European Cooperative Society adopted

July 2003 saw the adoption of the Statute for a European Cooperative Society, a new form of European-scale business open to cooperatives and other organisations and individuals. The Statute includes provisions on employee information, consultation and participation.

In 1989, the European Commission revived the long-dormant proposal for a European Company Statute (ECS), aimed at giving companies the option of incorporating at European rather than national level, with the aim of helping them take advantage of the EU internal market and compete in European and world markets. The proposed ECS was aimed essentially at public limited companies. However, it was felt that similar opportunities should also be offered to "social economy" organisations, such as cooperative, mutual and not-for-profit enterprises. Hence, in 1992, the Commission issued proposals for specific Statutes for a European Cooperative Society, a European Association and a European Mutual Society. As with the draft ECS, each of these consisted of a Regulation dealing with the company law aspects and an accompanying Directive on the employee involvement arrangements to be applied in these proposed new types of European-level business organisations.

The three social economy Statutes completed the initial stages of the EU legislative process in 1993, but then became bogged down in the same political disagreements in the Council that prevented progress on the ECS until the late 1990s. However, the December 2000 breakthrough on the ECS, which finally led to its adoption in October 2001(European Company Statute adopted), enabled the draft Statute for a European Cooperative Society to be revived by the Swedish Presidency in the first half of 2001. The new versions of the draft Regulation and Directive followed the basic approach that had allowed progress to be made on the ECS, and the Council reached a broad agreement in June 2002 (Council debates social issues). It then reconsulted the European Parliament (EP), as the texts had changed substantially since the EP had given its formal Opinions on the initial proposals in 1993. The EP duly issued fresh Opinions in May 2003 (Parliament: Resolution on ECS worker involvement). A number of Parliament's proposed amendments were incorporated into the drafts, which were then subject to political agreement in Council in June 2003 (Parliament: Resolution on ECS worker involvement), followed by formal agreement on 22 July. Regulation (EC) No.1435/2003 on the Statute for a European Cooperative Society (or Societas Cooperativa Europaea - SCE) and Directive 2003/72/EC supplementing this Statute with regard to the involvement of employees were published in Official Journal L207 on 18 August 2003.

The Regulation creates an optional new form of European-scale cooperative business, open to cooperatives (and other types of organisations and individuals) operating in more than one EU member state, while the Directive provides rights to information, consultation and (in some circumstances) board-level participation for the employees of these European cooperatives.

Employee involvement Directive

The SCE worker involvement Directive lays down rules for most types of SCE which are almost identical to those in the ECS (European Company Statute adopted). In brief terms, this means that:

  • employee involvement arrangements - information and consultation, along with board-level participation in some circumstances - must generally apply in each SCE;
  • the organisations participating in the formation of an SCE must hold negotiations over the involvement arrangements with a special negotiating body (SNB) made up of elected or appointed employee representatives, with seats allocated in proportion to the number of employees employed in each member state by the participating organisations;
  • the negotiations should lead to a written agreement on the employee involvement arrangements. If these arrangements involve a reduction of existing board-level participation rights which cover a certain proportion of employees, this must be approved by a special two-thirds majority of SNB members (from at least two member states);
  • the SNB may decide (again by a special two-thirds majority) not to open talks or to terminate talks in progress - in which case existing national information and consultation rules, including those transposing the European Works Councils (EWCs) Directive, will apply (this option does not apply to some SCEs formed by transformation;
  • where the SNB and management reach an agreement, this should set up a "representative body" (RB) similar to an EWC, or an information and consultation procedure. If the parties so decide (and compulsorily in some cases), the agreement may also set out the rules for board-level participation;
  • SNB negotiations must be completed within six months, which may be extended to a total of one year by agreement; and
  • if no agreement is reached, or the parties so decide, a statutory set of "standard rules" apply, providing for a standard RB - similar to the statutory EWC laid down in the EWCs Directive's subsidiary requirements. The standard rules also stipulate board-level participation in certain circumstances where this existed in the participating organisations.

The SCE involvement Directive differs from the ECS Directive on a number of points, summarised below.

Participation in meetings

The Regulation provides that SCEs must hold a general meeting of their members at least once a year; this meeting has specified decision-making powers. The involvement Directive provides that employees and/or their representatives should, in certain circumstances, be entitled to participate in the general meeting - or section/"sectorial" meetings, where these exist - with voting rights. The Directive also stipulates that agreements on employee involvement in SCEs may, in addition to information, consultation and participation arrangements, provide an entitlement for employees to participate in such general or section/sectorial meetings.

SCEs formed solely or mainly by individuals

The Directive provides for special arrangements for SCEs established exclusively by individuals ("natural persons") or by a single legal entity (eg a company or firm) and a number of individuals. Such SCEs are covered by the Directive's general involvement provisions if the participating organisations and individuals employ at least 50 workers in at least two member states. However, if they have fewer than 50 employees in total, or 50 or more employees in a single member state only, these SCEs are covered by national employee involvement rules in the countries where they operate, rather than the Directive's provisions. Nevertheless, the Directive does apply if, following the creation of the SCE, at least one-third of its employees from at least two member states so request, or the total workforce subsequently reaches or exceeds 50 employees in at least two member states.

Additional provisions

The above-mentioned differences between the SCE involvement Directive and that accompanying the ECS reflect the particular nature and structure of cooperatives. However, the SCE Directive also contains a number of other new provisions that do not appear to be related to the specific situation of SCEs (and were mostly inserted at the behest of the EP). Principally, these are as follows:

  • the methods chosen by member states for nominating, appointing or electing members of SNBs or statutory RBs (based on the standard rules in the SCE Directive's annex) "should seek to promote gender balance". The ECS involvement Directive contains no such requirement;
  • agreements on employee involvement in SCEs should, like those in European Companies, specify cases where the agreement should be renegotiated and the procedure for renegotiation. However, the SCE Directive adds that the circumstances of such renegotiation should include "where appropriate, in the event of structural changes in the SCE and its subsidiaries and establishments which occur after the creation of the SCE";
  • the list of issues to be covered at the annual information and consultation meetings of statutory RBs based on the SCE Directive's annex includes "initiatives with regard to corporate social responsibility", an item not mentioned in the ECS Directive; and
  • the ECS Directive's annex provides that "four years after" a statutory RB is established, it should examine whether to open negotiations for the conclusion of an agreement on employee involvement, or to continue to apply the standard rules. The SCE Directive changes the wording to "not later than four years".

Prospects

The SCE Directive must be implemented by the EU member states by 18 August 2006, the same date as the SCE Regulation comes into force across the EU.

The European Commission estimates that there are around 300,000 cooperatives in the EU, which employ some 2.3 million workers. There is thus a considerable number of potential users of the new SCE form. Furthermore, the fact that the SCE is also open under certain circumstances to individuals and to companies means that it may be of wider interest.

There are now four EU Directives providing for transnational employee involvement arrangements. The 1994 EWCs Directive provides for the creation of EWCs in multinational companies over a certain size, while the 1997 EWCs Directive extended the earlier Directive to the UK. The 2001 ECS involvement Directive lays down the involvement arrangements to apply to the new optional European Company. It provides both for EWC-like transnational information and consultation arrangements - principally through an RB - and, in some circumstances, for board-level employee participation. While its information and consultation provisions largely mirror those of the EWCs Directive, they also differ from them at some points. For example, the ECS involvement Directive stipulates stronger information and consultation rights, a composition of SNBs and statutory RBs more proportional to workforce size, shorter SNB negotiations and a clearer role for trade unions in SNBs. It has been argued that these changes may provide clues as to the EU institutions' thinking on possible amendments to be made in the review of the EWCs Directive, on which the social partners are due to be consulted in late 2003 (EC: Social policy state of play).

The new SCE worker involvement Directive generally follows the ECS involvement Directive fairly closely, with some variations related to the specific nature of cooperatives. In its information and consultation provisions, it thus incorporates all the "advances" made by the ECS involvement Directive over the EWCs Directive. However, it also adds a number of further refinements, which seem likely to figure in the debate over the review of the EWCs Directive - such as the requirement of member states to ensure gender balance among employee representatives, and the inclusion of corporate social responsibility among the issues for information and consultation.

With the SCE now adopted, it should be noted that the proposed Statute for a European Association has also recently been revived and is under discussion in Council working groups, while the Statute for a European Mutual Society is also due to be dusted down for renewed consideration.

This article is based on research and material prepared by Mark Carley, chief editor of the European Industrial Relations Observatory and co-editor of the IRS/IRRU journal European Works Councils Bulletin.