Noerr wins landmark case – staff members employed in other EU countries are not included when calculating co-determination thresholds

Noerr has successfully represented mutares AG before Munich I Regional Court in what is known as “status proceedings” regarding the correct composition of the supervisory board of the company listed in the Scale 30 index of Deutsche Börse. The Court followed Noerr‘s argumentation that the prevailing practice, i.e. not counting staff members of corporate groups who are employed in other EU countries when calculating the relevant co-determination thresholds, does not violate German constitutional law.

The plaintiff, Konrad Erzberger, recently gained nationwide notoriety with the status proceedings he initiated against TUI AG by arguing before the European Court of Justice that German corporate co-determination legislation was not in line with EU law. In its judgment handed down on 18 July 2017, the European Court of Justice confirmed, however, that German corporate co-determination provisions are compatible with EU law. This judgment has created legal certainty to the effect that staff members who are employed with a group subsidiary in another EU Member State do not need to be involved in elections of employee representatives to the supervisory board of the German parent company.

What is much more significant in practice is the question of whether the staff members of group companies who are employed in other EU countries can be ignored not only for the purpose of elections, but also for the purpose of counting, i.e. for calculating the thresholds relevant for application of the German co-determination acts (“German Codetermination Act“=”MitbestG”, and “German One-Third Participation Act”=”DrittelbG”). This “counting issue” was not part of the ECJ proceedings and has been subject of controversial debate, both in courts and legal literature for quite some time. Following clarification of the “election issue” by the European Court of Justice, this “counting issue” has now been raised by Mr Erzberger in numerous new status proceedings in recent months.

In his status proceedings against mutares AG, the plaintiff has now invoked German constitutional law, arguing on the basis of an expert report that for reasons of equal treatment (Art. 3 of the German Constitution) the staff members of group subsidiaries who are employed in another EU country must be counted when calculating the relevant number of employees.

Munich I Regional Court denied a violation of the principle of equal treatment under constitutional law and dismissed the plaintiff's motion in the trial court instance. The court held that since foreign subsidiaries are subject to entirely different regulations, there are already good reasons to argue that companies which also have employees abroad are not even comparable to companies which only have employees in Germany. The Court said that in any event the entrepreneurial freedom to decide whether or not to operate subsidiary companies abroad justified treating those companies differently. The plaintiff has filed an appeal against this decision.

Advisors to mutares AG: Noerr LLP
Dr Ralph Schilha (Capital Markets), Dr Martin Landauer (Employment & Pensions), Dr Daniel Dommermuth-Alhäuser (Employment & Pensions; all Munich)

In-house: Jens Tiede (Head of Group Legal)