Why business fears Giscard d'Estaing

Daily Telegraph

[may18]

June 1 2003, 1:46 PM

(Filed: 01/06/2003)

The former French president has presented his draft for a new European constitution. It seeks to enshrine in law social and economic rights which would seriously constrain UK plc. Grant Ringshaw and Mary Fagan report

Last week, after 15 months of tortuous negotiation, proposals for a new EU constitution, including a Charter of Fundamental Rights, were finally unveiled. The constitution and the charter could have a sweeping effect on the way that Britain does business, touching everything from employment practices to competition policy.

Giscard d'Estaing: his Euro rights threaten UK profits Business feels bruised. In December 2000, the constitution was billed by the Government as little more than a toothless "declaration" at the Nice summit.

But now the charter looks set to be enshrined as a legally-binding document within the constitution. The charter aims to create a series of far-reaching social rights which have worrying implications for Britain's bosses.

They include (under Article 28) rights to strike action which are far more generous than those under British law. They also raise the prospect of cross-border picketing.

Two years ago, the Government supported the charter, claiming it would not have legal status. But under the new plans, the charter could be enforced by law, leading courts (including the European Court of Justice) to overrule Parliament on employment practices.

The Confederation of British Industry has campaigned strongly against the charter. Speaking to the Telegraph last week, Digby Jones, the director general, said: "The biggest worry from a business perspective is that the charter will be enshrined in the constitution and so be legally binding in the UK.

"At the Nice summit in 2000 all the countries signed up to this as best practice but, as the new constitution is now drafted, it has legal efficacy. What worries me is that Article 28 essentially says that workers and employees [or unions] have the right to negotiate collective agreements - and in cases of conflict, to defend their position by taking collective action including strikes. This means we are enshrining in UK legislation the right to strike and picket."

Jones says he is confident the Government will fight the move away from best practice. But he is concerned about the implications if it fails. "We do not want the British reputation for labour market flexibility destroyed. And we do not want trade union activities of the kind which happen in France inflicted on Britain. Please do not let us go there."

Part of the fear factor is that no one knows what the actual effect of the charter will be as that depends on how it is interpreted. At one extreme it could allow British citizens to take the UK government to the European Court of Justice in Luxembourg over key issues such as the right to strike.

In the past 15 months, the original text of the charter has been watered down to include some deference to "national laws and practices". But what worries many is that the deference to national laws and practices is untested - and it is the ECJ rather than a British court which will decide on when and how it might be applied.

Employment law experts argue that the charter poses more questions than it answers because it is framed as a broad set of principles. Raymond Jeffers, the head of the employment group at Linklaters, the law firm, says: "Article 23 says there should be equality between men and women in all areas including 'employment, work and pay'.

"But there is no guidance about how this should be ensured. Is it by a national government passing legislation or is the obligation on individual companies? We already have discrimination laws - so are they going to be superseded? We do not know."

The Institute of Directors is far more critical. "The charter's provisions which deal with the labour market are so vague that they have the potential to be expanded to an almost unlimited extent. For instance, providing 'fair and just' working conditions [under Article 31] that 'protect dignity' would allow activist courts to impose almost any number of obligations on employers," says Ruth Lea, head of the IoD's policy unit.

Many believe the key will be how "activist" the ECJ will be. But the implications of the charter cannot be underestimated. Lea argues it has greater significance for UK business than the euro and "the potential to be as economically damaging". Critics argue the charter could lead to radical changes in British labour relations, an avalanche of litigation in the ECJ and British companies facing huge additional swathes of regulation.

According to Jeffers, part of the problem is that while the charter is fine as a "set of high level objectives", its application is fraught with difficulty and potential contradiction. For instance, Article 11, which guarantees freedom of expression, could contradict Article 8, which enshrines protection of personal data.

"The long and short of this is that there is a lot of thinking which still needs to be done on how these proposals are put into effect," says Jeffers. That does not help businesses trying to grapple with how it will affect them, and how much it will cost to comply.

Another major issue which has so far been overlooked is the impact of the proposals on competition law. Last week, competition lawyers at Norton Rose warned the Government that the current draft of the constitution could undermine the UK's approach to anti-competitive practices and could also contradict changes already in train in Brussels.

In recent years the UK domestic competition regime has moved away from the EU model to one more akin to the approach taken by the US - a move which the Government believes provides a greater level of deterrence.

Where the EU uses a "market dominance" test in judging whether mergers are good or bad, the UK takes a broader view of the overall effect on competition and choice. The UK has also moved towards criminalisation of individuals engaged in certain anti-competitive activities, which again is closer to the US approach.

According to Martin Coleman, the head of Competition and the EC Department at Norton Rose, the UK has been able to develop in this way because at present national authorities have competence in cases where the EU specifically does not.

"What the constitution is saying is that the EU has exclusive competence in competition law. Now it could say that the UK can carry on as it is, but it could also say we cannot develop competition policy as we think fit and we could not argue with that," Coleman says.

He also points out that, from next May, the EU will primarily have jurisdiction where cross-border competition issues arise. "The constitution is now saying the EU can intervene if it doesn't like what the member states are doing. It contradicts what the EU is already doing."

The European convention, headed by Valery Giscard d'Estaing (the former French president), which produced the proposals, has until June 20 to deliver a final draft. Line-by-line intergovernmental negotiations, in a bid to reach agreement, will start in October.

For the business community, it will be a nerve-racking time. The CBI's Jones expects the UK to fight hard on behalf of UK business, but he is far from sanguine. For one thing, he is not convinced that the spectre of tax harmonisation is off the agenda in spite of ministers' reassurances to the contrary. The treatment of tax within the constitution is still a contentious issue for member states.

"As for tax harmonisation - you can bet your last pound that if it happens - we will harmonise up to France [where corporation tax is levied at 60 per cent of profits against a top rate of 30 per cent in the UK] not down to Estonia [which charges nothing on profits which are reinvested]. There will be nothing then to stop jobs going to India and China," he says.

The unveiling of the draft constitution may have been a landmark in European history. So far, as far as corporate Britain is concerned, it is a landmark it could have done without.

[fieldmarshaldj]

These French "Conservatives" make our American liberals look respectable.

[Paleo Conservative]

Easy solution. Ditch the EU and join NAFTA.

[Dog Gone]

They also raise the prospect of cross-border picketing.

Just imagine allowing foreigners to come set up picket lines outside your company entrance to shut it down.

Imagine surrendering tax policy to some entity in which you only have minority representation.

Any politician who advocates joining the EU under these conditions should be tried for treason.

[lewislynn]

Just imagine allowing foreigners to come set up picket lines outside your company entrance to shut it down.

That's easy to prevent. All "your company" has to do is move it's operations offshore to the foreigner's land...it's being done on what seems to be a daily basis here.

[Dark Wing]

British business leaders are breaking out in the cold sweats over continental business regulations and this is isolating the Europhiles. Add to that the brain dead European central bank policies causing deflation, and Blair's dream of Britain fully inside the E.U. are going down the drain.

[Dog Gone]

Some companies probably would. If local conditions get too tough, you move if you can.

That option isn't available to most companies, unless they're in manufacturing. Even then, moving something like a bakery overseas won't work.

[may18]

well i think b.liar must eventually wake up and just realise people dont want europe in the uk

[McGavin999]

This is just the tip of the iceburg, once they start reading the entire document, the British people will understand they have just handed over their freedom.

[may18]

ive read it and im horrified ;<