Brussels, 26/11/2004 (Agence Europe) - On Thursday, as we reported in an earlier edition, the Competitiveness Council agreed on the draft directive on cross-border mergers. The Member States agreed to accept the compromise drafted by the Dutch Presidency on worker participation in such a cross-border merger. Laurens Jan Brinkhorst, who chaired the Competitiveness Council, said he was delighted with the outcome, seeing it as an important breakthrough which would make the EU more competitive and allow EU companies to merge more easily, whether SMEs or multinationals. Single Market Commissioner Charlie McCreevy said: “This is an important step towards the EU's efforts in breathing new life into the Lisbon Strategy. We are hopeful that the European Parliament will be able to support the agreement.” The directive will allow cross-border mergers of limited liability companies in the European Union. Today such mergers are impossible or very difficult and expensive. The Directive will be particularly helpful for small and medium sized companies that want to operate in more than one Member State.
In general, mergers will be governed in each Member State by the principles and rules applicable to "domestic" mergers. One of the main issues at stake in the Council discussions was the provision on employee participation. Member States have widely differing worker participation (co-determination) systems. This raised the question of how to deal with cross-border mergers which could lead to a loss or a reduction of employee participation. Germany and Austria in particular have co-management systems guaranteeing worker participation.
Employee participation in the newly created company will be subject to negotiations based on the model of the European Company Statute (Directive 2001/86/EC). Under that model, a special negotiating body should be established in order to agree on participation arrangements. In case of failure, standard rules on employee involvement would apply, stipulating that the higher standard of workers participation existing among the merging companies will apply to the merged entity if at least one third of the total number of employees before the merger were covered by a workers' participation scheme. To a question from a reporter suggesting that this would be to Germany's advantage, Charlie McCreevy said that good worker participation did not necessarily conflict with good economic performance.
The new directive includes an 'expiry' clause. France feared the spread of co-management. When a merged company is managed with worker participation, that system will be maintained for three years following the merger. After the three years, the system can be dropped.
It has taken 20 years for agreement to be reached on this issue by qmv. The agreement on a third of workers before the merger having to be covered by a workers' participation scheme was acceptable to Germany (which initially wanted 25%) and France (which wanted 50%). Italy voted against, Denmark subjected its vote to approval by its national parliament and the UK (where there is little worker participation) did not object, reportedly being satisfied with the promise of favourable treatment in another area (possibly the working time directive).
The agreement is subject to the codecision procedure whereby the European Parliament and Council must agree on the text. In a press release, Klaus-Heiner Lehue (CDU), the EP's rapporteur on this issue, said that Thursday's compromise paved the way for approval by the EP.