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Cross-border transfers of undertakings in the context of Council Directive 77/187 of February 14, 1977

Research Essay

Hausarbeit 2008 24 Seiten

Jura - Europarecht, Völkerrecht, Internationales Privatrecht

Leseprobe

Outline

A. Introduction

B. Scenarios of cross-border transfers of undertakings

C. Scope of the Acquired Rights Directive

D. Definition of transfers of undertakings

E. Appropriateness of the three pillars of protection for transnational Transfers
I. Suitability of the first pillar of measures of employment protection
1. Transfer of contractual rights and obligations
2. Transfer of statutory rights and obligations
3. Transfer of rights and obligations deriving from collective bargaining agreements
II. Suitability of the second pillar of measures of employment protection
III. Suitability of the third pillar of measures of employment protection

F. Jurisdiction of courts in cross-border scenarios

G. Conclusion

Bibliography

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A. Introduction

While mergers, acquisitions and outsourcing processes were mainly confined to the bor- ders of individual Member States between the late 1960s and mid-1970s, the internation- alisation of capital markets, the abolition of obstacles to trade, the improved infrastructure and the widespread supply of qualified labour entailed a significant rise in the number of

cross-border transfers of undertakings during the second half of the 1980s and from 1995 onwards.[1] Between 2002 and 2006, offshoring and delocalization operations from one Member State to another increased by 800 percent according to the European Restructur- ing Monitor.[2] The European Commission ascribes this trend to the enlargement of the European Union, the consolidation of the internal market and the introduction of facilitat- ing legal measures and expects the increase of transnational transfers of undertakings to continue.[3]

The social incisions for workers caused by transnational rationalisation measures are usu- ally severe. While transfers of undertakings on national level must not necessarily result in the relocation of the business, cross-border transfers involve the offshoring of the produc- tion site by definition and therefore inevitably result in job losses. Moreover, relocation of undertakings from one country to another are often accompanied by the reduction or re- moval of the influence of trade unions and other workers’ representatives and frequently entail downwards harmonisation of working conditions. It is therefore not surprising that research studies indicate that the mere announcement of transfer activities frequently cause fear, uncertainty, psychological problems and difficulties with personal relationships among workers which often result in decreased productivity and reduced devotedness to-

wards the employer.[4] With respect to cross-border transfers, it is fair to assume that the

general working morale will be extremely embittered and it is evident that such adverse at- titudes are likely to have a negative impact on the performance of the undertaking. On the long run, resistance to transfers of enterprises may consequently turn out to be a real threat to the functioning of the internal market and the aims pursued by the European Council

with its Lisbon Strategy according to which the Community shall become “the most com- petitive economy in the world.[5]

In principle, the European legislator has recognized that it is inevitable to guarantee that workers do not perceive their terms and conditions of employment as being threatened by transfers of undertakings and that workforces, both in the transferor and transferee under- taking, have a legitimate interest in being properly informed and consulted.[6] The initial Acquired Rights Directive of 1977 was designed to address these core needs. According to the preamble, the legislation aimed to protect “employees in the event of a change of em- ployer” and “to ensure that their rights are safeguarded.” In substantive respect, the Directive included three pillars of protective measures: First, the directive guaranteed the de jure transfer of terms and conditions which characterised the employment relationship from the transferor to the transferee. Secondly, the legislator ensured that employees en- joyed protection against dismissal on the grounds of the transfer. And thirdly, the con- tinuation of the functioning of employee representation bodies was safeguarded and the transferor and the transferee became obliged to inform and consult with workers’ representatives about the transfer and its potential impact on the workforce.[7]

Although the Directive has turned out to be one of the few effective social policy instru- ments in European Community law, it is rather questionable whether it provides for suffi- cient protection of workers in the event of cross-border transfers of undertakings. The le- gal uncertainty stems from the fact that although the Directive includes a provision ac- cording to which the legislation “shall apply where and in so far as the undertaking, busi- ness or part of the undertaking or business to be transferred is situated within the territo- rial scope of the Treaty “, the European legislator missed the chance to introduce an ex- press reference on the applicability of the law to cross-border scenarios. The absence of any case-law of the European Court of Justice in this respect as well as the fact that the is- sue has only to some extent been addressed in the legal literature intensifies the existing uncertainty about whether cross-border transfers of undertakings are sufficiently covered by the Directive or if sustainable amendments are necessary in order to achieve the aims set out in the preamble.

The purpose of this essay is to investigate in how far the Directive could be amended to deal with the specific case of cross-border transfers of undertakings. In order to provide a sophisticated solution, I will first outline the relevant scenarios in which cross-border

transfers of undertakings may possibly occur in practice and discuss whether those cases are covered or if the Directive’s scope needs to be extended. Subsequently, I will check whether the definition of transfers of undertakings is broad enough to apply to cross- border transfers or if it is necessary to introduce amendments in order to safeguard work- ers’ interests sufficiently. The main focus of this paper, however, lies on the analysis of the appropriateness of the three substantive pillars of protection in cross-border scenarios. Eventually, I will briefly address problems in relation to conflicts of jurisdictions before I give a personal recommendation.

B. Scenarios of cross-border transfers of undertakings

In a globalized world, the newspapers report almost daily about mergers of companies from different countries, acquisitions of national undertakings by foreign investors and offshore outsourcing processes of previously domestic activities. If these cross-border scenarios played in a mere national context within the borders of a Member State of the European Union, they would principally qualify as transfers of undertakings in the legal sense because the case-law of the European Court of Justice suggests that its interpretation

of the phrase “legal transfers or mergers” is so broad that it is no longer a serious im- pediment to the application of the Directive.[8] On a transnational level, however, such a generalizing assumption in relation to the application of the Directive to reorganisation measures is not possible. Rather, three different scenarios must be distinguished:[9]

- The simultaneous transfer of ownership and the relocation of business assets from the transferor to the transferee whereas the latter is situated in a different country than the former
- The relocation of all tangible and intangible assets to another country by the trans- feror followed by a subsequent transfer of ownership to the transferee
- The transfer of ownership to the transferee with a subsequent relocation of the un- dertaking to another country by the acquirer

Although all three possible scenarios include the typical legal element that indicates a cross-border relation, namely the fact that the transferor and the transferee are governed by laws of different countries, this does by no means imply that all given examples qualify as

transfers of undertakings in the sense of the Directive. In the second and third scenario, the legal transfers of the respective economic entity are completed under one specific jurisdic- tion and are not performed simultaneously with the physical relocation of the undertaking.

Consequently, the application of the Directive will not be triggered and the employment protection will depend solely on the country where the legal transfer is being performed.[10] It follows that cross-border problems with respect to reorganisation measures are likely to arise only in cases in which the place of business and the applicable national law changes. The first scenario assumes these preconditions and therefore forms the typical example which causes problems under the existing legislation.

In geographical respect, however, cross-border transfers of undertakings may occur either if an enterprise is transferred between two Member States of the European Union or, since the Directive also applies to the European Economic Area, between the Community and Norway, Iceland or Liechtenstein . In addition, cross-border transfers may also arise in re- lation to third countries either if an undertaking is transferred out of the territory of the Community to a non-member State or vice versa.

C. Scope of the Acquired Rights Directive

Since there is no express provision regarding the applicability of the Directive to cross- border transfers of undertakings and due to the lack of case-law in this respect, at present it is rather questionable whether the existent scope of the Directive is broad enough to cover the several transnational scenarios outlined above. The starting point for any legal analysis of this problem must be the wording of the Directive of which Article 1 (2) reads as follows:

This Directive shall apply where and in so far as the undertaking, business or part of the undertaking or business to be transferred is situated within the territorial scope of the Treaty.”

Already a first reading of the paragraph indicates that there is no straight-forward answer as to whether cross-border transfers of undertakings are sufficiently covered by the Direc- tive. From a purely textually point of view, the legislation operates solely on the grounds of the location of the business or undertaking “to be transferred” so that the application of the Directive is triggered if an undertaking is transferred which is situated within the terri-

tory of the Member States of the European Union or the European Economic Area. Al- though this does by no means imply that cross-border cases are generally covered because the Member States are the addressees of the Directive and since their national laws usually do not have extra-territorial effect[11], the wording suggests that the future location of the undertaking seemed to be irrelevant to the legislator at the time the Directive was origi- nally adopted. The fact that no distinction between national and cross-border transfers of undertakings was drawn, as well as the absence of any contravening element in the text, therefore clearly illustrates the non-significance of national borders in this context.[12] Inso- far it seems conclusive that cross-border transfers of undertakings within and between the Member States of the European Union and the European Economic Area fall within the scope of the Directive so that no amendments appear necessary in this respect.

[...]


[1] Hepple, page 10.

[2] http://www.eurofound.europa.eu/emcc/erm/index.php?template=searchfactsheets

[3] COM (2007) 334 final, page 11.

[4] Hepple, Labour Laws and Global Trade, page 172.

[5] Barnard, page 132.

[6] Barnard, page 619.

[7] S chiek, page 272.

[8] Barnard, page 634.

[9] CMS, page 16 et seq.

[10] Gaul / Otto, page 39.

[11] EAT in Holis, paragraph 25.

[12] Hellsten, page 23.

[13] COM (74) 351 final/2 of 29 May 1974.

[14] Hellsten, page 23.

Details

Seiten
24
Jahr
2008
ISBN (eBook)
9783640793235
ISBN (Buch)
9783656738602
Dateigröße
460 KB
Sprache
Deutsch
Katalognummer
v163865
Institution / Hochschule
King`s College London – Faculty of Law
Note
82,00 %
Schlagworte
Grenzüberschreitende Betriebsübergänge cross-border transfers of undertakings Betriebsübergang transnational Betriebsübergang in Europa Europäischen Union Auslagerung Outsourcing Ausgründung Richtlinie 77/187/EWG Arbeitsrecht Europäisches Arbeitsrecht Kollektives Arbeitsrecht Europarecht Betriebsrat Internationales Arbeitsrecht Rom I

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Titel: Cross-border transfers of undertakings in the context of Council Directive 77/187 of February 14, 1977