The Bauholding Strabag case (15-11-04)
by Mag. Walter Gagawczuk, Chamber of Labour Austria
On 13 October an article appeared in the Wiener Zeitung under the headline ‘Österreichische Strabag ist erste Europa AG’ (Austrian Strabag is the first European Company). It reported, among other things, that the previous day Bauholding Strabag had been registered as an SE. Bauholding Strabag is a major company in the building sector with subsidiaries all over Europe (Germany, Belgium, Netherlands, Poland, Slovakia, Slovenia, Czech Republic, Hungary, Bulgaria, Croatia, Romania, Russia, Switzerland, Ukraine, Serbia), in Africa (Kenya, Tanzania, Uganda) and in the Near East (Oman, Qatar).
In the official Austrian company register it states that the general shareholders’ meeting decided on the transformation of Bauholding Strabag AG into a European Company on 4 October and that it was registered on 12 October. Perhaps Bauholding Strabag was the first European Company; it was certainly one of the first, and this was clearly important to Strabag. Officially (quoted in the Austrian newspaper Der Standard, 13 October 2004) it was stated that the purpose had been ‘to make cost savings possible [by having] fewer subsidiaries than at present. Also, mergers would be easier.’
Regarding employee involvement, no Special Negotiating Body (SNB) was set up and therefore there have been no negotiations and no agreement with the ‘competent organ of the company’ (as specified in the Directive). There is an agreement signed by the chair of the European Works Council (EWC), however, which states that the existing agreement between Bauholding Strabag AG and the EWC will serve as the new agreement for Bauholding Strabag SE and that the participation provisions applying to Bauholding Strabag AG shall also apply to Bauholding Strabag SE.
Although the judge was informed that no SNB had been established and that therefore no agreement had been reached between Bauholding Strabag AG and the SNB, he nevertheless registered the SE.
A complaint has been made against this decision: the complainants are IG Bau (Germany), the Conseil d’entreprise Strabag Belgium, ACV-bouwen Industrie (Belgium) and the Bundesarbeitskammer (Austrian Chamber of Labour).
It is unclear whether the appeal court will examine the question of compliance with the Directive. The appeal court may reject the complaint on procedural grounds. Because this is the first case of its kind, no one can really say what the legal outcome is likely to be.
If the complaint is not successful this does not (automatically) mean that there will be no employee involvement in Bauholding Strabag SE or that the agreement signed by the EWC chair will be valid.
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In what follows I argue why in this case the standard rules will apply.
A. What is the legal situations as regards the Regulation, the Directive and national (Austrian) law?
Community law
Council Regulation (EC) No 2157/2001:
Art 12.2:
‘An SE may not be registered unless an agreement on arrangements for employee involvement pursuant to Article 4 of Directive 2001/86/EC has been concluded, or a decision pursuant to Article 3.6 of the Directive has been taken, or the period for negotiations pursuant to Article 5 of the Directive has expired without an agreement having been concluded.’
Council Directive 2001/86/EC:
Recital (8)
‘The concrete procedures of employee transnational information and consultation, as well as, if applicable, participation, to apply to each SE should be defined primarily by means of an agreement between the parties concerned or, in the absence thereof, through the application of a set of subsidiary rules.’
Art. 1, Objective:
‘1. This Directive governs the involvement of employees in the affairs of European public limited companies (Societas Europaea, hereafter ‘SE’), as referred to in Regulation (EC) No 2157/2001.
2. To this end, arrangements for the involvement of the employees shall be established in every SE in accordance with the negotiating procedure referred to in Articles 3 to 6 or, under the circumstances specified in Article 7, in accordance with the Annex.’
Art 3.6 Decision not to open negotiations or to terminate negotiations already opened:
‘The special negotiating body may decide by the majority set out below not to open negotiations or to terminate negotiations already opened, and to rely on the rules on information and consultation of employees in force in the Member States where the SE has employees. Such a decision...’
Art 4, Content of the agreement:
‘1. The competent organs of the participating companies and the special negotiating body shall negotiate in a spirit of cooperation with a view to reaching an agreement on arrangements for the involvement of the employees within the SE.
2. Without prejudice to the autonomy of the Parties, and subject to paragraph 4, the agreement referred to in paragraph 1 between the competent organs of the participating companies and the special negotiating body shall specify:
(a) [...]
4. Without prejudice to Article 13.3. (a), in the case of an SE established by means of transformation, the agreement shall 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.’
Art 5, Duration of negotiations:
‘1. Negotiations shall commence as soon as the special negotiating body is established and may continue for six months thereafter.
2. The parties may decide, by joint agreement, to extend negotiations beyond the period referred to in paragraph 1, up to a total of one year from the establishment of the special negotiating body.’
Art 7.1, Standard rules:
‘In order to achieve the objective described in Article 1, Member States shall, without prejudice to paragraph 3 below, lay down standard rules on employee involvement which must satisfy the provisions set out in the Annex.
The standard rules as laid down by the legislation of the Member States in which the registered office of the SE is to be situated shall apply from the date of registration of the SE where either:
(a) the parties agree; or
(b) by the deadline laid down in Article 5, no agreement has been concluded, and:
- the competent organ of each of the participating companies decides to accept the application of the standard rules in relation to the SE and so to continue with its registration of the SE, and
- the special negotiating body has not taken the decision provided for in Article 3(6).’
National law
Gesetz über das Statut der Europäischen Gesellschaft – SEG (Law on the Statute of the European Company – SEG)
§ 2 Eintragung (Registration)
‘(1) Die Europäische Gesellschaft (SE) sowie die die Europäische Gesellschaft betreffenden Urkunden und Angaben werden gemäß den für Aktiengesellschaften geltenden Vorschriften in das Firmenbuch eingetragen oder zum Firmenbuch eingereicht.
(2) Der Anmeldung der Europäischen Gesellschaft (SE) zur Eintragung in das Firmenbuch ist auch
1. die Vereinbarung über die Beteiligung der Arbeitnehmer gemäß Art 4 der Richtlinie 2001/86/EG zur Ergänzung des Statuts der Europäischen Gesellschaft hinsichtlich der Beteiligung der Arbeitnehmer, Amtsblatt Nr. L 294 vom 10. November 2001, S 22 bis 32, (§§ 230 und 231 ArbVG) oder
2. der Beschluss gemäß Art 3 Abs 6 der Richtlinie 2001/86/EG (§ 227 Abs 1 ArbVG) oder
3. eine Erklärung sämtlicher Mitglieder des Vorstands, dass die Frist des Art 5 der Richtlinie 2001/86/EG (§ 226 ArbVG) abgelaufen ist, ohne dass eine Vereinbarung zustande gekommen ist,
beizufügen.’
‘(1) The European Company (SE), as well as the documents and declarations relating to it, will be registered with or submitted to the Company Register in accordance with the provisions applying to public limited companies.
(2) Along with the European Company (SE)’s application for registration in the Company Register,
1. the agreement on arrangements for employee involvement pursuant to Article 4 of Directive 2001/86/EC supplementing the Statute for a European Company with regard to the involvement of employees, OJ No L 294, 10 November 2001, pp. 22–32 (§§ 230 and 231 ArbVG) or
2. a decision pursuant to Article 3 (6) of Directive 2001/86/EC (§ 227 (1) ArbVG) or
3. a declaration of all members of the executive board that the negotiation period pursuant to Article 5 of Directive 2001/86/EC (§ 226 ArbVG) has expired without an agreement having been concluded,
must also be enclosed.’
B. CONCLUSIONS
The procedures of transnational employee information and consultation, as well as, if applicable, employee involvement in an SE, should be defined
1. by means of an agreement between the parties concerned, or, in the absence thereof,
2. through implementation of a set of subsidiary rules, or
3. a decision pursuant to Article 3(6) of the directive.
The parties concerned are the special negotiating body (SNB) and the competent organs of the participating companies.
A decision pursuant to Article 3(6) can be taken only by the SNB with the majority set out in this provision.
In the ‘Strabag case’ no SNB was set up. No decision was taken by the EWC of Strabag Holding AG (although this EWC is clearly not the SNB pursuant to Directive 2001/86/EC); the agreement was only signed by the EWC chair.
We can conclude that if there is no SNB there cannot be
- an agreement between the parties concerned, nor
- a decision pursuant to Article 3(6) of the directive.
The remaining possibility concerning the procedure of transnational employee information and consultation, as well as, if applicable, employee involvement in an SE, is that the standard rules will apply.
Pursuant to the wording of Article 7(1) of the directive the standard rules apply – besides when there is an agreement to that effect – if by the deadline laid down in Article 5 no agreement has been concluded, and the competent organ of each of the participating companies decides to accept the application of the standard rules in relation to the SE and so to continue with its registration of the SE, and the special negotiating body has not taken the decision provided for in Article 3(6).
This provision proceeds on the assumption that the provisions of the Directive and the Regulation (esp. Art 12(2)) have been observed. Therefore the wording of Article 7(1) has four requirements:
1. no agreement has been concluded
2. by the deadline laid down in Article 5;
3. the competent organ of each of the participating companies decides to accept application of the standard rules in relation to the SE and so to continue with its registration of the SE; and
4. the special negotiating body has not taken the decision provided for in Article 3(6).
In the Strabag case these requirements were not all fulfilled, due to the fact that some provisions of the Directive and the Regulation (esp. Art 12(2)) were not observed. As a result, the law does not have a solution for the Strabag case – there is a gap (an unforeseen gap – in Austria this is called a ‘planwidrige Lücke’). In that case the provisions must be interpreted in terms of purpose and not merely in terms of wording. Interpretation in terms of the intention of the legislator leads us to the conclusion that the requirements under Article 7(1) that cannot be met because the company failed to implement particular provisions of the Directive and the Regulation should for that reason be disregarded (‘teleological reduction’).
The neglected requirements are the following:
• ‘by the deadline laid down in Article 5’: this requirement proceeds on the assumption that there have been negotiations;
• ‘the competent organ of each of the participating companies decides to accept the application of the standard rules in relation to the SE and so to continue with its registration of the SE’: this requirement proceeds on the assumption that an SE may not be registered unless the requirements of Art 12(2) are fulfilled;
• the special negotiating body has not taken the decision provided for in Article 3(6); this requirement proceeds on the assumption that an SNB has been created.
The remaining requirement is that no agreement between the SNB and the competent organs of the participating companies has been concluded. This is the case and therefore the standard rules will apply.
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