As of 22 September 1996, the European Works Councils (EWC) Directive requires multinational companies in Europe to establish European-wide works councils. The councils should be representative of their employees "for the purposes of informing and consulting" them over a whole range of issues affecting the business, and particularly where employees' interests are affected.

At first sight Article 13 of the Directive seems to allow companies to opt out of the Directive if they had voluntarily set up works councils before 22 September. The crucial part of Article 13 reads: 

"... the obligations arising from this Directive shall not apply to...undertakings...in which, on the date laid down in Article 14(1) for the implementation of the Directive (22 September 1996)...there is already an agreement, covering the entire workforce, providing for the transnational information and consultation of employees". 

The attraction of voluntary agreements for multinational companies is the hope that they would free them from some of the requirements of the Directive. Voluntary agreements, they hope, give them more room to manoeuvre in information and consultation.

But how far can you go to avoid the Directive by using voluntary agreements under Article 13?

Certainly some think a great deal - an estimated 200 Article 13 agreements were concluded by the 22 September deadline. Some of these may have gone too far and may not survive as valid "opt outs" from the requirements of the Directive. There are a number of questions that could be raised about the validity of an agreement reached under Article 13.

Who negotiated the agreement?

Article 13 agreements may be at risk if all employees were not represented. For example, of 51 agreements recently analysed, employee representatives from only one country signed the agreement in a third of them. An agreement at Cement Roadstone Holdings excludes representation for the company's 3,000 UK employees. If successfully challenged, the company will have to start the procedure again to establish an EWC as laid down in the Directive. 

Member States' transposition law - the national legislation putting the Directive into practice in each country - may expressly require representation of employees in their country (as the relevant Belgian law requires). The European Trade Union Confederation, which includes central confederations in all Member States, finalised in February 1996 a Protocol of procedures on negotiations for the creation of EWCs. This made mandatory the involvement of the trade unions from the country where the company's European headquarters is located (Article 1). It made it a prerequisite that (Article 3): "where negotiations are opened in multinational companies with undertakings in the UK..., trade unions from (the UK) should become involved from the beginning in the process to set up an EWC".

Who is covered?

Article 13 states it must cover "the entire workforce". An agreement which does not include the workforce employed in the UK may not qualify as exempt from the Directive. An agreement signed on 6 March 1996 establishing an "EU works council" for the ING Group was the first not to include significant UK operations (Barings Bank).

What is the legal status of an Article 13 agreement?

Member States have different definitions of a (collective) "agreement": who may be parties to it, what formalities must be observed, what contents may be required, whether and how it can be enforced. Conflicts between different national laws may lead to the European Court defining what constitutes an "agreement" for the purposes of Article 13. Present Article 13 agreements may find themselves outside that definition.

Which law governs the agreement?

An Article 13 agreement binds enterprises and workers' representatives in more than one country. 

Again, different national laws create difficulties and may lead the European Court to strike down agreements negotiated. For example, the Court may question what type of employee representatives negotiated the Article 13 agreement or will participate in the body established. If "inappropriate", the agreement may not survive.

Can the parties choose which national law can govern the agreement?

Is "forum shopping" allowed? For example, it would be strange if the parties to an Article 13 agreement could choose the law of a non-Member State to govern the agreement. In such a case, but also if UK law was chosen, there would be no Member State law applicable which transposes the Directive. Some Member States' transposition laws already lay down requirements for any Article 13 agreements which affect enterprises on their territory. These would be in addition to the law chosen for the agreement. It is most likely that EC law will emerge to ensure that the Directive's requirements are maintained, whatever law the parties designate to govern their agreement.

Is an Article 13 agreement a "collective agreement" in UK law?

As defined by TULRCA s.178, the parties must be trade unions and employers. The definition of "trade union" in TULRCA, s.1 might cover almost any group of workers claiming representative status and such a "trade union" has the capacity to enter into contracts (TULRCA s.10). 

But an ad hoc group of representatives negotiating an Article 13 agreement is problematic. The members of the group, or "trade union", may already be union members, with possible conflicts of membership. 

The "trade union" would need, at least, officers, a constitution, internal meetings, voting procedures, records and property or funds. 

It must comply with requirements under TULRCA, including the holding of property by trustees, registers of members, accounts and rights of access to them, members' superannuation schemes, elections to trade union office and independent scrutiny, investigation by the Certification Officer (and CROTUM), a right to membership of, and protection against exclusion from or discipline by the union, procedures for industrial action and liability resulting from it, and so on. 

The employer will not get off easily either. Such a "trade union" might be considered as "recognised" and hence entitled to other labour law rights. This might mean automatic recognition of any minority unions or staff associations to which individual members of the group are affiliated. There could be problems of "confidentiality" of information supplied to individual members of the "trade union", as well as the union itself. The agreement might be enforceable by the "trade union" and/or by individual representatives.

Does the Article 13 agreement have adequate means of enforcement?

Article 11(3) requires Member States to "ensure that adequate administrative or judicial procedures are available to enable the obligations deriving from this Directive to be enforced". 

A special problem for agreements made under UK law, is that a collective agreement is conclusively presumed not to be legally binding unless certain conditions are fulfilled (TULRCA s.179(1)). It is very unlikely that the European Court would accept as a substitute for the binding requirements of the Directive an Article 13 agreement which was binding on nobody and which could not be enforced. So the agreement must be legally enforceable to be valid - which poses many risks to the parties to it.

What does the Article 13 agreement provide for workers?

When the transnational enterprise has establishments in more than one Member State, each Member State's law and industrial relations practice may envisage a different kind of "transnational information and consultation". Will the legal definition prescribed in the Directive itself prevail?

Conclusion

The view that, under Article 13 agreements, anything goes, is unlikely to survive scrutiny by the courts. More likely, EC law based on the Directive will develop to regulate Article 13 agreements. 

This result cannot be avoided by the parties to the agreement declaring that they can choose whichever national law they want to apply. Sooner or later, Article 13 agreements will be challenged before the European Court of Justice. 

Until then, agreements based on non-Member State law (including the UK) are very insecure. Those based on national transposition laws which reflect the Directive are more secure; but the safest route is compliance with the Directive.