There is no existing board-level representation for employees in companies in Estonia and the issue of employee involvement in European companies has not been of great concern. Employer and trade union interest has instead been focussed on legislation implementing the EU directive on a framework for information and consultation rights at national level (2002/14/EC). The legislation transposing the directive on employee involvement in European companies was discussed with both employers and unions, and was passed with their support, but little debate.
There is no existing employee board-level representation in Estonia and the legislation implementing the directive on employee involvement in European companies was passed with little debate.
Directive was transposed by law and came into effect in February 2005 five months after the October 2004 deadline
The directive on employee involvement in European companies was transposed through the following legislation passed on 12 January 2005 which entered into force on 11 February 2005: Act on the involvement of employees in the affairs of a Community-scale undertaking, a Community-scale group of undertakings, or a European Company ( Üleühenduselise Ettevõtja, Üleühenduselise Ettevõtjate Grupi ja Euroopa Äriühingu Tegevusse Töötajate Kaasamise Seadus). This legislation, as the name indicates, also covered the legislation implementing the European works council directive, and many of the provisions are common. Legislation covering the changes necessary to adapt Estonian company legislation to the Regulation on European companies was passed on 10 November 2004 and came into effect on 10 December 2004.
Special negotiating body (SNB)
Estonian members of the SNB are elected by a general meeting of all employees or, where there are several companies, by delegates elected at general meetings.
Estonian SNB members are elected by all employees at a general meeting. If there are several companies involved in Estonia, the SNB members are elected by a joint body consisting of at least three representatives from each company, elected at that company’s general meeting of employees. Their voting strength should be in proportion to the number of employees they represent. In choosing the SNB members from Estonia, the aim should be that each of the companies involved should be represented. If the number of companies is greater than the number of SNB places, those from the larger companies have priority (§54 and §17).
The presence of external union representatives on the SNB is neither specifically prohibited nor specifically permitted by the Estonian legislation.
The section of the legislation on the choice of the Estonian members of the SNB does not refer to the issue as to whether or not they may be external union representatives (§17).
Funding of at least one expert guaranteed.
The section of the Estonian legislation on funding states that “reasonable expenses” of the SNB will be borne by the companies and specifically includes “the expenses that are connected with inviting at least one expert” (§61 and §20).
Standard rules under the fallback procedure
Same arrangements apply as for SNB members – election by a general meeting of employees or by delegates elected at general meetings, where several companies are involved.
The same arrangements which apply for the choice of Estonian members of the SNB also apply for the choice of Estonian members of the SE representative body – known as the representative body of employees (Töötajate esinduskogu) in the Estonian legislation. In other words, they are elected by a general meeting of employees or by delegates elected at general meetings of employees, if several companies are involved (see section on SNB). However, in this case the legislation is specific and states that only employees may be members (§65).
The company should bear the expenses of the representative body, including at least one expert.
The company is obliged to “compensate for the expenses connected with the functioning” of the representative body. These specifically include organising meetings, interpreting services, travel and accommodation expenses of members and “the expenses of inviting at least one expert” (§69). This section states that the arrangements for covering the expenses of the SE representative body are the same as those for the expenses of a European works council (§32).
Arrangements for the election of employee board members are the same as those for the SNB – election by a general meeting of employees or by delegates elected at general meetings, where several companies are involved.
Estonian employee representatives at board level are to be chosen in the same way as Estonian SNB members – by election at a general meeting of employees or by delegates elected at general meetings, where several companies are involved (§76) (see SNB section).
Misuse of procedures and structural change
Changes in the structure of an SE in its first year that affect whether it would have been covered by the board-level elements of the directive are assumed to be a misuse of procedure, unless the opposite can be proved.
There should be new negotiations, if “it can be concluded … that the purpose [of establishing an SE] was to leave employees without the right to be involved or limit their use of rights”. There is a presumption that changes in the first year after the foundation of an SE which affect whether or not a company would have been covered by the employment thresholds in the directive – eg having more than 25% of employees with participation rights in the course of a merger – are a misuse of procedures, unless the company can prove that this was not the case (§81). In addition, employee representatives only have one year in which to make a complaint to the court “starting from the day the member of the representative body of employees … was informed of the significant changes” (§82).
Other than where they are seen as a misuse, structural changes in the SE are not specifically covered in the Estonian legislation.
There is no automatic right to renegotiate the agreement if there are changes in the structure of the SE, unless they are seen as misuse of the SE procedure (see section on this). The one year time limit means that later changes are not covered.
Unions and employers were consulted on the introduction of the legislation and they were broadly supportive of the proposals.
Unions and employers were involved in the discussions with the government on transposing the directive into national legislation. The original government proposal had been for three EU directives – on European works councils, on the involvement of employees in European companies and on establishing a general framework for informing and consulting employees – in a single piece of Estonian legislation. However, both the unions and employees asked for the legislation on a framework for information and consultation, which potentially has a much wider national impact, to be dealt with separately. This was agreed by the government and the legislation implementing the two other directives, including employee involvement in European companies, passed without significant debate.
L. Fulton (2008) Anchoring the European Company in National Law - Country Overviews (online publication, prepared for worker-participation.eu)
Dr. iur. Merle Muda (Department of Labour and Social Security Law Faculty of Law University of Tartu)
The SE directive was transposed into Estonian law by the third chapter of the Employee Involvement. The draft of the Employee Involvement Act passed three readings in the Riigikogu (the Estonian parliament) without extensive debate. The Estonian law on employee involvement in the European Company (SE) was adopted in January 2005 and entered into force on 11 February 2005. According to the IEA, employees’ representatives are elected to the special negotiating body and the statutory representative body by a general meeting of employees. The Confederation of Estonian Trade Unions did not approve of this solution, stating that it should be the trade unions’ prerogative to elect employees’ representatives to these bodies.
1. Transposition of the SE Directive into Estonian Law
1.1 Legislative Drafting Process
Estonia began to make preparations for the transposition into national law of Directive 2001/86/EC supplementing the Statute for a European Company with regard to employee involvement (hereinafter: the SE Directive) in October 2002 when a commission was set up at the Ministry of Social Affairs in order to elaborate the Social Dialogue Act. The draft of the Social Dialogue Act was completed at the end of 2003 and harmonised Estonian labour law with three EC directives: Directive 94/45/EC on the establishment of a European Works Council or of a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (hereinafter: the EWC Directive), Directive 2002/14/EC establishing a general framework for informing and consulting employees in the European Community, and the SE Directive.
On 11 March 2004, the Estonian social partners – the Confederation of Estonian Trade Unions and the Estonian Employers’ Confederation – made a joint declaration stating that the parts of the draft of the Social Dialogue Act that deal with employee involvement at European level may be adopted without essential amendments, but the national system for informing and consulting employees (i.e. the rules arising from Directive 2002/14/EC) must be regulated in a separate act.
The Estonian Ministry of Social Affairs took the position of the social partners into account: the Ministry removed the regulation on the national information and consultation system from the draft of the Social Dialogue Act, renamed the draft the Employee Involvement Act and sent it to the Riigikogu (the Estonian Parliament) at the beginning of November 2004.
The draft of the Employee Involvement Act passed three readings in the Riigikogu without extensive debate. The Riigikogu adopted the act on 12 January 2005, renaming it the Employee Involvement in the Activities of Community-Scale Undertakings, Community-Scale Groups of Undertakings and European Company Act (hereinafter: the IEA). The IEA will be published in the Riigi Teataja (State Gazette) on 1 February 2005 and will enter into force on 11 February 2005.
1.2 Involvement of employees in the activities of Community-scale undertakings, Community-scale groups of undertakings and European Company act
As already stated, the IEA harmonises Estonian law with two EC directives: the EWC Directive and the SE Directive. The act consists of six chapters:
1. General provisions.
2. Employee involvement in Community-scale undertakings or Community-scale groups of undertakings.
3. Employee involvement in the European Company.
4. State supervision.
6. Implementation provisions.
Thus, the SE directive is transposed into Estonian law by the third chapter of the IEA: Employee involvement in the European Company. The structure of this part of the act is as follows:
Division 1. General provisions.
Division 2. Establishment of the representative body and procedure of employee involvement.
Subdivision 1. Negotiations on employee involvement.
Subdivision 2. Agreement on employee involvement.
Subdivision 3. Statutory representative body and employee involvement.
Sub-subdivision 1. General provisions.
Sub-subdivision 2. Representative body.
Sub-subdivision 3. Employee involvement.
Division 3. Special provisions.
According to the IEA, employees’ representatives are elected to the special negotiating body and the statutory representative body by a general meeting of employees. The Confederation of Estonian Trade Unions does not approve of this solution, stating that it should be the trade unions’ prerogative to elect employees’ representatives to these bodies. However, given the fact that in Estonia trade unions have been established in relatively few companies (only about 13 per cent of the workforce are members of trade unions) it is reasonable to give the right to elect employees’ representatives to a general meeting of employees.
2. Implementation of Regulation (EC) No. 2157/2001 in Estonia
The most important act on companies in Estonia is the Commercial Code (available in English at <http://www.legaltext.ee/>). However, the Estonian Ministry of Justice took the view that the addition of the implementing provisions on European Companies to the Commercial Code would not be rational, as Regulation (EC) No. 2157/2001 on the Statute for a European Company (SE) constitutes a legal basis for European Companies which is independent of national law.
Therefore, in order to harmonise Estonian company law with Regulation (EC) No. 2157/2001 the Estonian Ministry of Justice prepared the draft of the Council of the European Union Regulation (EC) No. 2157/2001 on the European Company Statute (SE) Application Act (hereinafter: the ECA) in the first half of 2004. The draft of the ECA was sent to the Riigikogu in July 2004 and passed on 10 November 2004. The ECA entered into force on 10 December 2004.
As already mentioned, the ECA lays down rules on the implementation of Regulation (EC) No. 2157/2001 in special cases when the place of foundation of the European Company is Estonia. The ECA consists of five chapters: General provisions, Transfer of the SE’s registered office, Establishment of the SE, SE organs, and Winding Up of the SE.
The ECA mostly concerns regulation of SE organs. According to Regulation (EC) No. 2157/2001, an SE may have a one-tier or a two-tier management system. The Estonian Commercial Code provides only for a two-tier management system (a management board and a supervisory board) for public limited liability companies. Therefore, it is necessary to issue a regulation on the one-tier management system in Estonia (a member state has this right in conformity with Article 43 (4) of the Regulation). The ECA states that the administrative organ managing an SE under the one-tier system shall be an administrative board. The act also provides detailed rules on the legal status of this body.
3. Concluding remarks
Taking into account the economic situation in Estonia, it is unlikely that many SEs will be established. The main importance of transposition of the SE directive into Estonian law lies in the possibility of electing employees’ representatives in participating companies and subsidiaries or establishments that are situated in Estonia.
Last but not least, over the next few months both the IEA and the ECA will be translated into English and will be available on the Internet at <http://www.legaltext.ee/>.
- For the text of the act transposing Regulation (EC) No. 2157/2001 on the Statute for a European Company (SE) (Englisch version) see: http://www.legaltext.ee/text/en/X90027.htm
- Link to EU Commission website, inofficial translations are available for some countries
Andres Vutt and Margit Vutt (2007), in: JURIDICA INTERNATIONAL XII/2007, pp. 125-133
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