz über die Beteiligung der Arbeitnehmer in einer 
Europäischen Gesellschaft (German Law on involvement of employees in a 
European company), which determines that, in the case where an SE [Societas 
Europaea; European Company] with its registered office in Germany is 
established by means of transformation, a separate selection procedure for persons 
nominated by trade unions for a certain number of supervisory board members 
representing the employees must be guaranteed, compatible with Article 4(4) of 
Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a 
European company with regard to the involvement of employees? 
II. The proceedings in the appeal on a point of law are stayed pending the 
decision of the Court of Justice of the European Union on the request for a 
preliminary ruling. [Or. 3] 
Grounds 
IG METALL AND VER.DI 
 
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A. Subject matter of the main proceedings 
The parties concerned are in dispute – in so far as relevant for the proceedings to 
refer for a preliminary ruling – regarding the effectiveness of provisions in an 
agreement concluded between the employer and the special negotiating body on 
the involvement of employees in a Societas Europaea (Agreement on employee 
involvement) within the meaning of Paragraph 21 of the German Law on 
involvement of employees in a European company (the SEBG). 
The employer (third-named party concerned) is an SE with a two-tier board 
system. It has an SE Works Council (fourth-named party concerned) and a Group 
Works Council (fifth-named party concerned). The applicants are two trade 
unions represented in the employer’s undertaking. Other trade unions represented 
among the employer’s workforce or within its group are also parties to the 
proceedings (parties named under 6. to 8.). 
The employer originally had the legal form of an Aktiengesellschaft (private 
company limited by shares) under German law. In accordance with point 2 of the 
first sentence of Paragraph 7(1) of the Gesetz über die Mitbestimmung der 
Arbeitnehmer (German Law on employee participation; ‘the MitbestG’), it had a 
Supervisory Board consisting of eight members representing the shareholders and 
eight members representing the employees. In accordance with point 2 of 
Paragraph 7(2) of the MitbestG, the Supervisory Board members representing the 
employees included six employees of the undertaking and two trade union 
representatives. The two trade union representatives were nominated by the trade 
unions represented within the employer’s group and elected in an election process 
held separately from that for the other six Supervisory Board members 
representing the employees in accordance with Paragraph 16(2) of the MitbestG. 
In 2014, the employer was transformed into an SE. Since that time, it has had a 
Supervisory Board composed of 18 members. In accordance with the Agreement 
on employee involvement concluded on 10 March [Or. 4] 2014 by the employer 
and the special negotiating body, nine of the Supervisory Board members are 
employee representatives. The Agreement provides for more detailed 
requirements regarding how these members are appointed. According to Part II, 
point 3.1, of the Agreement, only SAP employees or representatives of trade 
unions represented within the SAP Group may be nominated and appointed as 
employee representatives on the Supervisory Board. The trade unions are also 
entitled to an exclusive right of nomination for a certain number of the employee 
representatives allotted to Germany according to Part II, point 3.3, of the 
Agreement; the individuals whom they have nominated are elected by the 
employees in a separate election process. 
Part II, point 3.4, of the Agreement also contains provisions for the formation of a 
supervisory board reduced to 12 members. In this case, the Supervisory Board 
must include six employee representatives. The employee representatives in the 
first four seats allotted to Germany are elected by the employees working in 
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Germany. The trade unions represented in the employer’s group may also make 
nominations for some of the seats allotted to Germany; however, no separate 
election process is held for the individuals whom they have nominated. 
In the court-order proceedings initiated by the applicants, they asserted that the 
provisions in the Agreement on employee involvement concerning appointment of 
the employee representatives in a twelve-member supervisory board are invalid. 
They hold the view that those provisions breach Paragraph 21(6) of the SEBG, as 
the trade unions are not granted an exclusive right to nominate employee 
representatives on the Supervisory Board, in other words, this right is not 
safeguarded by means of a separate election process. 
The employer holds the view that the trade unions’ exclusive right of nomination 
provided for in Paragraph 7(2), in conjunction with Paragraph 16(2), of the 
MitbestG is not protected by Paragraph 21(6) of the SEBG. 
The lower courts rejected the applicants’ claims. With this appeal on a point of 
law, the applicants continue to pursue the form of order sought. [Or. 5] 
B. Relevant national law 
I. The Gesetz über die Mitbestimmung der Arbeitnehmer (German Law on 
Employee Participation) (‘the MitbestG’) of 4 May 1976 (BGBl. (Federal Law 
Gazette) I, p. 1153, last amended by the Law of 24 April 2015 – BGBl. I p. 642) 
reads as follows (in extract form): 
‘Paragraph 7 
Composition of the Supervisory Board 
(1) The supervisory board of an undertaking 
1. with normally no more than 10 000 employees shall be 
composed of six members representing the shareholders 
and six members representing the employees; 
2. with normally more than 10 000 employees, but no more 
than 20 000, shall be composed of eight members 
representing the shareholders and eight members 
representing the employees; 
3. with normally more than 20 000 employees shall be 
composed of 10 members representing the shareholders and 
10 members representing the employees. 
(2) The members of the supervisory board representing the 
employees shall include 
IG METALL AND VER.DI 
 
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1. in a supervisory board containing six employees’ 
representatives, four employees of the undertaking and two 
trade union representatives; 
2. in a supervisory board containing eight employees’ 
representatives, six employees of the undertaking and two 
trade union representatives; 
3. in a supervisory board containing 10 employees’ 
representatives, seven employees of the undertaking and 
three trade union representatives. 
(5) The trade unions referred to in subparagraph 2 must be 
represented in the undertaking itself or in a different undertaking 
whose employees participate in the election of the undertaking’s 
supervisory board members in accordance with this Law. [Or. 6] 
Paragraph 16 
Election of trade union representatives to the Supervisory Board 
(2) The election shall be held on the basis of nominations from 
the trade unions represented in the undertaking itself or in a 
different undertaking whose employees participate in the election 
of the undertaking’s supervisory board members in accordance 
with this Law. …’ 
II. The Gesetz über die Beteiligung der Arbeitnehmer in einer Europäischen 
Gesellschaft (German Law on involvement of employees in a European company; 
‘the SEBG’) of 22 December 2004 (BGBl. (Federal Law Gazette) I, p. 3675, 
3686, last amended by the Law of 20 May 2020 – BGBl. I. p. 1044) in the version 
applicable from 1 March 2020 reads as follows (in extract form): 
‘Paragraph 2 
Definitions 
(8) “Involvement of employees” means any mechanism, 
including information, consultation and participation, through 
which employees’ representatives may exercise an influence on 
decisions to be taken within the company. 
(…) 
(12) “Participation” means the influence of employees on the 
affairs of a company by means of 
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1. exercising the right to elect or appoint some of the 
members of the company’s supervisory or administrative 
organ, or 
2. exercising the right to recommend or oppose the 
appointment of some or all of the members of the 
company’s supervisory or administrative organ. 
Paragraph 21 
Content of the agreement 
(1) The written agreement between the management boards 
and the special negotiating body shall lay down the following, 
without prejudice to the autonomy of the parties otherwise and 
subject to subparagraph 6: [Or. 7] 
(3) In the event that the parties conclude an agreement on 
participation, its content must be laid down. In particular, the 
following should be agreed: 
1. the number of members of the supervisory or 
administrative organ of the SE whom the employees are 
able to elect or appoint or whose appointment they are able 
to recommend or oppose; 
2. the procedure by which the employees are able to elect or 
appoint these members or to recommend or oppose their 
appointment; and 
3. the rights of these members. 
(6) Without prejudice to the relationship of this Law to other 
provisions on employee participation within the undertaking, in 
the case of an SE established by means of transformation, the 
agreement shall provide for at least the same level of all elements 
of employee involvement as the ones existing within the 
company to be transformed into an SE. […].’ 
C. Relevant provisions of EU law 
Article 4 of Council Directive 2001/86/EC of 8 October 2001 supplementing the 
Statute for a European company with regard to the involvement of employees […] 
reads as follows (in extract form): 
‘Content of the agreement 
IG METALL AND VER.DI 
 
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1. The competent organs of the participating companies and 
the special negotiating body shall negotiate in a spirit of 
cooperation with a view to reaching an agreement on 
arrangements for the involvement of the employees within the 
SE. 
2. Without prejudice to the autonomy of the parties, and 
subject to paragraph 4, the agreement referred to in paragraph 1 
between the competent organs of the participating companies and 
the special negotiating body shall specify: [Or. 8] 
4. Without prejudice to Article 13(3)(a), in the case of an SE 
established by means of transformation, the agreement shall 
provide for at least the same level of all elements of employee 
involvement as the ones existing within the company to be 
transformed into an SE.’ 
D. Relevance and clarification of the question referred 
The decision in the present legal dispute depends on whether the requirements in 
Paragraph 21(6) of the SEBG for the formation of an agreement on employee 
involvement concerning employee participation upon the establishment of an SE 
by means of transformation of an Aktiengesellschaft under German law are 
compatible with Article 4(4) of Directive 2001/86/EC. 
I. The applicants’ application, by which they seek a form of order – in so far as 
of interest in the present proceedings – for the provisions on determining the 
employee representatives in a 12-member supervisory body contained in the 
Agreement on employee involvement of 10 March 2014 to be found invalid, 
would succeed on the basis of national law alone. 
1. The application is admissible. 
[…] [Or. 9] […] 
2. The application would also be well founded. The provisions in the 
employer’s Agreement on employee involvement of 10 March 2014 on the 
appointment of employee representatives in a 12-member supervisory board 
would be invalid. They would be in breach of Paragraph 21(6) of the SEBG. 
(a) In principle, the parties to an agreement on employee involvement in 
accordance with Paragraph 21(1) of the SEBG may organise a procedure for 
employee involvement within the meaning of Paragraph 2(8) of the SEBG 
autonomously. This makes it possible for them to make provisions specially 
tailored to the requirements of the planned SE and to develop mixed forms or new 
concepts or procedures alongside the use of existing involvement systems. This is 
intended to ensure a meaningful balance of the legal situations existing in 
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individual Member States while ensuring appropriate adaptation to the 
requirements and structures of the SE to be established […]. 
(b) However, the autonomy granted to the parties to an agreement on employee 
involvement is, in accordance with Paragraph 21(1) of the SEBG, subject to the 
express condition of the guarantee provided for in subparagraph 6 of that 
paragraph. Accordingly, [Or. 10] where an SE is established by means of 
transformation of an Aktiengesellschaft, the agreement must provide for at least 
the same level of all elements of employee involvement as the ones existing 
within the company to be transformed into an SE (first sentence of 
Paragraph 27(6) of the SEBG). Therefore, where an SE is established by means of 
transformation of an Aktiengesellschaft, the Law restricts the parties’ autonomy in 
negotiations in favour of achieving greater preservation of the status quo […]. 
(c) According to the standard methods of interpretation of national law, the 
present Chamber is satisfied that the first sentence of Paragraph 21(6) of the 
SEBG requires parties to the agreement on employee involvement, where an SE is 
established by means of transformation, to ensure in that agreement that the 
elements of a procedure for employee involvement that characterise employees’ 
influence on the company’s decision-making, in the sense of Paragraph 2(8) of the 
SEBG, also remain at the same level in the SE to be established. These elements 
are to be initially determined on the basis of the decisive national law, each in 
relation to the procedures for employee involvement within the meaning of 
Paragraph 2(8) of the SEBG that already exist in the Aktiengesellschaft to be 
transformed. It must be ensured that the level of the elements accordingly 
characterising employees’ influence on the company’s decision-making also 
remains the same in the SE. It must be noted here that the first sentence of 
Paragraph 21(6) of the SEBG does not require that the procedures existing in the 
company be transformed and the legal situation therein be preserved in full. 
Therefore, there must be a guarantee that the procedural elements which 
decisively characterise the influence of employees’ representatives in the 
company to be transformed remain qualitatively the same in the agreement on 
employee involvement that will apply to the SE. 
(d) On this basis, the provisions on appointing employees’ representatives in a 
12-member supervisory board contained in the employer’s Agreement on 
employee involvement would not be compatible with the requirements of 
Paragraph 21(6) of the SEBG. [Or. 11] 
(aa) The procedural elements of company participation characterising employee 
influence in an Aktiengesellschaft under German law providing employee 
participation in accordance with point 2 of the first sentence of Paragraph 7(1), in 
conjunction with point 2 of Paragraph 7(2), of the MitBestG include the separate 
process for electing employees’ representatives nominated by the trade unions to 
the supervisory board in accordance with Paragraph 16 of the MitbestG. 
IG METALL AND VER.DI 
 
9 
(1) In accordance with point 2 of Paragraph 7(2) of the MitbestG, where a 
supervisory board is composed of eight members representing the shareholders 
and eight members representing the employees, the members representing the 
employees must include six employees of the undertaking and two trade union 
representatives. The process of electing the trade union representatives is 
conducted separately from that for the other supervisory board members 
representing the employees and is based on nominations by the trade unions that 
are represented within the undertaking or in a different undertaking whose 
employees are participating in the election (first sentence of Paragraph 16(2) of 
the MitbestG). While the other supervisory board members representing the 
employees must be employed within the undertaking or in an undertaking 
belonging to its group, the trade unions are entitled to nominate external persons 
for election; these persons need not be members of the nominating trade union or 
employed by it. 
(2) The right of the trade unions to nominate persons for a certain number of the 
supervisory board members representing the employees, as provided for in the 
German Law on Employee Participation, is based on the acknowledgement by the 
German legislature that involvement of employee representatives nominated by 
trade unions constitutes a key element in the opinion-forming of the supervisory 
board, precisely because they are independent […]. Since its entry into force on 
1 July 1976, the Law has always assumed that, on the employee side, the 
participation of representatives of the superordinately organised workforce, in 
other words, of the trade unions represented in the undertaking or group, is 
absolutely necessary in order to ensure the equal involvement of shareholders and 
employees in the supervisory boards of undertakings in terms of their respective 
rights and weighting. Restricting possible [Or. 12] employee representatives 
exclusively to persons who are members of the business association is accordingly 
not in the interests of employees themselves […]. According to the legal 
appraisals, the employee representatives on the supervisory board who have been 
nominated by the trade unions, and whose representation is legitimised by being 
elected by employees, enhance employee participation. This is intended to ensure 
that the persons sitting as employee representatives on the supervisory board are 
highly familiar with the circumstances and requirements of the undertaking while 
at the same time having external expertise […]. 
(bb) With this, the right of trade unions to submit nominations for a certain 
number of supervisory board members representing the employees, which is 
safeguarded by a separate election process, constitutes a characteristic element for 
the employee participation procedure in an Aktiengesellschaft whose employees 
participate in accordance with point 2 of Paragraph 7(1), in conjunction with point 
2 of Paragraph 7(2), of the MitbestG, which must be guaranteed at the same 
qualitative level in the agreement on employee involvement in the case of 
transformation into an SE in accordance with Paragraph 21(6) of the SEBG […] 
[Or. 13] […] 
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(1) Accordingly, it would be necessary to ensure the right of trade unions to 
nominate persons for a certain number of supervisory board members representing 
the employees in the agreement on employee involvement. To this extent, this 
would also require a separate procedure for selection of these persons by the 
employees or their representatives – that is separate from the procedure of 
appointing the other employee representatives. Only a right of nomination that is 
safeguarded in this way continues to ensure the same level of employee 
involvement in the new SE, by means of the equal involvement of employees in 
the supervisory board in terms of rights and weighting, according to the ideas of 
the German legislature and intended by Paragraph 7(2), point 2, in conjunction 
with Paragraph 16(2), of the MitbestG, and therefore the influence of employees 
on the company’s decision-making (that existed prior to the transformation) 
within the meaning of Paragraph 2(8) of the SEBG in employee participation 
within the meaning of Paragraph 2(12) of the SEBG. 
(2) The guarantee in Paragraph 21(6) of the SEBG is also effected in the 
number of employee representatives nominated by trade unions who would have 
to be elected through a separate appointment procedure. In accordance with 
points 1 and 2 of Paragraph 7(2) [Or. 14] of the MitbestG, two of the six or eight 
members representing the employees on a 12-member or 16-member supervisory 
board respectively in an Aktiengesellschaft are to be trade union representatives. 
Where a supervisory board consists of 20 members, three of the 10 supervisory 
board members representing the employees are to be trade union representatives 
(point 3 of the first sentence of Paragraph 7(1), in conjunction with 
Paragraph 7(2), point 3, of the MitbestG). This weighting made by the German 
legislature determines the level of employees’ influence on the company’s 
decision-making that is safeguarded by Paragraph 21(6) of the SEBG. Therefore, 
the number of members representing the employees on the supervisory board of 
the SE, which is proportionally dependent on the size of the supervisory board, 
must continue to be guaranteed, in so far as mathematically possible. If the size of 
the supervisory board is reduced – as is potentially the case in the main 
proceedings – from formerly 16 members in the Aktiengesellschaft to 12 in the 
SE, the parties to the Agreement on employee involvement would be obliged to 
allow the trade unions an exclusive right of nomination for at least one 
supervisory board member representing the employees. 
(3) The trade union’s exclusive right of nomination for a certain number of 
supervisory board members representing the employees, which is to be ensured in 
the agreement on employee involvement, would not have to be restricted to 
German trade unions represented in the undertaking or group. With the negotiated 
solution, the parties to the Agreement on employee participation – subject to 
taking account of the requirements of Paragraph 21(6) of the SEBG – are given 
the means of making provisions specially tailored to the planned SE, in order to 
make it possible to alter its structures appropriately. The unique features of an SE 
include the involvement of employees across the European Union and the 
resulting internationalisation of employee representatives on the Supervisory 
IG METALL AND VER.DI 
 
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Board. It would run counter to this objective if nominations were limited to 
German trade unions alone. 
(e) The provisions on the 12-member supervisory board in the employer’s 
Agreement on employee involvement of 10 March 2014 are not sufficient to fulfil 
these requirements arising from Paragraph 21(6) of the SEBG. Although the trade 
unions represented in the employer’s [Or. 15] Group are able to submit 
nominations for election as supervisory board members representing the 
employees, the provisions in Part II, point 3.4, of the Agreement on employee 
involvement do not adequately ensure that the employees’ representatives on the 
Supervisory Board will also actually include a person nominated by trade unions, 
since no provision is made for any separate selection procedure. 
II. As far as the present Chamber is concerned, however, this raises the 
question of whether its proposed interpretation of Paragraph 21(6) of the SEBG is 
compatible with the requirements of Article 4(4) of Directive 2001/86/EC. 
Under the EU-law provision, without prejudice to Article 13(3)(a) of that 
directive, in the case of an SE established by means of transformation, the 
agreement must provide for at least the same level of all elements of employee 
involvement as the ones existing within the company to be transformed into an 
SE. Should the standard be based on a different understanding with a lower level 
of protection applicable across the European Union, to be ensured to the same 
extent by all Member States as the case may be, the present Chamber would be 
obliged to interpret Paragraph 21(6) of the SEBG correspondingly in accordance 
with EU law. 
The present Chamber is unable to judge with the certainty expected for a court of 
last instance what requirements to be implemented by Member States arise from 
Article 4(4) of Directive 2001/86/EC for the level of protection to be guaranteed 
in the agreement on employee involvement for the benefit of employees. The 
provision has not been the subject of interpretation by the Court of Justice to date. 
The correct application of EU law in this case is also not obvious. The Court of 
Justice of the European Union is accordingly required to provide the necessary 
interpretation of Article 4(4) of Directive 2001/86/EC.