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CJEU advisor: German law on employees’ representatives is compatible with EU law

German law on who can elect members of a company's supervisory board does not break EU rules on freedom of movement or discrimination on the grounds of nationality, advocate general Saugmandsgaard Øe has said in an opinion.08 May 2017

TUI AG, the head of travel operator TUI group, has been challenged in the German courts by a shareholder, Konrad Erzberger, over the voting process for its supervisory board. Erzberger has claimed that board members should all be appointed by the company's shareholders instead of, in accordance with German law, half by shareholders and half by employees employed in Germany.

Erzberger argued that the German law infringed EU law on the freedom of movement for workers and the prohibition of discrimination on grounds of nationality.

The Higher Regional Court in Berlin therefore referred a question to the Court of Justice of the European Union (CJEU) on whether the German law on employee participation is compatible with EU law.

In his non-binding opinion on the case, the advocate general said the German legislation does not infringe the EU laws. Employees of the TUI group employed outside Germany are not, in principle, covered by the laws on freedom of movement for workers. Freedom of movement only applies to those who make use of it, and most of the employees concerned have probably never done so, he said.

The fact that a company is owned or controlled by a company established in another EU country is not in itself enough to affect the freedom of movement of workers, and the general prohibition of discrimination on grounds of nationality does not apply to situations which are wholly internal to a member state, the advocate general said.

For employees working in Germany, freedom of movement applies when they leave, or want to leave, Germany to work for a subsidiary in another EU country. However, the German legislation does not restrict this, even if that worker loses his or her right to vote or stand for the board. As EU law currently stands, member states are not required to give workers who pursue an economic activity in another member state the same participation rights as those enjoyed by workers employed on national territory, he said.

Even if the Berlin court comes to another conclusion and finds that freedom of movement has been restricted, the advocate general said he considers that the restriction would be justified. The legislation in question reflects economic and social policy choices that are a matter for individual countries, he said.

While the advocate general is not convinced by the argument that the German employee participation system is an element of national identity, it is beyond doubt that it constitutes an essential element of the German employment market and of the German social order, he said.

It would not be possible to bring workers from outside German into the system without changing its fundamental characteristics, the opinion said. To do so would involve transferring responsibility for arranging and conducting elections from employees and companies in a group to the management of the parent company, and this would run counter the principles on which the system is based, the advocate general said.

Opinions of advocates general are not binding on the court, but are followed in the majority of cases.