Select Committee on European Scrutiny Twenty-First Report


STATUTE FOR A EUROPEAN CO-OPERATIVE SOCIETY


(23217)
15510/01

Amended draft Council Regulation on the Statute for a European co-operative society.


Legal base:Article 308 EC; consultation; unanimity
Deposited in Parliament: 26 February 2002
Department:HM Treasury
Basis of consideration: EM of 18 February 2002
Previous Committee Report: None
To be discussed in Council: June 2002
Committee's assessment:Politically important
Committee's decision:Not cleared; further information requested



Background

  7.1  The Commission's original proposal for a European Co-operative Statute (considered by a previous Committee in 1992[11]) was modelled on the proposed European Company Statute (ECS). No progress was made on the proposal, however, during the years in which the ECS was stalled in Council. With the adoption of that measure last year[12], work has now resumed on the European Co-operative Statute.

  7.2  The objective of the Statute is to provide co-operatives with a legal framework so that they can operate across borders on equal terms of competition with companies. The Statute consists of a Regulation, which sets out the framework for a European Co-operative Society (SCE), a new type of pan-European legal body, and a Directive[13], requiring a particular level of employee involvement in the SCE. The Statute would apply only to bodies that chose to form a SCE in order to operate in two or more Member States.

  7.3  The Regulation and Directive are on slightly different timetables and are being discussed in different Councils of Ministers. We have already considered the Directive once, and have requested further information on it.

  7.4  The background note on Co-operatives and the European Statute for a European Co-operative Society, provided by the Treasury, which is annexed to our paragraph on the Directive is also relevant to the draft Regulation.

The draft Regulation

  7.5  The current text of this draft Regulation is a compromise proposal produced by the Belgian Presidency at the end of last year. The document makes it clear that the principal object of a SCE is the satisfaction of its members' needs and/or the development of their social and economic interests, and not the remuneration of a capital investment. The draft measure sets out rules for certain key aspects of SCEs' statutes, including formation, capital requirements, rules of incorporation, membership and mergers. Other rules would be left to the existing law of the SCE's home member state.

  7.6  In regard to formation, it provides for an SCE to be created:

  • by five or more natural persons, by five or more natural persons and legal entities, or by two or more legal entities;

  • by a merger of two or more existing co-operatives; or

  • by conversion of an existing co-operative which has, for at least two years, had a subsidiary or establishment in another Member State.

In the first two cases, at least two of the natural persons or legal entities should be from different Member States.

  7.7  Membership of an SCE is in line with the principles of voluntary and open membership and primacy of the individual. The latter is reflected in the rule of "one member, one vote" although weighted voting may be allowed in some circumstances. An SCE may also have a proportion of "investor members" who do not use the society's services. This proportion will be restricted to ensure the primacy of the "one member, one vote" principle; the actual proportions have yet to be agreed.

  7.8  An SCE must be registered in the Member State in which its head office is located. It will, however, be able to move its registered office to another Member State without having to wind-up and re-register.

The Government's view

  7.9  The Economic Secretary to the Treasury (Ruth Kelly) tells us that the Government is in favour of a Statute for a European Co-operative Society. However, she draws our attention to two linked outstanding issues in the current proposal — investor members and voting rights. She says:

    "To maintain co-operative principles in the Statute for a European Co-operative Society the Government wishes to limit the scope of investor members and to uphold the primacy of the ... 'one member, one vote'. In the current proposals weighted voting may be allowed to reflect 'contribution' to the SCE. The meaning of contribution in this context is not yet agreed (whether it means throughput/business with the SCE or whether it means capital contribution). The Government will seek to ensure that the control of the SCE lies with the members and not the capital."

  7.10  The Minister tells us that a consultation to establish the levels of interest in the original proposal for an SCE (and parallel proposals for a European Mutual Society and a European Association) was carried out in 1992. The findings suggested that takeup in the UK would be small. In 2001, HM Treasury and the Department of Trade and Industry circulated a joint consultation paper to about 70 relevant bodies in order to obtain more up to date information. Five responses only were received. These broadly supported the latest proposals and expressed the hope that a Statute would be adopted without delay.

  7.11  The Minister provides us with a Regulatory Impact Assessment (RIA). This notes that any SCE registered in the UK would need to be registered and supervised. It suggests that this would most sensibly be done by a body set within the Financial Services Authority. SCEs themselves would face formation costs, and, possibly, minimum capital requirements.

  7.12  Although it is not possible to gauge the eventual compliance cost, since it is unclear how many co-operatives might seek to become SCEs, it is unlikely to be substantial. The RIA underlines the point that the Regulation will be optional, applying only to those bodies operating under UK law which choose to become an SCE in order to operate more easily across Member State borders.

  7.13  Finally, the Minister informs us that the Spanish Presidency will seek political agreement on the Regulation at the Council of Ministers in June.

Conclusion

  7.14  We thank the Minister for her helpful Explanatory Memorandum. It is good news that progress is once more being made on the Statute for a European Co-operative Society, of which this draft Regulation forms part.

   7.15  We support the Minister in her wish to uphold the primacy of the 'one member, one vote' principle and to ensure that control of the European Co-operative Societies lies with the members. Indeed, we wish to be assured that the Government has been successful in amending the draft Regulation to that end. We will, therefore, keep the document under scrutiny until we know more about the progress of negotiation on this issue.


11  (13584) 5086/92; see HC 79-i (1992-93), paragraph 24 (17 June 1992). Back

12  OJ No. L 294, 10.11.01 p.1-21 and p.22-32. Back

13  See HC 152-xix (2001-02), paragraph 11 ( 13 February 2002). Back


 
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