8.5 International (group) relations

Decision-making and co-determination vary widely also in international relations. International groups often use the so called Nederland-constructie (also if the senior management is located in the Netherlands), which limits the employees’ co-determination to the Dutch branch of the group and places the strategic decisions made at the level of the top-level holding company beyond the employees’ influence. This erosion of co-determination is partly compensated by the European Works Council regulations with regard to the right to be informed and consulted; only partly, however, because the influence of a European Works Council cannot be compared with that which a Dutch works council can exercise over the decisionmaking in the Dutch enterprise. The doctrines of joint entrepreneurship and attribution addressed above can also play a part in international groups.

I have concluded above that co-determination under corporate law is in keeping with the balance of control in Dutch groups, but this does not apply to international groups. Because of the use of the Nederland-constructie and the related exemptions, co-determination under corporate law is limited to the Dutch part of the group, but that is usually not the level at which the strategic decisions are made. The regulations regarding the right to be heard are unclear and should be clarified in my opinion. In my opinion the limitation should thereby not be as drastic as in the two-tier board regime, since the rights to be heard have much less impact on the fundamental powers of the shareholders and the shareholders’ meeting. The erosion of the right to be informed and the right to be consulted is compensated to some extent by European regulations, but that does not apply to co-determination under corporate law. The European directives and regulations in the field of co-determination under corporate law apply only if the entrepreneur opts to conduct his enterprise as a European legal entity or opts for a European restructuring. However, the regulations are expressly not intended to create European co-determination under corporate law, but rather to protect employees’ (national) co-determination powers when a European legal entity is incorporated or a European restructuring is implemented. That objective is realised only partly, as demonstrated in Chapter 5. Although many member states provide for a form of co-determination under corporate law, I do not believe that a directive with minimum regulations in the field of co-determination under corporate law is politically feasible, also since that form of co-determination is very closely linked to national corporate law regimes. Moreover, co-determination under corporate law is highly controversial in a number of member states and it is apparent from the directives on European legal entities and European restructurings that such co-determination is very problematic. It is conceivable, however, that corporate law co-determination will become part of the negotiation process with the Special Negotiating Body (SNB) in the context of setting up a European Works Council. In the case of a group with a top-level holding company in the Netherlands it would be desirable, for instance, that the powers under corporate law are exercised by the European Works Council rather than by the central works council. That would also accommodate the legitimacy objections that may be raised in that case, since a European Works Council represents not only the Dutch employees, but all the employees in the various member states.

The limited influence of employees on the decision-making in international groups is due to the principles of territoriality and legitimacy. Dutch co-determination law is limited to the Dutch territory and the Dutch employees do not represent the staff members of the international group who work abroad. Moreover, entrepreneurs have freedom of establishment within the European Union. Co-determination, or in any event co-determination under corporate law, is at odds with that fundamental freedom, since strong forms of co-determination may stand in the way of establishing a enterprise in a specific member state. I have concluded in section 5.9 that it cannot be precluded that the European Court of Justice will rule that imposing Dutch co-determination on foreign legal entities or attaching conditions to an outbound cross-border change of the legal structure or a transfer of the registered office will disproportionally breach the freedom of establishment. This will give rise to a difference (that is unreasonable in my opinion) between forms of cross-border mobility that have been harmonised, such as cross-border mergers and the incorporation of a European legal entity, and cross-border restructurings that are directly based on freedom of establishment. By harmonising cross-border restructurings and linking them to a co-determination regime, it is possible to strike a balance between the fundamental freedoms on the one hand and the co-determination right on the other hand. In my opinion the emphasis is thereby rightly on preserving co-determination and avoiding abuse.