WRITTEN QUESTION P-0528/03

by Regina Bastos (PPE-DE) to the Commission

(18 February 2003)

Subject: Factory closures: BAWO Confecções, Lda, Estarreja (Portugal)

On 1 February 2003, the German firm operating in Estarreja (Portugal) under the name of BAWO Confecções, Lda attempted to remove its equipment at a time when the workers were on holiday, thus giving rise to a controversy over the possible closure of the plant. There are strong grounds for suspecting that the aim of this operation was to transfer the equipment to a factory owned by the same firm in Egypt.

On 10 February 2003, after the end of the holiday period, BAWO did not resume operations, yet no information was given concerning the future of the plant. This can only confirm the existing fears that the plant will be closed and all of its 78 workers will be made redundant.

In view of these extraordinary circumstances, the Portuguese President, Jorge Sampaio, met, on his own initiative, a delegation of BAWO workers. On that occasion, he stated:

We cannot accept the endless invocation of notions such as restructuring, conversion or change of equipment purely to justify decisions to close down operations; responsible modern management is not compatible with secretive approaches or denying the real problems, especially when one is dealing not with objects or numbers but with people.

In view of the recent wave of closures by multinational enterprises of their operations in Portugal, can the Commission state:

- whether BAWO, and in particular its plant in Estarreja, BAWO Confecções, Lda, has been a recipient of Community funding;

- if so, what sums were granted and when, and what conditions were required of the company;

- what political measures it intends to take with a view to preventing, and ultimately penalising, similar attitudes on the part of companies that operate behind a wall of secrecy and refuse all social responsibility for their workers' future?

Answer given by Mrs Diamantopoulou on behalf of the Commission

(20 March 2003)

The Commission would like to inform the Honourable Member that the company in question has not received Community funding from either the European Social Fund (ESF) or the European Regional Development Fund (ERDF).

The Commission wishes to point out that there are Community rules on preventing and dealing with relocations, which relate both to the social aspect and to State aid, particularly where these are cofinanced by the Structural Funds.

1. In relation to the social aspect, several Community Directives may be applicable where company closures have major social repercussions, for example collective redundancies: Directive 98/59/EC(1) on collective redundancies and Directive 94/45/EC(2) on European Works Councils. These Directives stipulate that workers' representatives must be informed and consulted in advance concerning the decisions in question, with a view to trying to avoid these redundancies or limit their social impact.

As these Directives have been transposed into national law in the Member States, it is up to the relevant national authorities to ensure that the rules in question are properly applied.

Directive 2002/14/EC(3) on informing and consulting employees at national level develops these principles, making provision for the concepts of anticipation and prevention by involving workers' representatives in companies' strategic decisions and in foreseeable employment developments within the undertaking. This Directive is to be transposed no later than 21 March 2005, but most Member States already have some legal provisions on this matter.

In January 2002 the Commission also proposed that the European social partners identify the principles to be observed by undertakings when restructuring and that they establish appropriate means of ensuring they are complied with throughout the Union. The social partners decided, at the end of 2002, to include this issue in their multiannual work programme. The Commission hopes that work done within the European social dialogue has a tangible and useful influence on the way in which restructuring is carried out in Europe.

2. With regard to national State aid and/or cofinancing from the Structural Funds, in order to avoid unfair competition between countries and to ensure that State aid does not artificially boost the local economy but instead promotes sustainable development, provision is made in Community rules for measures to combat the effects of relocation:

- first, in the Guidelines on national regional aid (1998), the Commission stipulated provisions which oblige recipients to maintain for a period of five years any investment receiving such aid(4);

- second, along the same lines, the general Regulation on the Structural Funds (1999) provides that productive activities retain the contribution from the Funds only if the location of these activities does not change in the five years following the decision to award the contribution(5);

- third, for a major project (i.e. over EUR 50 million) to receive cofinancing under an ERDF programme, a specific request must be submitted to the Commission, and the Member States must complete a questionnaire containing a question on the possibility of it giving rise to a relocation. This aspect is taken into account by the Commission in deciding on the level of ERDF cofinancing (up to 35 % in the Objective 1 regions) which may be awarded, if any.

(1) Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to collective redundancies, OJ L 225, 12.8.1998.

(2) Council Directive 94/45/EC of 22 September 1994 on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees, OJ L 254, 30.9.1994.

(3) Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishing a general framework for informing and consulting employees in the European Community Joint declaration of the European Parliament, the Council and the Commission on employee representation, OJ L 80, 23.3.2002.

(4) Guidelines on national regional aid:http://europa.eu.int/eur-lex/pri/en/oj/dat/1998/c_074/c_07419980310en00090031.pdf. These guidelines apply as of the date of publication in the OJ (OJ C 74, 10.3.1998) 4.10. Aid for initial investment must be made conditional, through its method of payment or through the conditions associated with its acquisition, on the maintenance of the investment in question for a minimum period of five years.

(5) Council Regulation (EC) No 1260/1999 of 21 June 1999 laying down general provisions on the Structural Funds, OJ L 161, 26.6.1999, Article 30(4)(b) http://europa.eu.int/comm/regional_policy/sources/docoffic/official/regulation/pdf/l_16119990626en00010042.pdf: 4. The Member States shall ensure that an operation retains the contribution from the Funds only if that operation does not, within five years of the date of the decision of the competent national authorities or the managing authority on the contribution of the Funds, undergo a substantial modification: (a) affecting ; and (b) resulting either from a change in the nature of ownership in an item of infrastructure or a cessation or change of location in a productive activity.