EMPLOYEE INVOLVEMENT IN EUROPEAN CO-OPERATIVE
Draft Council Directive supplementing the Statute for a European Co-operative Society with regard to the involvement of employees.
|Legal base:||Article 308 EC; consultation; unanimity
|Document originated:||6 November 2001
|Department:||Trade and Industry
|Basis of consideration:||Minister's letter and EM of 4 February 2002
|Previous Committee Report:||None
|To be discussed in Council:||7 March 2002
|Committee's assessment:||Politically important
|Committee's decision:||Not cleared; further information requested
11.1 The Commission's original proposal for a European
Co-operative Statute (considered by a previous Committee in 1992)
was modelled on the proposed European Company Statute (ECS). No
progress was made on the proposal, however, during the years in
which the ECS was stalled in Council. With the adoption of that
measure last year,
work has now resumed on the European Co-operative Statute.
11.2 The Statute consists of a Regulation, which sets
out the framework for a European Co-operative Society (SCE), a
new type of pan-European legal body, and a Directive, requiring
a particular level of employee involvement in the SCE. The Statute
would apply only to bodies that chose to form a SCE in order to
operate in two or more Member States. In his letter of 4 February,
the Minister for Employment Relations and the Regions (Mr Alan
Johnson) tells us that the Regulation and Directive are on slightly
different timetables and are being discussed in different Councils
of Ministers. He explains that he has submitted an Explanatory
Memorandum to the Committee now, even though no depositable text
has appeared, as he may be asked to agree the Directive in March.
The working document is a re-draft of the proposal from the early
11.3 A background note on Co-operatives and the European
Statute for a European Co-operative Society, provided by the Treasury,
is annexed to this paragraph.
11.4 The draft Directive sets out the arrangements for
the involvement of employees in an SCE. For an SCE to be registered,
it will need to have in place a system of employee involvement
which is in accordance with the provisions of the draft Directive.
The proposal covers information, consultation and, where appropriate,
participation (that is, employee representation on the management
or supervisory body).
11.5 For most SCEs, the arrangements are identical to
those agreed for the European Company Statute. In the first instance,
the arrangements are to be freely negotiated between the employees
and the management. If a negotiated agreement has not been reached
within deadlines set in the Directive, the standard rules set
out in its Annex are to apply, if the management decides that
it wants to continue with the registration of the SCE.
11.6 On information and consultation, the
standard rules provide that a representative body of employees
shall have the right to meet management once a year. At the meeting,
the representatives must be informed and consulted on matters
concerning the SCE itself and any of its subsidiaries or establishments
in another Member State or which exceed the powers of the decision-making
organs in a single Member State. In the words of Part 2 of the
"The meeting shall relate in particular to the structure,
economic and financial situation, the probable development of
the business and of production and sales, the situation and probable
trend of employment, investments, and substantial changes concerning
organisation, introduction of new working methods or production
processes, transfers of production, mergers, cut-backs or closures
of undertakings, establishments or important parts thereof, and
11.7 Provision is also made for extraordinary meetings
where exceptional circumstances (such as relocations, transfers,
the closure of undertakings or undertakings or collective redundancies)
significantly affect employees.
11.8 On worker participation, the standard rules
set out the basic principle that, if there is no negotiated agreement
and management wishes to proceed, participation in the SCE should
be set at the highest level at which it existed in any of the
participating legal entities before registration as an SCE. There
would be no entitlement to participation if none had existed previously.
11.9 The main difference from the employee involvement
model agreed for the European Company Statute relates to those
SCEs which do not have any employees when they are first established.
These are defined in the document as SCEs established exclusively
by natural persons (that is, by individuals) or by a single legal
entity and natural persons, and are described as "ex novo"
SCEs. The proposal with regard to such SCEs is that the standard
rules for information and consultation shall apply
from the date of registration.
The Government's view
11.10 The Minister tells us:
"The Government supports the principle of employee involvement
in the European Co-operative, provided the arrangements can be
made in a flexible manner. The proposal allows for flexibility,
in that it gives priority to freely negotiated arrangements for
most SCEs while the fallback model for participation incorporates
the principle of acquired rights, rather than a right per se to
participation. The Government believes that the proposal should
follow the employee involvement arrangement established for the
European Company Statute. The proposal under discussion does this.
The working group is continuing to assess whether different rules
should apply to SCEs with less than 50 employees (for example,
national rules would apply) and how to treat 'ex novo' SCEs (those
formed by parties with no existing employees). The Department
favours flexible provisions reflecting the fact that SCEs will
often be smaller than European Companies. The Government notes
that the European Co-operative Society will be a voluntary arrangement
to be entered into by those seeing advantage in it."
11.11 The Minister informs us that the Department of
Trade and Industry and the Treasury launched a joint consultation
exercise on the European Co-operative Statute last summer. Only
5 responses were received, two of which commented substantively
on the draft Directive. Both supported the model of employee involvement
set out in the proposal.
11.12 As the Statute would be an entirely optional arrangement,
a Regulatory Impact Assessment has not been produced.
11.13 The Minister also tells us that although the Directive
would need to be transposed into UK legislation, it would affect
only those organisations and/or individuals who chose to register
as an SCE, and would not have a direct impact on existing UK law
as it applies to UK co-operatives.
11.14 The Spanish President hopes that provisional agreement
will be reached on the Directive in March, and political agreement
reached on both the Regulation and the Directive in June.
11.15 We thank the Minister for his Explanatory Memorandum
and helpful background note.
11.16 As they stand, the provisions for "ex novo"
European Co-operative Societies (SCEs) seem odd and unsatisfactory.
The requirement that the standard rules for information and
consultation are to apply to them from the date of registration
would appear to pre-empt free negotiation between management and
employees, once the latter are in place, and hence to rule out
the possibility of worker participation. We assume, from the Minister's
comments, that the UK is negotiating for changes to this part
of the text. Nevertheless, we are not prepared to accept the document
as it stands.
11.17 We ask the Minister to inform us of the progress
of negotiations on "ex novo" SCEs and on SCEs with fewer
than 50 employees. We also ask that he deposit an official text
as soon as one becomes available.
11.18 Meanwhile, we shall keep the document under
BACKGROUND NOTE BY THE TREASURY ON CO-OPERATIVES: EUROPEAN
STATUTE FOR A EUROPEAN CO-OPERATIVE SOCIETY (SCE)
What is a Co-operative?
1. There is no definition of a co-operative in UK legislation,
however, there are accepted international co-operative principles
set out by the International Co-operative Alliance (ICA). The
ICA defines a co-operative as "an autonomous association
of persons united voluntarily to meet their common economic, social,
and cultural needs and aspirations through a jointly-owned and
2. In the UK most co-operatives operate under the Industrial
& Provident Societies Acts of 1965-1978. These are a consolidation
of legislation dating from the mid-19th Century. Examples
of co-operatives in the UK range from the Co-operative Group (CWS)
Limited, (the UK's largest co-operative which undertakes a range
of activities including wholesale, retail, funeral directorship,
and also owns the Co-operative Bank a company) to many
and varied small societies such as allotment societies. Co-operatives
in the UK are precluded from offering banking services as the
I & P Act specifically excludes this and it is for this reason
the Co-operative Bank takes a corporate form.
3. Co-operatives in other Member States do not necessarily
look the same as UK co-operatives. For example the Spanish co-operative
'Mondragon', has the structure of a large conglomerate operating
in a number of sectors ranging from financial services to construction,
and co-operative banks are found in several member states.
What is an SCE?
4. The objective of the Statute for a European Cooperative
Society (SCE) is to provide co-operatives with a legal framework
that will enable them to operate across borders on equal terms
of competition with companies. The recently agreed Statute for
a European Company (SE), puts in place a similar framework for
companies but is not suited to the specific features of co-operatives,
the SE being a capital based undertaking.
5. An SCE would instead have as its principal object the satisfaction
of its members' needs and/or the development of their economic
and social activities, and not the remuneration of a capital investment.
Membership of an SCE accords to the principles of voluntary and
open membership and primacy of the individual.
6. The SCE aims to set out a body of harmonised EU rules for
certain key aspects of cooperative societies' statutes e.g. formation,
capital requirements, rules of incorporation, membership, mergers
etc. Other rules would be left to the existing law of the SCE's
home member state. Conversion to an SCE would be entirely voluntary
and the SCE Statute would be in addition to and not in replacement
of member states existing cooperative laws.
7. SCEs would, however, be able to operate freely across EU
borders and to draw their members from more than one EU member
state. An SCE's home state under the statute would be the member
state where the SCE has its registered head office.
5086/92; see HC 79-i (1992-93), paragraph 24 (17 June 1992). Back
No. L 294, 10.11.01, p.1-21 and p.22-32. Back