ECJ upholds German codetermination rights, but misses an opportunity
On 18 July, the CJEU quietly settled the ongoing legal struggle about codetermination rights in transnational companies in Case C-566/15 Erzberger vs TUI AG. In this preliminary ruling, German codetermination law has been declared to be in compliance with EU law. This judgement will satisfy those advocates of the argument that representation rights on German supervisory boards can be limited to workers within the German territory.
At least in the short term, the judgement is good news for the German trade unions, as reported by the Hans Böckler Foundation. The judgment is expected to act as a ‘firewall’ against further attacks from representatives of the business sphere who, like Konrad Erzberger, have invoked EU social rights with the contradictory aim of undermining workers’ codetermination rights in Germany.
However, the judgment also represents a missed opportunity to push forward for stronger EU-level industrial relations, labour rights and transnational solidarity. It focusses exclusively on Member States’ sovereignty, and fails to make any case in favour of trade union or collective labour rights.
Overall, the Court follows the Advocate General’s (AG) Opinion. It argues that, given ‘the absence of harmonisation or coordination measures at Union level’ in the field of workers’ collective representation rights on company boards, Member States have the right to ‘set the criteria for defining the scope of application of their legislation’. According to the CJEU, the German national law limiting such rights to workers employed in that country does not breach equal treatment or freedom of movement if the criteria set by the law ‘are objective and non-discriminatory’.
The Court’s judgment may present a legally sound conclusion to the case. However, it is not only the operative part of the judgement that is important; the reasoning behind it should also be well-founded, convincing and grounded in law and its principles. In this regard, the disappointingly short Court’s Grand Chamber judgment is very weak and fails to convince. With Social Europe currently facing rough waters, in only three pages of considerations the 15 judges preferred to adopt a pragmatic stance rather than confront Member States’ attempts to shield their own national systems. The judgement is so categorially argued that it does not leave any avenues open to enforce workers’ representation rights via the free movement rules.
First, the CJEU avoids clarifying the relationship between a parent company and its business entities abroad. Notions of control, dependency or unity of direction in the group are simply ignored, although national labour courts usually take such distinctions into account to qualify employment relationships and labour rights in (transnational) groups. In his Opinion, the AG suggests that if TUI had been operating abroad with entities without ‘legal personality’ (i.e. dependent branches or establishments rather than subsidiaries), this could have led to a different conclusion, thereby implying that this ‘legal personality’ is the most relevant factor in looking for a cross-border element, and hence potentially a breach of equal treatment or freedom of movement rights under EU law.
Such a conclusion is not so clearly expressed in the CJEU judgment: the situation in dependent branches or establishments abroad is simply not considered. Furthermore, the CJEU does not even engage with the possibility that the cross-border nature of parent-company decisions could be the ‘cross-border element’ which makes EU law applicable to workers in an EU-scale group of companies. The Court ignores the fact that group decisions could equally affect workers across the group, irrespective of the location of their employment contract. It is thus problematic from the viewpoint of EU law to regard as perfectly ‘objective and non-discriminatory’ the fact that some workers are automatically excluded from collective rights enjoyed by other workers of the same group, when apparently the sole criterion for the exclusion is the location of their contract. This reasoning prevents workers and trade unions from taking equal part in democratic electoral and representative procedures within the same group, despite being, at least in some cases, equally affected by group decisions. Had the Court explored this avenue at all, it would have been interesting to read why and under which circumstances such exclusion is to be considered objective and non-discriminatory.
Moreover, the CJEU avoids expanding on the nature of codetermination rights and defining them as either corporate or labour rights, grounded in private or public law; how, for example, should the double embeddedness of codetermination rights in national labour and corporate law be articulated within EU law and international private law rules? This was a missed opportunity for the CJEU to sketch a definition of codetermination rights that could have set the path for future development in the fields of EU corporate and labour law.
Finally, the Court remains far behind the AG’s opinion in its encouragement of political and legislative action. While the AG openly declared his sympathy for a harmonisation of labour minimum standards across company groups in the EU, including codetermination rights, the judgment does not endorse such an opinion and remains mute. In short, the CJEU does nothing to prepare the ground for future case law on codetermination rights.
While the judicial struggle may be settled for now, this does not mean that there is no place for political action. One clear message has been communicated by the AG’s Opinion and the telling restraint of the CJEU’s judgement: substantive discrimination between workers regarding their labour rights in transnational groups will persist and qualify as lawful, unless EU legislation regulates or coordinates in an adequate manner. It is now up to the European Commission to respond to this message, and up to national and European trade unions and Member States to promote and support further action. The European Trade Union Confederation is already calling for an integrated EU framework on information, consultation and board-level representation rights as a first step in that direction. Legislative intervention could expand collective and individual labour rights within groups of undertakings in the EU, foster a genuinely European dimension to workers’ rights and industrial democracy which is able to keep pace with the internationalisation of companies and prevent workers across Europe being played against each other. Legislative inaction, on the other hand, would only reveal a striking dissonance with the declared intentions to support and relaunch a ‘social Europe’.