UK-governed EWCs are moving out to Ireland …or elsewhere?

By Pieter De Koster

11-2020

As a result of Brexit, and irrespective of a deal on the future relationship with the EU, European Works Councils (EWCs) which are today governed by UK law will need to find a new abode by year-end, i.e. by the expiry of the transitional period. EWCs are governed by UK law either because their headquarters (or central management) is located there or because a third-country (USA, Japan...) headquartered group chose the UK (as its agent) and hence UK law to apply to the agreement and the functioning of the EWC.

Since the UK will definitely cease to be an EU member state by end 2020, any such EWCs need to move elsewhere in the EU, to another member state. We also know that such choice is discretionary for central management (whether that is UK based or third country), so not to be negotiated, as long as there is a corporate presence of any kind in such other EU member state. The default option is to have the laws of the member state with the highest headcount govern the EWC. 

In this context, it appears that Ireland is a very popular destination as the new home for EWCs. Quite a number of formerly UK-law-governed EWCs have moved to Ireland in the meantime. Rightly so? Perhaps but not necessarily.

The arguments which are typically used for advocating Ireland as the best home for EWCs can be summed up as follows: language, business friendly environment, cooperative unions and political stability. Would and should these be the key factors that businesses use to decide the best location for their EWC? How would Ireland then compare to other candidates?

Generally, many EU member states would score pretty high on the scoreboard if the 4 parameters above are the ones to apply. Actually, almost all EU member states can meet these criteria to a considerable degree, apart from the usual suspects (in the South and the North of the EU) which score high on issues like more confrontational and ideologically inspired labour relations, a legal system which is very protective of employees’ individual and collective rights, wide competences for unionised labour which can be intrusive for business or really impact the freedom to operate, and the like.

One could, however, advance other parameters than those listed above, of direct relevance in comparing countries as to their business-friendly character and stability for hosting and operating an EWC. What about factors like the mere existence of, and long experience with, domestic works councils, the composition and hence cooperative or confrontational stance of the body itself vis-à-vis management, the scope of the rights and competences of a domestic works council, the (lack of) of standing in court of an EWC, and the range, use in practice and effectiveness of remedies in case of conflict, etc?

Since the operation and functioning of an EWC is governed by a given national law, it is key for management to be assured that such chosen national laws have experience with a concept of a ‘forum for exchange of information and consultation’ (such as a domestic works council). Countries which have not had any or much exposure to works councils in real life and do not display such a legal culture can hardly provide the proper framework for addressing the wider (non-regulated) issues that come with the management and operation of such body. For that reason alone, some countries, like Sweden (without any domestic works councils), former East European countries or also Ireland would not be top on my list.

A few member states (Belgium, Luxembourg, Denmark) have domestic works councils which are joint bodies, composed of employee and management representatives (as opposed to only employee representatives, who then meet up with a management delegation). In such joint works councils, parties do come together around a table to exchange views and information and discuss projects of relevance. This is a different picture than the employee composed works council facing management and shooting questions and opinions at them.

In terms of actual scope of authority, the concepts of ‘information and consultation’ for domestic works councils may have a quite different meaning and impact in various countries. In some, it simply means a monologue (I provide information) and a dialogue (I also answer any questions you may have), whilst in other countries these concepts include an enforceable right to an opinion, which may hold up the roll-out of transactions and projects, or even a veto right to any such project.

From a practical legal perspective and depending on the kind of waters the company would be navigating, conflict management and dispute resolution can be a key factor. In an EWC context, conflicts may arise on a variety of issues such as the transnational nature of a given project or transaction, the business sensitivity of certain information, the timeliness of the EWC intervention, the role of the select committee versus the full meeting, and the like. Most countries provide for direct access and standing of an EWC in labour court or in specific arbitration systems for any such disputes. Many countries have already seen quite a build- up of case-law on EWCs (not only France and the Netherlands, but also the UK and Ireland). Only very few countries, and actually I know only of one (Belgium), do not allow the EWC as such to conduct legal proceedings or to act as such in judicial proceedings. Hence, actual enforcement of procedural or substantive rules in the functioning of an EWC is rare in such countries.

With this note, we do not intend to launch some competitive bargaining to welcome migrating EWCs in one or the other EU member state. Its only purpose is to highlight some factors and parameters which could and probably should guide management in taking a well-considered strategic decision of locating its EWC in a given EU member state. That decision, which on the face of it could appear to be clinical or mechanical, can materially impact the ease or difficulty with which cross-border projects or transactions of all kinds can be planned, decided and rolled out in Europe.