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Let me state at the outset that Article 16 Tenth Directive merely supports the position of employee participation at company level within Europe. The provision raised awareness of employee participation, particularly in those Member States which had not been very familiar with it or not at all. It is cause for celebration that the Member State were able to reach a compromise on this very politically sensitive issue. The provisions may not deserve the beauty prize, but they are a start. Nevertheless, it cannot do any harm to think about appropriate changes to the European solution for employee participation with cross-border mergers, in light of the principles underlying this solution. My ideas on this centre of the solutions lye along the lines which have been set out at the European level for workers involvement in the undertaking.

The biggest problems associated with the provisions on employee participation go back to the vague and complex system included in Article 16 Tenth Directive, in which not much attention is paid to the manner in which participation manifest itself in a national context. There is a risk that national participation rights will not be recognised. Due to the peculiarities of Dutch participation law, this risk cannot be underestimated for Dutch workers. The risk becomes even greater if the company resulting from the merger is established in a foreign country. Monitoring of the substantive application of Article 16 Tenth Directive and the ensuing participation result then becomes the responsibility of a foreign authority, which usually knows little about Dutch participation law. From this vantage point, it is a loss that the Dutch works council is no player in the manner in which the managements of the participating companies apply the main rule and exceptions (whether the alternative regime goes into effect or not) and in implementing the statutory standard rules into the articles of association. This gap is inconsistent with the notion of protection on which Article 16 Tenth Directive is predicated. It is contradictory that the European regulations create a system which is targeted to preserve participation rights, but which then excludes the employees – the group entitled to the protection – from the process of giving shape to these regulations. This is all the more so, since my research has shown that the text of the law is ambiguous and susceptible to multiple interpretations on many points. Of course, this problem does not arise during negotiations. The employees are involved in drawing up the agreement through the special negotiating body.

The gap might be filled in by including rules in the Tenth Directive that the management of the participating company must inform and consult with the national employees (or their representatives) about the way in which they will be applying the main rule and exceptions or the statutory standard rules laid down in Article 16.

This would entail further specification of the information and consultation rights in Directive 2002/14/EC. While the Dutch employees will usually receive the information, too, through the procedure in Article 25 WCA, the right to issue a recommendation is not specifically geared to the application of Article 16 Tenth Directive. It would be in keeping with the European law for workers to explicitly be given the opportunity to comment on a major decision which may affect their employment position within the company. It makes no sense to grant the employees or the employee representatives a separate right of recommandation concerning the manner in which the management will apply Article 16. The European legislator made the criteria in Article 16 mandatory, so that the management of the participating companies are not entitled to any entrepreneurial freedom in this regard. A right of consultation is thus rather meaningless. The employees or employee representatives could, on the other hand, be provided the opportunity to protest the manner in which the management applies Article 16. The option could be introduced, I think, of raising objections to the (foreign) authority charged with monitoring the way the management implements the provisions of Article 16 Tenth Directive (scrutiny of the legality of the merger). I believe that this addition to the rights in Directive 2002/ 14/EC is justifiable, since it relates to the application of statutorily prescribed criteria, and, in particular, foreign authorities will often not be knowledgeable about the employee participation law of another Member State. In order to avoid a conflict with the right of establishment in Article 49 TFEU, such an objection procedure should, though, provide a conclusive answer relatively fast.

In the long run, there may be possibilities for redesigning the legal position of employee participation at the European level. The findings from my research show how difficult it is to transpose domestic participation systems on another legal system in a manner which does justice to the notion of protection in Article 16 Tenth Directive. Participation encompasses more than just a proportional number of appointment, election, recommendation and/or objection rights. It is closely related to the management structure in which it operates, so that some elements of participation law can easily be lost upon the transformation of a participation system from the one legal system to the other. What’s more, the current, complex regulations impede companies from entering into cross-border mergers.

My preference would be to place participation – like workers involvement in the undertaking – within a separate legal system which is independent of the crossborder merger as such. The question arises what such a scheme ought to look like. In my opinion, this should not be a single uniform scheme applicable to all domestic limited liability companies of a certain size. I do not deem this either feasible or desirable, given the Member States’ divergent views on employee participation law. Instead, I have in mind a directive which regulates the employee participation for the cross-border mobility of limited liability companies generally. This type of scheme would, moreover, immediately resolve the participation issue which has thwarted the formulation of the Fourteenth Directive.

The contours of the scheme should be delineated by a number of standard participation systems which have been equated with each other. Such a design would enable the Member State to select a system which fits in best with their national company law. The system in the Fifth Directive, which was based on three standard models, could be looked at for guidance. The three models include: (i) direct representation of the workers up to one-third of the members in the supervisory body or the non-executive board; (ii) a binding right of objection for the workers as regards the appointment of the supervisory body or the non-executive board and (iii) the establishment of a body which represents the workers at company level and possesses similar information and consultation rights as the supervisory element within the company. The second model is more in line with the previous Dutch participation system, and could be replaced by the present Dutch system entailing an (enhanced) right of recommendation regarding the composition of the supervisory board or the non-executive board and perhaps a right to speak.

The participation system selected and implemented by a Member State would take effect when participation is threatened by the cross-border mobility of national limited liability companies. The negotiation option could continue to exist, provided the management of the participating companies can directly decide to apply the standard participation system in force in the Member State where the company wishes to establish. Hence, the standard participation system would actually replace the current statutory stand rules. In this way, a ‘foreign’ participation system would no longer apply to the company created by the merger, but rather, a standard system would come into force which had already gained a position within the national company law of the country of establishment. This is a huge advantage. Employee participation need no longer be an extremely complicated exercise. Such a scheme, I think, also has a good chance of being successful, especially since the regulations would be confined to situations in which the employees’ existing participation rights were threatened by the cross-border mobility of companies. The Member States will realise that the current provisions in Article 16 Tenth Directive only impede crossborder mobility. In that respect, my approach not only serves to protect existing participation rights, but also facilitates cross-border mergers.