Bibliography

Barnard, Catherine “EC Employment Law” Oxford, 2006 (cited as: Barnard) CMS Employment Practice Area Group “Study on the Application of Directive 2001/23/EC to cross-border transfers of undertakings” Brussels, 2005 - 2006 (cited as: CMS) European Commission “First phase consultation of social partners under Article 138 (2) of the EC Treaty concerning cross-border transfers of undertakings, businesses or parts of undertakings or businesses” Brussels, 2007

(cited as: European Commission, “First phase of consultation of social partners”) European Commission “Commissions Report on Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses” Brussels, 2007 (cited as: COM (2007) 334 final) European Commission “Towards Common Principles of Flexicurity: More and better jobs through flexibility and security” Brussels, 2007

(cited as: European Commission, “Towards common principles of flexicurity”)

III

European Trade Union Confederation “ETUC’s answer to the questionnaire of the Member States and the social partners at community level on the effect of the provisions of Council Directive 2001/23/EC” Brussels, 2008 (cited as: ETUC) Evans, John “Is the law failing to keep up?” Employment Law Journal, 2004 Number 51, pages 8 - 10 (cited as: Evans) Evason, John “Outsourcing and Offshoring - Employment law Kurnatowska, Monica issues” Practical Law Companies, 2005 Volume 16, Number 11, pages 35 - 44 (cited as: Evason / Kurnatowska) Evason, John “Cross-border transfers - Does TUPE apply?” Kurnatowska, Monica Practical Law Company, 2008 Ellis, Daniel Volume 19, Number 5, pages 33 - 40 (cited as: Evason / Kurnatowska / Ellis) Feudner, Bernd „Grenzüberschreitende Anwendung des § 613a BGB“ Neue Zeitschrift für Arbeitsrecht, 1999 Heft 22, pages 1184 - 1190 (cited as: Feudner) Gaul, Björn “Cross-border transfers of undertakings - Lost in Björn, Otto translation?” Practical Law Company, 2007 Volume 18, Number 7, pages 37 - 44 (cited as: Gaul / Otto)

IV

Hellsten, Jari “From Internal Market Regulation to European Labour Law” Helsinki, 2007 (cited as: Hellsten) Hepple, Bob “The legal consequences of cross border transfers of undertakings within the European Union - A report for the European Commission DG-V” Cambridge, 1998 (cited as: Hepple) Hepple, Bob “Labour Laws and Global Trade” Oxford, 2005

(cited as: Hepple, Labour Laws and Global Trade) Malmberg, Jonas “The legal position of Employees on Cross-Border Transfers of Undertakings in the EU : A question of Jurisdiction and Choice of Law” The International Journal of Comparative Labour Law and Industrial Relations, 2006, pages 385 - 406 (cited as: Malmberg) McMullen, John “Transfers continue to confuse” Employment Law Journal, 2004 Number 47, pages 22-24 (cited as : McMullen) Schiek, Dagmar “Europäisches Arbeitsrecht” Baden-Baden, 2007 (cited as: Schiek)

V

A. Introduction

While mergers, acquisitions and outsourcing processes were mainly confined to the borders of individual Member States between the late 1960s and mid-1970s, the internationalisation of capital markets, the abolition of obstacles to trade, the improved infrastructure and the widespread supply of qualified labour entailed a significant rise in the number of cross-border transfers of undertakings during the second half of the 1980s and from 1995 onwards. ¹ Between 2002 and 2006, offshoring and delocalization operations from one Member State to another increased by 800 percent according to the European Restructuring Monitor. ² The European Commission ascribes this trend to the enlargement of the European Union, the consolidation of the internal market and the introduction of facilitating legal measures and expects the increase of transnational transfers of undertakings to continue. 3

The social incisions for workers caused by transnational rationalisation measures are usually severe. While transfers of undertakings on national level must not necessarily result in the relocation of the business, cross-border transfers involve the offshoring of the production site by definition and therefore inevitably result in job losses. Moreover, relocation of undertakings from one country to another are often accompanied by the reduction or removal of the influence of trade unions and other workers’ representatives and frequently entail downwards harmonisation of working conditions. It is therefore not surprising that research studies indicate that the mere announcement of transfer activities frequently cause fear, uncertainty, psychological problems and difficulties with personal relationships among workers which often result in decreased productivity and reduced devotedness towards the employer. ⁴ With respect to cross-border transfers, it is fair to assume that the general working morale will be extremely embittered and it is evident that such adverse attitudes are likely to have a negative impact on the performance of the undertaking. On the long run, resistance to transfers of enterprises may consequently turn out to be a real threat to the functioning of the internal market and the aims pursued by the European Council with its Lisbon Strategy according to which the Community shall become “the most competitive economy in the world.” 5

In principle, the European legislator has recognized that it is inevitable to guarantee that workers do not perceive their terms and conditions of employment as being threatened by transfers of undertakings and that workforces, both in the transferor and transferee undertaking, have a legitimate interest in being properly informed and consulted. ⁶ The initial Acquired Rights Directive of 1977 was designed to address these core needs. According to the preamble, the legislation aimed to protect “employees in the event of a change of employer” and “to ensure that their rights are safeguarded.” In substantive respect, the Directive included three pillars of protective measures: First, the directive guaranteed the de jure transfer of terms and conditions which characterised the employment relationship from the transferor to the transferee. Secondly, the legislator ensured that employees enjoyed protection against dismissal on the grounds of the transfer. And thirdly, the continuation of the functioning of employee representation bodies was safeguarded and the transferor and the transferee became obliged to inform and consult with workers’ representatives about the transfer and its potential impact on the workforce. 7

Although the Directive has turned out to be one of the few effective social policy instruments in European Community law, it is rather questionable whether it provides for sufficient protection of workers in the event of cross-border transfers of undertakings. The legal uncertainty stems from the fact that although the Directive includes a provision ac-cording to which the legislation “shall apply where and in so far as the undertaking, business or part of the undertaking or business to be transferred is situated within the territorial scope of the Treaty“, the European legislator missed the chance to introduce an express reference on the applicability of the law to cross-border scenarios. The absence of any case-law of the European Court of Justice in this respect as well as the fact that the issue has only to some extent been addressed in the legal literature intensifies the existing uncertainty about whether cross-border transfers of undertakings are sufficiently covered by the Directive or if sustainable amendments are necessary in order to achieve the aims set out in the preamble.

The purpose of this essay is to investigate in how far the Directive could be amended to deal with the specific case of cross-border transfers of undertakings. In order to provide a sophisticated solution, I will first outline the relevant scenarios in which cross-border

transfers of undertakings may possibly occur in practice and discuss whether those cases are covered or if the Directive’s scope needs to be extended. Subsequently, I will check whether the definition of transfers of undertakings is broad enough to apply to cross-border transfers or if it is necessary to introduce amendments in order to safeguard workers’ interests sufficiently. The main focus of this paper, however, lies on the analysis of the appropriateness of the three substantive pillars of protection in cross-border scenarios. Eventually, I will briefly address problems in relation to conflicts of jurisdictions before I give a personal recommendation. B. Scenarios of cross-border transfers of undertakings

In a globalized world, the newspapers report almost daily about mergers of companies from different countries, acquisitions of national undertakings by foreign investors and offshore outsourcing processes of previously domestic activities. If these cross-border scenarios played in a mere national context within the borders of a Member State of the European Union, they would principally qualify as transfers of undertakings in the legal sense because the case-law of the European Court of Justice suggests that its interpretation of the phrase “legal transfers or mergers” is so broad that it is no longer a serious impediment to the application of the Directive. ⁸ On a transnational level, however, such a generalizing assumption in relation to the application of the Directive to reorganisation measures is not possible. Rather, three different scenarios must be distinguished: 9

- The simultaneous transfer of ownership and the relocation of business assets from the transferor to the transferee whereas the latter is situated in a different country than the former

- The relocation of all tangible and intangible assets to another country by the trans-feror followed by a subsequent transfer of ownership to the transferee

- The transfer of ownership to the transferee with a subsequent relocation of the undertaking to another country by the acquirer

Although all three possible scenarios include the typical legal element that indicates a cross-border relation, namely the fact that the transferor and the transferee are governed by laws of different countries, this does by no means imply that all given examples qualify as