Split remains over plans for European firm

Date: 02/10/1997

By Simon Coss

A PLAN put forward earlier this year aimed at breaking a 30-year deadlock over the creation of European companies now appears highly unlikely to be accepted by EU governments.

Social affairs ministers will discuss the proposals, drawn up by former European Commissioner Etienne Davignon, when they meet in Brussels next Tuesday (7 October).

But Germany and the UK appear to be as divided as ever over the old obstacle which has so far blocked agreement on a European Company Statute - the issue of whether employees' representatives should have a compulsory seat on company boards (a system known in Euro-speak as 'co-determination').

Bonn already has legislation requiring it, while the UK has always been - and still is - opposed to the idea in principle.

Davignon's plan suggested that workers and employees try to resolve the issue through negotiations on a firm-by-firm basis. But, crucially, he said that if no agreement was reached, employees would be guaranteed a 'fall back' position of 20&percent; of seats.

Over the summer, the Luxembourg presidency tried to put together a compromise text based on Davignon's plan. Its approach drew on existing EU rules on worker consultation, but it too failed to square the co-determination circle.

Government experts from both Bonn and London have in effect ruled out the possibility of agreement at next week's meeting. “We are keen to promote social partnership in the EU and support these goals. But we have strong reservations about Davignon. Any approach based on co-determination is going to be unattractive to us,” said one UK official.

This downbeat message was echoed by the Germans. “The position seems very clear. There is no common ground and co-determination is the big problem,” said one expert.

Even the European Commission, which asked Davignon to draw up his report, seems to be retreating from its initially positive reaction to it.

“Davignon's report is not necessarily a blueprint. It could perhaps be looked at more as a point of departure,' said Barbara Nolan, spokeswoman for Social Affairs Commissioner Pádraig Flynn. “Both Commissioner Flynn and [Internal Market] Commissioner Monti remain committed to resolving this situation. They feel the elements for a compromise are there, but it will require some flexibility from certain parties.”

At present, companies wishing to operate across the Union have to set up head offices in each of the 15 member states. Many complain that this is costly and inefficient, and significantly reduces the advantages of operating within the internal market.

Davignon's plan would not oblige firms to set up as European operations and all businesses would have the option of operating under the present system if they preferred.