Europe: Sidestepping SE codetermination

In a recent judgement by the Court of Justice of the European Union (CJEU), the merger of two companies belonging to Olympus, a Japanese company, highlights a flaw in the European Company Statute (SE) that allows German companies to escape from the German system of employee participation. This loophole was exploited by Olympus, which created an SE without any special negotiating body or employee involvement. The CJEU ruled that no obligation exists for negotiations on employee involvement in certain situations. This judgement raises concerns about the effectiveness of the European company structure.

Why it matters: The ruling is important because it reveals a flaw in the European SE system, allowing companies to avoid employee participation requirements. The targeted audience for this information includes all stakeholders in the European business community who may be affected by similar situations, and it matters to them because it raises questions about the integrity of the SE framework.

The big picture: The case highlights a broader context of potential loopholes and shortcomings in the European SE structure. The ruling brings attention to the need for a comprehensive review of the regulatory framework to ensure that it aligns with the intended objectives and prevents companies from exploiting the system.

What's next: The CJEU's ruling cannot be appealed, so it is now up to the next cohort of MEPs to consider amending the law to address the flaw in the SE system.

The bottom line: The Olympus case exposes a loophole in the European SE structure. The ruling means it is potentially open for other companies to now follow this “model” and exploit this flaw.

ADDITIONAL INFORMATION:

• CJEU ruling: CJEU, 16 May 2024, Case C- 706/22.
• European Company Statute (SE)