EU Company Law package must end 'regime shopping'

The European Trade Union Confederation (ETUC) urges the European Commission to include in its forthcoming ‘European Company Law package’ binding measures to protect workers and end ‘regime shopping’ which allows companies in Europe to move their headquarters to another Member State where they pay less taxes and lower wages regardless of where their genuine economic activity take place.

The ETUC has serious concerns about the recent Polbud-Wykonawstwo case judgment in the Court of Justice of the European Union (CJEU), where the Court confirmed that relocating registered offices with the aim of enjoying more favourable legislation does not constitute abuse, even if the company has no genuine economic activity in that Member State. By doing so, the Court gives the green light to companies wishing to circumvent national standards and obligations on tax, social security and workers’ rights.

The ETUC fears that this ruling will lead to an increasing number of artificial commercial arrangements for purely financial reasons, creating an accelerating downward spiral in living and working conditions.

The ETUC demands that:

  • Companies must be obliged to register in the country where a dominant part of their economic activity takes place. The Commission should propose connecting the location of the registered office to the location of economic activities. Greater transparency in company ownership must be guaranteed so that workers and the public know who the responsible owner is.
  • Workers’ participation rights must be fully respected and guaranteed. Any plan to move a registered office cross-border must include workers’ involvement – information, consultation and participation rights – to ensure that employees can anticipate major changes in their company.

“If the Commission is serious about putting the European Pillar of Social Rights into practice and creating a fair labour market for workers, it must introduce measures to plug the legal loopholes that enable firms to get away with regime shopping,” says Peter Scherrer, ETUC Deputy General Secretary.

“The Company Law package has to put in place binding restrictions on letterbox practices to avoid exploitation of workers, wage gaps between Member States, reduced revenues for public services and unfair competition for responsible employers.

“The introduction of the European Company Law package is also an excellent opportunity to ensure workers are properly informed and consulted about changes in the company’s seat. Any circumvention of existing rights to workers’ participation must be prevented.

“Harmonised rules and safeguards for workers are a ‘conditio sine qua non’ for the support of the ETUC,” concluded Peter Scherrer.