Hopes fade for new EU firm deal

Date: 11/12/1997

By Simon Coss

LUXEMBOURG's hopes of ending its EU presidency on a high note by brokering a compromise next week which would finally allow businesses to set up as European companies look set to be dashed.

Diplomats from the Grand Duchy have drawn up a revised version of the plan for a European Company Statute which will be presented to EU social affairs ministers at their meeting next Monday (15 December).

But the Luxembourgers' carefully drafted text is likely to run into exactly the same sort of opposition as the original proposal put forward by former European Commissioner Etienne Davignon earlier this year.

Luxembourg had hoped that its compromise would get around the difficult question of whether or not workers' representatives should be guaranteed a place on company boards - a practice known in Eurospeak as 'co-determination' - and break almost 30 years of deadlock on the issue.

The problem is that while co-determination is enshrined in German national law and Bonn will not accept any company statute plan which does not include it, other member states - most notably the UK - have said they cannot agree to a formula which would oblige them to adopt the principle.

“There may be scope for agreement in the future, but not on the plan as it stands. We will probably say further study is needed,” said one UK official.

“Our basic concern is that the model on offer will not be particularly attractive to many companies.”

London stresses that it is not alone in its opposition to the proposal, insisting that its concerns are shared by France, Ireland and Spain.

Davignon's original plan attempted to deal with the co-determination issue by saying that employers and employees should negotiate over how many places workers' representatives should have on company boards.

Crucially, however, he said that in cases where there was no agreement, a fall-back clause would come into play guaranteeing 20&percent; representation.

The Luxembourg compromise builds on Davignon by proposing a complex procedure involving the formation of special negotiating groups which would decide, by absolute majority, whether or not co-determination should be an issue during procedures to set up a European company.

If they did not agree, only EU rules on informing and consulting workers as set out in the 1994 Works Council Directive would apply within the new organisation.

The business community has given a lukewarm reaction to the Davignon plan. While business leaders say that they would welcome the opportunity to set up pan-European operations, they insist that such an option would only be really useful to them if it was accompanied by harmonised EU legislation on taxation and company law.