EAT rules that Irish law applies to European Works Council agreement post-Brexit

In this latest decision regarding European Works Councils, the EAT was satisfied that HSBC validly moved its European Works Council to Ireland with effect from the end of the Brexit transition period by appointing an Irish representative agent. As the UK is no longer a member state of the European Union or the European Economic Area, UK HSBC employees are no longer entitled to representation.

What is a European Works Council?

A European Works Council (EWC) is a standing body that facilitates the information and consultation of European employees on ‘transnational’ issues. Until the end of the Brexit transition period on 31 December 2020, EWCs were composed of employees’ representatives from EU and EEA countries where a business had employees, as well as any other country agreed to be in scope under the terms of an EWC agreement. EWCs operate separately and with a different competence from national-level information and consultation bodies.

Brexit amendments

The concept of a EWC dates from 1994, and the key EU legislation is known as the EWC Directive. EWCs were introduced into UK law through the Transnational Information and Consultation of Employees Regulations 1999 (TICER). In March 2019, in anticipation of a ‘no deal’ Brexit on 29 March 2019, the Employment Rights (Amendment) (EU Exit) Regulations 2019 (Exit Regulations) were made.

The UK’s withdrawal from the EU was later delayed until 31 January 2020 and a ‘no deal’ Brexit was avoided. Nonetheless, these changes were still progressed: TICER was amended into Amended TICER by the Exit Regulations with effect from the end of the Brexit transition period.

The easyJet case

Unfortunately, the Exit Regulations were poorly drafted. As the previous government ignored warnings about this, there has been a lot of uncertainty about the ongoing obligations of businesses that operated a EWC under UK law before the end of the Brexit transition period.

Some certainty was provided in the summer of 2023 when the Court of Appeal decided easyJet. Although it noted that Amended TICER is ‘ill thought through’ legislation, it confirmed that businesses that used to operate an EWC under the default ‘subsidiary requirements’ contained in the schedule to Amended TICER must continue to do so i.e. that UK law EWC continues to exist. This is despite the Court of Appeal recognising that a business having to operate a second EWC under UK law in addition to a EWC under the laws of a member state of either or both the EU and the EEA gives rise to ‘practical difficulties’. We wrote in detail about the decision in easyJet here.

HSBC’s move to Ireland

In contrast to easyJet, the litigation involving the HSBC European Works Council involved a EWC operating under a negotiated EWC agreement.

In December 2020, and in anticipation of the imminent end of the Brexit transition period, HSBC, a British bank, gave notice that, with effect from 1 January 2021, it was appointing an Irish representative agent to assume its responsibilities under the EWC Directive and so its EWC agreement was being amended to be governed by Irish law. It also indicated that, as its EWC agreement referred to its scope being business operations and employees in EEA member states, UK employees would no longer be represented on the EWC and UK business operations would be outside the EWC’s scope from that date.

In early 2021, the EWC complained to the Central Arbitration Committee (CAC) about these actions by HSBC. In mid-2021, the CAC ruled against the EWC on each complaint.

Appeals rejected by the EAT

The EAT dismissed the EWC’s appeals against the CAC’s decisions, finding that:

• UK not covered: The EWC agreement referred to it covering operations located “in the EEA Member States” and, in context, this meant member states of the EEA from time to time. UK business operations and employees are therefore no longer covered by the agreement.

  Critically, the EAT noted that the Court of Appeal’s decision in easyJet last year involved a materially different situation. In that case, easyJet had argued that its EWC operating under UK law no longer existed (as it was governed by the default subsidiary requirements as opposed to an EWC agreement), as it had established a new EWC operating under German law’s subsidiary requirements. In contrast, HSBC never argued that its EWC agreement had ceased to have effect. So, although easyJet meant that the HSBC EWC agreement continued to exist, it did not mean that it must continue to apply to UK employees if its terms do not provide for that.

• Correct that EWC agreement governed by Irish law: The CAC had not erred in accepting that the EWC agreement was now governed by Irish law. It did so on the basis that it was clear from the EWC agreement that the location of central management (for the purposes of the EWC Directive) would determine the applicable governing law. Since the end of the Brexit transition period and HSBC’s designation of an Irish representative agent, that had been Ireland.

  Importantly, the EAT described the change in governing law as being one that “can properly be described as one that is imposed by law”. As such, it was irrelevant that the EWC had not agreed to the change, as it had happened automatically.

• No parallel UK law EWC: The EAT dismissed the EWC’s appeal that the EWC agreement should continue to operate in parallel under UK law with the agreement also operating under Irish law for the purposes of the EWC Directive. This would have meant that, like easyJet, HSBC would have had to operate two EWCs. However, the EAT noted that there is only one EWC established by the EWC agreement and that the EWC Agreement “can only be subject to one law, either English or Irish; it cannot simultaneously be governed by both”.
• EWC’s choice of law not overridden: The EWC’s choice of law under the EWC agreement had not been overridden by the CAC’s decision. The EAT noted that, as the parties had chosen for the choice of law to follow the location of central management, the CAC had in fact given effect to that intention.

Implications for employers

This decision is extremely welcome news for all businesses that operated an EWC under a EWC agreement governed by UK law before the end of the Brexit transition period. It clearly distinguishes the situation for these businesses from those under the subsidiary requirements, such as easyJet.

As all relevant EWC agreements were concluded on the basis of fulfilling a business’s obligations under the EWC Directive, it appears that only those businesses operating under the UK’s subsidiary requirements might have to continue to operate a EWC under UK law. As there may be as few as three such businesses, the practical significance of easyJet might be limited to just easyJet and two other UK businesses, with all other businesses that used to have EWC agreements under UK law not having to operate two EWCs in perpetuity.

However, with yet further litigation on this issue currently before the CAC and the possibility that HSBC’s European Works Council might try to appeal against this decision, uncertainty continues over the precise implications of Brexit on EWCs.

Finally, in May 2024, the former government launched a consultation on abolishing Amended TICER. We wrote about this here. The subsequent election of a new Labour government means that the complete repeal of Amended TICER is now unlikely. However, UK businesses and employees alike will be hopeful that, as a minimum, Amended TICER is improved in the near future, such as to allow businesses and their EWCs to merge their two EWCs if that is their wish.

HSBC European Works Council v HSBC Continental Europe [2024] EAT 104 – judgment available here