Hopes rise of end to stalemate over ‘European firm’

Date: 08/05/1997

By Simon Coss & Chris Johnstone

HOPES of a breakthrough in long-stalled attempts to get agreement on a European Company Statute which would save business billions of ecu are rising after almost 30 years of deadlock.

At the initiative of the European Commission, a committee of experts headed by former Belgian Commissioner Etienne Davignon is putting the finishing touches to a report which is expected to breathe life into efforts to create a 'one-stop shop' for companies setting up pan-European operations.

Many also believe that the chances of getting agreement have been boosted both by last week's change of government in the UK and the recent outcry over car manufacturer Renault's decision to close its factory in Vilvoorde, Belgium.

At present, businesses which want to operate across the Union have to register as a company in each of the 15 EU member states.

Attempts began in 1970 to find an off-the-shelf European company model of legal, tax and employment rules which would allow businesses to operate across frontiers without the inconvenience and expense of setting up a series of different national subsidiaries.

But progress had always been stalled by apparently irreconcilable differences between member states, most notably Germany and the UK, over the issue of worker consultation and information.

Davignon's report is expected to recommend that, in future, companies wishing to set up EU-wide operations would be able to register just once, provided they agreed to let workers' representatives sit on the company board. This would satisfy the Germans, who already have such rules and have always resisted any attempts to weaken their employment legislation.

Davignon also hopes to placate the majority of member states, who have made it clear they do not wish to match the German measures, by pointing out that setting up as a European company would be an option rather than an obligation for businesses. Firms wishing to carry on operating in individual countries as at present would be free to do so.

“They have come up with a formula which ought to open up and renew political discussions,” said one official.

If agreement can be reached, it would reduce the burden on businesses, which are currently obliged not only to register 15 times but also to comply with a wide range of national rules which significantly add to their administrative costs.

“Assuming the report provides the answer people want - allowing companies to run their operations throughout the single market through branches - it could save large firms a great deal of money,” said Dirk Hudig, national manager of ICI in Belgium.

Two recent changes in Europe's political climate suggest that Davignon's proposal is likely to be more warmly received than previous attempts to break the deadlock.

Renault's decision to close its Belgian factory with the loss of 3,100 jobs focused attention on the issue of worker consultation in company decisions and, for many, showed how easy it is for large employers to disregard existing rules, strengthening the case for new measures.

A second crucial turning point came last week with the British Labour Party's landslide victory over former Prime Minister John Major's Conservative government. Almost as soon as he took office, incoming Premier Tony Blair confirmed that the UK would sign up to the social chapter of the Maastricht Treaty as soon as possible.

Worker consultation forms a crucial plank of that agreement and the Labour government's move shows it is prepared to give serious consideration to areas of social policy the previous administration refused even to talk about.

Social Affairs Commissioner Pádraig Flynn and his internal market counterpart Mario Monti will brief Commission colleagues on the report next Wednesday (14 May). It is then set to be discussed by internal market ministers at their 21 May meeting.