Communication from the Commission on the review of Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company with regard to the involvement of employees
Date: 2008-09-30
Institutions: European Commission
Subjects: European company, exchange of information, labour law, worker consultation, worker participation

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 30.9.2008 
COM(2008)591 final 

COMMUNICATION FROM THE COMMISSION 

on the review of Council Directive 2001/86/EC of 8 October 2001 supplementing the 
Statute for a European company with regard to the involvement of employees 

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COMMUNICATION FROM THE COMMISSION 

on the review of Council Directive 2001/86/EC of 8 October 2001 supplementing the 
Statute for a European company with regard to the involvement of employees 

1. 

INTRODUCTION 

Council Regulation (EC) No 2157/20011 (hereinafter “the Regulation”) establishes a 
Statute for a European company (hereinafter “SE”) with a view to creating a uniform 
legal framework enabling companies from different Member States to plan and carry 
out  the  reorganisation  of  their  business  on  a  Community  scale.  Council  Directive 
2001/86/EC2  (hereinafter  “the  Directive”)  supplements  the  Regulation  as  far  as  the 
involvement  of  employees3  is  concerned,  with  the  aim  of  ensuring  that  the 
establishment  of  an  SE  does  not  entail  the  reduction  of  practices  of  employee 
involvement existing within the companies participating in the creation of the SE. 

As required by Article 15 of the Directive, in this Communication the Commission is 
reviewing  the  application  of  the  Directive  with  a  view  to  proposing  any  necessary 
amendments. 

In  preparation  for  this  review,  the  Commission  commissioned  a  report  by 
independent experts and addressed to the Member States and to the European Social 
Partners a questionnaire together with the draft report. 

2. 

TRANSPOSITION OF THE DIRECTIVE 

At the request of the Council, the Commission set up an Expert Group composed of 
national  experts  and  the  social  affairs  counsellors  in  order  to  provide  a  forum  for 
discussing  the  arrangements  for  transposing  the  Directive  into  national  legislation. 
The group held meetings between December 2001 and June 2003 during which the 
main  issues  arising  from  the  implementation  of  the  Directive  were  extensively 
discussed4. 

Despite  this  preparatory  work,  only  six  Member  States  transposed  the  Directive 
within the deadline established in the Directive (8  October 2004), and it took more 
than two years for the necessary measures to be in place in all Member States5. As 
for  the  quality  of  implementation,  the  abovementioned  report  prepared  by  the 

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Council Regulation (EC) No 2157/2001 of 8 October 2001 on the Statute for a European company (SE), 
OJ L 294, 10.11.2001, p. 1. 
Council Directive 2001/86/EC of 8 October 2001 supplementing the Statute for a European company 
with regard to the involvement of employees, OJ L 294, 10.11.2001, p. 22. 
Involvement  of  employees  means  any  mechanism, 
information,  consultation  and 
participation, through which employees’ representatives may exercise an influence on decisions taken 
within the company (Article 2(h) of the Directive). 
The working papers of the Group can be found at: 
http://ec.europa.eu/employment_social/labour_law/docs/2007/merged_working_papers_en.pdf 
http://ec.europa.eu/employment_social/labour_law/docs/new_general_table_en.pdf. 

including 

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independent  experts6  shows  that  several  issues  deserve  further  clarification  or 
verification by the Commission (cf. point 3.6 below). 

3. 

THE CONTENT OF THE DIRECTIVE 

3.1. 

The main principle 

The  fundamental  principle  and  stated  aim  of  the  Directive  is  to  secure  employees’ 
rights as regards involvement in company decisions. Employee rights in force before 
the establishment of SEs should provide the basis for employee rights of involvement 
in the SE (the ‘before and after’ principle). This aim is sought primarily by means of 
an agreement negotiated between the management of the companies concerned and 
the  employees’  representatives.  In  the  absence  of  agreement  within  a  six-month 
period  (which  can  be  extended  to  up  to  12  months  by  agreement),  the  Directive 
establishes  a  set  of  subsidiary  rules.  Furthermore,  employees’  representatives  may 
decide  not  to  open  negotiations  or  to  terminate  negotiations  already  opened,  and 
simply rely on the rules on information and consultation of employees in force in the 
Member States where the SE has employees. 

3.2. 

The negotiation procedure 

The legislation applicable to the negotiation procedure is that of the Member State in 
which the registered office of the SE is to be situated. 

As  for  the  start  of  negotiations,  it  is  the  responsibility  of  the  management  of  the 
companies participating in setting up an SE to take the necessary steps as soon as it 
has been decided to establish the SE. 

the  participating  companies  and 

For the purpose of the negotiations, a special negotiating body (hereinafter “SNB”) 
representative  of  the  employees  has  to  be  created.  The  SNB’s  members  are  to  be 
elected  or  appointed  in  proportion  to  the  number  of  employees  employed  in  each 
Member  State  by 
their  subsidiaries  and 
establishments. The method to be used for electing or appointing the members to be 
elected  or  appointed  in  their  territory  is  left  up  to  Member  States.  The  Directive 
addresses the situation at the moment the negotiations start, but does not provide for 
cases  in  which  changes  occur  in  this  initial  situation  before  the  negotiations  end. 
Notwithstanding  this,  several  Member  States  have  adopted  provisions  in  order  to 
deal with such changes7. 

The  essential  role  of  the  SNB  is  negotiating  the  content  of  the  right  to  employee 
involvement within the SE with the competent bodies in the participating companies. 
However,  it  may  also  decide  not  to  open  negotiations  or  terminate  negotiations 
already ongoing. While the principle governing the adoption of decisions by the SNB 
is  a  double  absolute  majority  (absolute  majority  of  its  members  representing  an 
absolute majority of the employees), if the SNB decides not to open negotiations or 
terminate any negotiations already opened, a triple qualified majority is needed (two 

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The final report can be found at: 
http://ec.europa.eu/employment_social/labour_law/docs/2008/synthesis_report86_en.pdf. 
BE, CZ, ES, LV, MT, PL, SI, SE, UK. 

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thirds of the members representing at least two thirds of the employees, including the 
votes of members representing employees employed in at least two Member States). 
This  triple  majority  is  also  needed  (with  certain  additional  conditions)  when  the 
outcome of the negotiations is a reduction of participation rights. 

The expenses relating to the negotiations are borne by the participating companies. 
Most Member States have included a test of reasonableness of such expenses, while 
others have included an indicative list of expenses to be covered by the participating 
companies. 

The SNB may request the assistance of experts of its choice for the purposes of the 
negotiations. Most of the national laws have limited to one the number of experts to 
be funded by the participating companies, as allowed by the Directive; only a few8 
have not included any such limitation. 

3.3. 

The content of the agreement 

One of the main principles of the Directive consists in allowing the parties to define 
freely the rules which will bind them as far as employees’ involvement is concerned. 
The  only  limit  to  the  autonomy  of  the  parties  is  laid  down  for  the  case  of  an  SE 
established by means of transformation by Article 4(4): the agreement has to 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. 

In order to assist the negotiating parties, the Directive has included a list of items to 
be  addressed  in  the  agreement.  On  the  other  hand,  Article  4(3)  of  the  Directive 
makes  it  clear that  unless the agreement provides otherwise, it is not subject to the 
standard rules. 

An agreement validly concluded under the rules of the Member State of registration 
is binding on the entire group of companies within the SE, all the local management 
bodies and all the employees of the group. 

3.4. 

The standard rules 

3.4.1.  Conditions for the application of the standard rules 

The  standard  rules  apply  only  in  a  subsidiary  manner,  i.e.  (a)  if  the  negotiating 
parties  so  agree,  or  (b)  if  no  agreement  has  been  concluded  by  the  deadline  of  six 
months  (under  certain  circumstances  one  year)  and,  on  the  part  of  the  participating 
companies, their competent bodies decide to continue with the registration of the SE 
and,  on  the  part  of  the  employees,  the  SNB  has  not  decided  either  not  to  open 
negotiations or to terminate negotiations already opened. 

Moreover, as far as the standard rules on employee participation are concerned, the 
Directive  establishes  a  minimum  percentage  of  workers  covered  by  participation 
(25% in the case of a merger and 50% in the case of a holding or subsidiary) for the 
standard  rules  to  apply.  However,  even  if  those  percentages  are  not  reached,  a 
decision by the SNB to apply the standard rules suffices. 

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DE, IE, LV, SE. 

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3.4.2.  The composition of the body representative of employees 

According  to  Part  1  of  the  Annex  containing  the  standard  rules,  the  Representative 
Body (hereinafter “RB”) is composed of employees of the SE and its subsidiaries and 
establishments elected or appointed by the employees’ representatives in proportion 
to  the  number  of  employees  employed  in  each  Member  State  by  the  participating 
companies  and  their  subsidiaries  and  establishments.  It  is  through  the  RB  that 
employees will exercise their rights to involvement in the SE. 

In principle, the RB has a transitory nature, because four years after its establishment 
it  has  to  decide  whether  to  open  negotiations  on  concluding  an  agreement  or  to 
continue to apply the standard rules. 

3.4.3. 

Information and consultation 

As far as information and consultation are concerned, the competence of the RB is 
limited  to  questions  of  a  cross-border  nature.  In  order  to  exercise  this  competence, 
the  RB  has  the  right  to  hold  a  meeting  with  the  competent  body  of  the  SE  at  least 
once a year on the basis of regular reports drawn up by the competent organ on the 
evolution of the business of the SE. The topics for the meeting include the following: 
the structure, the economic and financial situation, the probable development of the 
business  and  of  production  and  sales,  the  situation  and  probable  trend  of 
employment, 
investments,  and  substantial  changes  concerning  organisation, 
introduction  of  new  working  methods  or  production  processes,  transfers  of 
production,  mergers,  cut-backs  or  closures  of  undertakings,  establishments  or 
important parts thereof, and collective redundancies. In addition to the regular reports 
and the information provided during the abovementioned meeting, the RB is entitled 
(a)  to  receive  information  when  there  are  exceptional  circumstances  that  affect 
employees’  interests  to  a  considerable  extent;  (b)  to  request  the  holding  of  an 
extraordinary  meeting  in  order  to  be  informed  and  consulted;  and  (c)  to  express  an 
opinion; a further meeting can be requested if this opinion is not followed by the SE. 

3.4.4.  Employee participation 

As for employee participation, the standard rules provide in the main that the level of 
participation in the SE is determined by the level of participation in the participating 
companies  before  the  SE  was  established.  Therefore,  if  none  of  the  participating 
companies  was  governed  by  participation  rules  before  the  SE  was  registered,  the 
latter does not have to establish provisions for employee participation. 

3.5. 

Reservation  and  confidentiality,  spirit  of  cooperation  and  protection  of 
employees’ representatives 

The Directive lays down the duty of members of the SNB and the RB and the experts 
appointed by them not to reveal any information given to them “in confidence”. This 
obligation continues after their term of office expires. 

It also provides that, in specific cases, the management body of an SE is not obliged 
to  transmit  information  if,  according  to  objective  criteria,  transmission  of  the 
information may seriously harm the functioning of the SE or be prejudicial to it. 

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It is a basic principle of the Directive that, as far as the involvement of employees is 
concerned,  the  relationship  between  the  employees’  representatives  and  the 
competent body of the SE is governed by the spirit of cooperation. 

Similarly  to  other  Directives  dealing  with  employee  involvement  in  companies’ 
decisions,  employee  representatives  enjoy,  in  the  exercise  of  their  functions,  the 
same  protection  and  guarantees  provided  for  employees’  representatives  by  the 
national  law  in  their  country  of  employment.  This  guarantee  covers,  in  particular, 
attendance  at  meetings  and  payment  of  wages  during  the  period  necessary  for  the 
performance of their duties. 

3.6.  Misuse of procedures 

The  Directive  obliges  Member  States  to  adopt  the  means  necessary  to  avoid  the 
establishment  of  an  SE  with  the  aim  of  depriving  employees  of  the  right  to 
involvement  they  already  enjoyed  or  of  withholding  this  right.  According  to  the 
abovementioned independent expert report, several Member States have not adopted 
any such measures. The Commission deems this to be a matter of concern. 

4. 

ISSUES  RAISED  BY  MEMBER  STATES  AND  EUROPEAN  SOCIAL  PARTNERS  IN  THE 
CONSULTATION 

4.1. 

General 

The vast majority of Member States and the European Social Partners consider that, 
for the time being, the Directive does not require amendment or clarification. Given 
the  virtual  lack  of  experience  in  applying  the  national  provisions  transposing  the 
Directive, more time is needed before it can be established whether amendments are 
necessary.  However,  a  few  issues  have  been  raised  that  the  Commission  considers 
deserve further attention. 

4.2. 

Employee participation at group level 

Some Member States and the ETUC have requested that the Directive be clarified as 
regards the issue of employee participation at group level. Indeed, in certain Member 
States employee participation is exercised also at group level, i.e. the employees in 
the subsidiaries have participation rights in the controlling company. 

The Directive in Article 3(4) second subparagraph, 7(2) and point (b) of Part 3 of the 
Annex  considers  the  level  of  employee  participation  within  the  participating 
companies (i.e. the companies directly participating in establishing an SE, according 
to Article 2(b)) as a reference for the application of the ‘before and after’ principle as 
regards  employee  participation.  It  follows  from  this  that  only  the  participation 
systems  existing  within  the  organs  of  these  participating  companies  would  be 
relevant  for  application  of  the  ‘before  and  after’  principle.  Therefore,  a  literal 
interpretation  of  the  abovementioned  provisions  could  result  in  employees  of 
companies  enjoying  participation  rights  at  group  level  being  deprived  of  these 
participation rights after the SE has been created — due to the fact that the company 
in  which  they  work  is  not  a  participating  company  within  the  meaning  of  the 
Directive but merely a subsidiary of a participating company. 

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Moreover, when determining the workforce to be taken into account for the purposes 
of calculating the percentages under Articles 3(4) and 7(2), the Directive also refers 
to the employees in the participating companies subject to a participation system. As 
a  result,  employees  of  a  subsidiary  having  participation  rights  at  the  level  of  the 
controlling  company  might  not  be  counted  for  the  purposes  of  calculating 
percentages. 

4.3. 

Changes occurring within the SE after its creation 

Some Member States have raised the issue of the Directive not containing provisions 
to deal with changes occurring within the SE after its establishment. The issue of SEs 
registered  without  employees  or  without  operations9  and  the  fate  of  employees’ 
involvement  when  the  SE  starts  operations  and  engages  employees  has  been 
particularly pointed out. 

According to recital 18 the ‘before and after’ principle should apply “not only to the 
initial establishment of an SE but also to structural changes in an existing SE and to 
the companies affected by structural change processes”. Indeed, Part 1 point B of the 
Annex  to  the  Directive  states  that  Member  States  must  “ensure  that  the  number  of 
members  of, and  allocation of seats on, the representative body shall be adapted to 
take  account  of  changes  occurring  within  the  SE  and  its  subsidiaries  and 
establishments”. Furthermore, the autonomy of the negotiating parties allows them to 
make provision for mechanisms that take into account changes in the SE. However, 
as far as employee participation rights are concerned, the Directive does not provide 
for any such mechanism that would cater for the situation where, for instance, an SE 
with  a  few  (or  none)  employees  at  the  moment  of  its  establishment  increases  its 
workforce  subsequently  or  where  an  SE  subject  to  employee  participation  transfers 
its  registered  office  and  is  absorbed  by  a  company  of  a  different  type  without 
participation  (or  with  less  participation).  In  these  situations  employee  participation 
rights could be lost or reduced. 

Community  law  has  already  dealt  with  the  issue  of  subsequent  domestic  mergers, 
(Article  16(7)  of  Directive  2005/56/EC10)  by  obliging  the  company  resulting  from 
the merger to ensure that employees’ participation rights are protected for a period of 
three years. To this end the rules on employee participation in the company resulting 
from a cross-border merger should be applied mutatis mutandis. 

4.4. 

Employees’  participation  rights  when  an  SE  converts  to  a  public  limited 
company 

Germany and the ETUC have pointed out that in the absence of any limitation in the 
Directive,  the  conversion  of  an  SE  into  a  public  limited  company  (permitted  by 
Article 66 of the SE Regulation) could result in the loss or reduction of participation 
rights if the form of company adopted is not subject to employee participation or if 
the level of employee participation is reduced. 

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More  than  half  of  the  SEs  for  which  data  are  available  did  not  have  employees  at  the  moment  of 
registration. Source: http://www.worker-participation.eu/european_company/se_companies. 
Directive  2005/56/EC  of  the  European  Parliament  and  of  the  Council  of  26  October  2005  on  cross-
border mergers of limited liability companies, OJ L 310, 25.11.2005, p. 1. 

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Community  law  has  already  dealt  with  a  similar  issue,  (Article  16(6)  of  Directive 
2005/56/EC)  by  obliging  such  a  company  to  take  a  legal  form  allowing  for  the 
exercise of participation rights. 

4.5. 

The complexity of the procedure for the involvement of employees 

Some  Member  States  have  pointed  to  the  need  to  simplify  and  harmonise  the 
procedures  established  by 
information, 
consultation and participation of employees. 

the  different  Directives  concerning 

BusinessEurope  considers  that  the  overly  complicated  and  structured  provisions 
around employee participation and the creation of the Special Negotiating Body have 
been  a  substantial  obstacle  impeding  companies  in  making  greater  use  of  the 
European  Company  Statute.  In  its  view,  greater  flexibility  is  needed  so  as  to 
strengthen the negotiating autonomy of the social partners at company level, and in 
so  doing  allow  for  agreed  solutions  tailored  to  the  needs  of  the  company  and  its 
employees. 

4.6. 

Other issues 

Germany considers that the term “all elements of employee involvement” as referred 
to in Article 4(4) and Part 3(a) of the Annex should be given a broad interpretation 
and  also  include,  for  example,  the  number  of  employee  representatives  on  the 
supervisory or administrative board. 

The  ETUC,  while  considering  that  it  is  too  early  to  revise  the  Directive,  highlights 
the following issues: (a) the size of the organ where participation is exercised should 
not  be  excluded  from  the  negotiations;  (b)  in  order  to  ascertain  the  level  of 
participation  for  the  purposes  of  applying  the  ‘before  and  after’  principle,  account 
should be taken not only of the participation rights exercised in practice but also of 
the participation rights granted by national legislation but not exercised in practice; 
(c)  employees’  representatives  within  the  SE  should  be  given  a  uniform  level  of 
protection; (d) the RB should be involved, at least, at the same time as information 
and  consultation  is  required  by  national  law;  (e)  representation  of  the  particular 
interests  of  younger  employees  and  of  disabled  employees  should  be  ensured  at 
European level. 

5. 

CONCLUSIONS 

The Directive has been operational throughout the EU only since 2007. According to 
official  data11,  146  SEs  had  been  registered  by  mid-June  2008.  Only  13  Member 
States had SEs registered in their territory, and of these only two (Germany and the 
Czech Republic) had registered more than 10. According to the majority of Member 
States  and  the  European  social  partners  there  is  a  lack  of  practical  experience 
applying  the  Directive.  The  Commission  agrees  with  them  that  it  is  too  early  to 
revise it now. 

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Supplement to the Official Journal of the European Union. http://www.ted.europa.eu/ 

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The  Commission  acknowledges  the  complexity  of  the  procedure  instituted  by  the 
Directive for employee involvement. However, it should be recalled that the adoption 
of the Directive was the result of a delicate compromise among Member States that 
took more than 30 years of negotiations to achieve. 

This  Communication  has  identified  some  issues  that  deserve  further  consideration. 
However, taking into account that the Directive is complementary to the Regulation 
and that the Regulation is due for review at the end of 2009, the Commission will at 
that time consider the appropriateness of revising both instruments and the scope of 
any such revision. 

In  the  meantime,  the  Commission  will  monitor  the  correct  implementation  of  the 
Directive,  and  will  continue  to  promote  exchange  of  best  practices  and  to  enhance 
capacity-building  of  all  stakeholders  by  way  of  seminars,  training  courses,  studies 
and  financial  support  for  projects  submitted  by  employer  and  employee 
representatives12. 

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The  Commission  promotes  several  actions  with  these  aims,  in  particular  under  budget  heading 
04.030303 — Information, consultation and participation of the representatives of undertakings. 

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