July 18, 2017
Today, the European Court of Justice has rendered a landmark decision about German corporate co-determination, avoiding a "Europeanization" of the current regime.
Germany has a unique system of employee co-determination on the supervisory board of mid-sized and large corporations. In most companies between 500 and 2,000 employees, a third of the supervisory board members must be employee representatives. In corporations with more than 2,000 employees, even half of the seats are filled with employee and union representatives. This system has undergone criticism from investors and legal scholars alike, albeit for different reasons. Since 2013, several scholars and activists have been trying to curb this system in several German courts, which is virtually carved in stone on a political level. The German courts have responded differently to these approaches. One of them (the "TUI Case") has been referred to the European Court of Justice, which has led to the case at hand. The plaintiff argues that the German co-determination laws only consider employees in Germany, not in other EU countries and therefore violate European laws, particularly the principles of non-discrimination (Art. 18 TFEU) and/or the freedom of movement for workers (Art. 45 TFEU).
The Court has heard various parties. Most interestingly, the EU Commission performed a surprising turn around in the oral hearing. In their written brief, the Commission had argued that the German co-determination laws do violate EU law. In the oral hearing of 24 January 2017, however, the Commission representative suddenly presented a different legal opinion. As evident from a press release (http://europa.eu/rapid/press-release_STATEMENT-17-141_en.htm), the Commission now held that the German co-determination laws do not violate European law. A similar development could be observed with regard to the Advocate General: In the oral hearing, he held that the German laws did violate EU law and referred to his home country Denmark to argue that co-determination laws could indeed extent to foreign operations. However, in his final written comments on 4 May 2017, the Advocate General deviated from this position and found the contested German co-determination rules compatible with EU law (https://curia.europa.eu/jcms/upload/docs/application/pdf/2017-05/cp170043en.pdf).
This decision comes as a relief to many German companies, which had feared a revolution of their co-determination system with tedious adaption steps, all of which is now history.
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