Political groups remain divided over employee participation rights under EU Inc.

The search for a compromise continues. In the European Parliament’s Committee on Legal Affairs (JURI), disagreements persist over the rights and obligations of the EU Inc., a new, uniform EU-wide legal form for companies. It is part of the so-called 28th regime, through which the European Commission aims to facilitate company formation and cross-border business activities and strengthen the EU's competitiveness.

The divide is between the Socialists and Democrats (S&D) on the one hand and the European People's Party (EPP) and Renew Europe on the other. The dispute concerns which rules on employee participation at board level should apply to an EU Inc. The focus is particularly on employees' involvement in corporate decision-making, for example through representation on supervisory or administrative boards.

Fallback rules remain the sticking point

The vote on the draft report by René Repasi (S&D, Germany) was initially scheduled for 8 October. It was postponed at short notice until 19 October. In the meantime, Repasi sought to find a compromise. However, no agreement appears to have been reached during this period either, and the vote was cancelled again.

The central point of contention therefore remains: which employee participation rules should apply if company management and employees cannot reach an agreement in joint negotiations on which national employee participation rules should apply to EU Inc. companies operating across borders? There is broad agreement among the political groups that both sides should first negotiate employee participation arrangements. However, disagreement remains over the fallback rules that determine which statutory provisions on employee participation should apply if these negotiations fail.

Repasi's proposal envisaged that, in such cases, the highest applicable level of employee participation among the Member States concerned would apply. This was intended to prevent companies from circumventing existing national rules by choosing the new European legal form. However, the proposal has since been dropped.

Opposition to extending national participation rules

The French shadow rapporteur for Renew Europe, Pascal Canfin, criticises Repasi's compromise proposal, arguing that it would allow national employee participation rights to be extended to other Member States.

As an example, he cites an EU Inc. with its registered office in a Member State without employee participation at board level, but which employs enough people in Germany for employee participation rights to apply there. Under Repasi's proposal, if negotiations failed, German employee participation rules would also apply to the parts of the EU Inc. based at its registered office abroad.

Canfin rejects this cross-border effect. He considers it an unacceptable extension of national employee participation rights, which should be viewed just as critically as a weakening of existing workers' rights.

Safeguarding workers’ rights while avoiding additional obligations

The EPP also shares these concerns. According to Axel Voss (EPP, Germany), existing workers' rights must be safeguarded. However, the EU Inc. should not be subject to additional obligations that do not apply to other legal forms of companies. After all, the legislative initiative aims to strengthen the EU's competitiveness by reducing company law barriers in the single market and facilitating company formation, cross-border growth and investment. The new legal form must remain attractive to businesses.

Agreement possible in November

Efforts to reach an agreement in JURI are now entering a third round. A further attempt is planned for 4 or 5 November. If the political groups reach a compromise, Parliament could adopt its position in plenary on 11 or 12 November, paving the way for trilogue negotiations. On the Council side, the Permanent Representatives Committee (Coreper I) is due to discuss the initiative on 23 October, with a view to agreeing a general approach.