ECJ - No Diminished Involvement after Conversion into SE

Nov 4, 2022 Benn-Ibler Rechtsanwälte

If a company under national law is converted into a European Company (societas Europaea; abbr. SE), the representation of trade unions in the composition of the supervisory board may not be decreased. If national law (in this case, German law) requires a separate ballot for employee representatives for the company to be converted, then such a regulation of the election procedure must also be maintained in the case of change in legal structure.

The European Court of Justice (ECJ) has so ruled in the case of the SAP group, thereby following the view of the German Federal Labour Court.

In 2014, the SAP Group converted its legal structure from a stock corporation under German law into an SE. It was agreed that while trade unions would continue to nominate candidates for some of the seats of the employee representatives on the supervisory board, the union candidates would no longer be elected in a separate ballot. This could have led to a situation where the supervisory board of the future SE would no longer include a representative proposed by the trade unions. The trade unions concerned then took the matter to the German Federal Labour Court (Bundesarbeitsgericht, hereinafter BAG).

In the view of the BAG, the application of German law requires that formative procedural elements of employee involvement be maintained to the same extent in a future legal form such as an SE. However, the court had doubts as to whether Directive 2001/86 (SE Directive) provided for a uniform level of protection to be guaranteed to the same extent by all Member States, which level was inferior to the German level, and therefore asked the ECJ to interpret the Directive.

The ECJ now emphasised that the wording of the Directive makes it clear that in the case of an SE established by conversion, the agreement on employee involvement applicable to that SE must at least require the same level of involvement as exists in the company to be converted into an SE (before-and-after principle). Accordingly, a separate ballot would be required with regard to the composition of the supervisory board of the company to be converted if national law requires such a ballot.

ECJ, C-677/20 (18 October 2022)