The 'freedom of choice' principle now applies to employment contracts, thanks to a little-known EU regulation that went into effect 1 March 2002.

• History of the 'European Legal Area' concept

Until recently, there has also been a lack of coherent European legislation to support EU-based foreign workers who would prefer to fight their case in a court that rules under their law of preference.

Now, however, the European Union has passed a regulation effective 1 March 2002 that, in theory, resolves this by incorporating former European treaties and conventions into EU law.

The bottom line: an employee and employer have the freedom to choose which country’s laws they will abide by — as long as that choice is clearly stated in the employment contract. And when there is no active choice stated as such, then the law of the country where the work is carried out, or the law of the country where the employer is located (unless the contract is more closely related to another country), prevails.

Amongst other clauses and proposals, the new EU regulation — "Council Regulation n° 44/2001 of 22 December 2000 on jurisdiction and the recognition and enforcement of judgments in civil and commercial matters” — draws upon article 220 of the 1957 Treaty of Rome (TOR).

The TOR included the option for European Member States "to act within the European Community in order to simplify the formalities governing the reciprocal recognition and enforcement of court judgements".

In theory, this means that, for example, a Dutch national working in Belgium under a US contract, could opt to sue in a Belgian court that rules under US law, as opposed to Belgian or Dutch law.

The most striking example so far of foreign law being used in a host country was the establishment of a Scottish court at Camp Zeist, the former US military barracks in the Netherlands, which was transformed into a Scottish Court that ruled under Scottish law during the trial of the two Libyans accussed of carrying out the Lockerbie bombing.

A painstaking development process

The emergence of an EU ruling on labour law and the appropriate jurisdiction has developed in a far less dramatic way.

After the 1957 Treaty of Rome came a multitude of lengthy and highly complex conventions, action plans and treaties that governed everything from terrorism to divorce settlements to immigration and freedom of movement.

All these various, complicated developments — many requiring ammendments and ratification — have played their part in inching forward the process of achieving a set EU regulation on contractual labour law throughout the member states.

However, the developments are largely thanks to the work of European governments and the many EU and EC bureaucrats.

As a result, many HR professionals and expatriates have had little insight into the behind-the-scenes political workings and do not know this latest EU regulation even exists or what it claims to offer them.

Moreover, the majority of those who are slightly familiar with the regulation are far from convinced of its supposed merits.

Unfamilar, unconvinced, unimpressed

Irish expatriate Bronagh Ryan works at the Utrecht-based recruitment agency, Undutchables, which finds Holland-based work for expatriates from all over the world.

She says this regulation is a sign that the EU is out of touch with reality.

“To fire an employee here, an employer has to go through a system of applying for a permit and that is very difficult to obtain if the reasons for doing so are petty. So all in all, employees here are pretty well protected,” says Ryan.

"This regulation - a waste of time and of money even discussing such an idea! What is the EU up to? I really don't know anymore."

Not only will the regulation prove unrealistic, Ryan says an expatriate using this regulation would just be demonstrating that he has come to the host country with the wrong mind-set.

“When a person moves to another country for work and to live, he has to adjust to the way of life in that country, and that means abiding by that country’s rules and regulations,” she explains. “You have to ask yourself then why you would want to leave your homeland if you are going to bring the laws from your country with you?

Netherlands-based French expatriate Muriel Delsart has been living in Amsterdam for 20 years.

Now office manager for Aprim Nederland bv, a French subcontractor for Dutchtone that installs mobile telephone infrastructure throughout the Netherlands, Descart is sceptical of the supposed development and says it is ridiculous to suggest that it can be enforced.

“It's totally insane as it means HR workers would have to study international law to be able to understand it.”

Descart agrees with Ryan on people needing to adapt to the country they live in — including its laws. “We can keep our identity, religion and political opinions but we have to adjust as we are only guests,” she says.

“Maybe this ruling might just work in the Netherlands as they are so tolerent, but never in France or any other 'Latin' country.”

Netherlands-based expatriate consultant Lydia Herremans, co-founder of Eindhoven-based Hestia Expatriate Consultants, has advised Dutch banks, multinationals such as KLM, and even the Dutch Ministry of Defence.

Herreman agrees that this regulation would prove unworkable, but says especially in Holland more than elsewhere.

“If there is a real conflict then I really think that the best situation would be just to find another job. In Holland, it’s impossbile to go to court and try to sue an employer,” Herreman says.

"People just don’t do that, its not the way here and things get very difficult for you if you try and do that. I can’t see this changing or getting any easier, therefore, if Dutch courts have to deal with a foreign law."

Unlikely impact on HR sector

Elements of scepticism also seem to extend into lower realms of the Dutch politcal framework.

Peter Krekel is deputy head of the Netherlands-based Bureau of International Civil Service Affairs.

While he believes the new directive does allow a substantial freedom of choice of contract for the employer and employee, he says most of this recent legislation is just an official confirmation of existing agreements.

As most employers did not even know about the previous treaties and conventions, he doubts many employers will make use of the new EU regulation.

"I doubt this will be used very much - what's the point? I think if a US company is based in Paris, then around 99 percent of business proceedings will operate French law – it’s just easier," he says.

Krekel also doubts that a French employee working for a US company would want to work under a US law contract. “This would mean that if he had a problem, he would either have to ask a French judge to rule on the case (but under US law) or even have to resort to a US judge based in America!"

And, he points out, this would not work " with all the bureaucratic complications of French workers unions" not to mention the differences between EU and US labour relations systems.

‘Freedom’ flawed, but some expats could benefit

Stefan Nerinckx is a partner at the Belgium-based Bogaert & Vandemeulebroeke law firm, which specialises, amongst other areas, in employment law throughout Europe.

He says there is even a “but” to the supposed freedom of choice offered in the regulation.

“The Treaty of Rome (TOR) of 1980 determines which legislation is applicable on agreements, ie, employment contracts,” Nerinckx explains. “However, even if parties have the freedom to choose the applicable legislation to their (employment) contract, the Treaty specifies certain rules to protect the interest of the employee.”

According to Nerinckx, the regulation does, therefore, offer some opportunities for expatriate employees, but only a specific niche.

"An employee working only in Belgium for the last 20 years, having an employment contract with a US company in which US law has been made applicable, will therefore not be deprived of the protective Belgian regulations in respect of termination of an employment contract," he says.

"Furthermore, US law will also be applicable, eg, in respect of discrimination law, so it could prove highly useful to him."

According to Nerinckx, the concept of this law has been around and in practice for a long time, even if HR professionals did not realise it.

Law at last

The important issue, he says, is the fact that it has now been made official EU law, although, again, its use for the HR sector remains to be seen.

"The Treaty of Brussels is really not that new as it dates back to the 1970s, although adapted somewhat over the years. The treaty determines what judge should be competent to rule about obligations resulting from an agreement.

“What is interesting now, however, is that it has become part of EU law by way of an EU regulation. Now, as a EU regulation, applicable in all EU member states its applicability is in principle more powerful than a treaty.”

But Nerinckx still doubts that the EU regulation on the TOR will have a “serious immediate impact” for HR professionals throughout Europe.

“We’ve conducted surveys and very few HR professionals are familiar with the TOR. Not only would you have to be an HR manager dealing with international mobility to find it relevant, you should furthermore understand it in all its complexities."

Although Nerinckx believes it won’t drastically change things for HR managers in the short term, he says, “I do think that more and more will become at least familiar with it if labour mobility increases.”

March 2002

UK-based freelance journalist Rob Hyde is a regular contributor to Expatica HR. A British national, Rob has lived and worked in England, France, Germany and Austria. His work has appeared in The Times, The Sunday Express and the Wall Street Journal Europe.

History of the 'European Legal Area' concept

1957: Article 220 of the Treaty of Rome included the option for the member states to act within the European Community in order to simplify the formalities governing the reciprocal recognition and enforcement of court judgments.

1968: The Brussels Convention was established, dealing with judicial powers and enforcement of judgments in civil and commercial matters.

1975: Various intergovernmental cooperation took place in the fields of immigration, the right of asylum and police and judicial cooperation. Includes the ‘Trevi Group’, in which the Ministers for Home Affairs meet to discuss combating terrorism and coordinating police cooperation on terrorism in the Community.

1980: The Rome Convention defined the law applicable to contractual obligations – ‘A contract shall be governed by the law chosen by the parties….By their choice the parties can select the law applicable to the whole or a part only of the contract’.

1985: Schengen Agreement. Governments of France, Belgium, the Netherlands, Luxembourg and Germany signed an agreement to end controls on their internal frontiers during a meeting in the small Luxembourg town of Schengen. This was not a formal European Union agreement and did not involve European institutions.

1986: Conclusion of The Single European Act. A new Article 8a defines the free movement of persons as one of the four main constituent elements of the single market and explicitly brings that field within the Community's sphere of jurisdiction.

1988: Like the Brussels Convention of 1968, the Lugano Conventions continued to address judicial powers and enforcement of judgments in civil and commercial matters.

1989: The intergovernmental coordinators' group on the free movement of put forward a proposal for a work programme (The Palma Document) advocating a more coordinated approach to the different aspects of cooperation on justice and home affairs.

1990: Dublin Convention determines the State responsible for examining applications for asylum lodged in one of the member states of the European Communities, and the London resolutions also relating to asylum.

1990: Schengen Implementing Convention set up new operational structures to ensure cooperation between police forces and customs authorities.

1992: The Treaty of Maastrichtadded cooperation in civil and criminal matters to Title VI as areas of common interest to the EU member states.

1996: The Treaty of Amsterdam aimed to ensure cooperation in criminal and also increase cooperation in civil matters, building on the ‘Freedom of Movement of Persons’ oulined in the Treaty establishing the European Community.

1998: The European Council drew up its Vienna action plan, addressing a European area of freedom, security and justice.

Both the EU Council and the EU Commission drew up a schedule of measures for implementing the Amsterdam Treaty. The main objective of judicial cooperation in civil matters is to improve collaboration between Member States' authorities.

The December Action Plan proposed to step up judicial cooperation, coordinating legal rules as the new Treaty requires and tackling a number of over-arching problems, such as data protection, tax havens, crime prevention, victims' aid and the pre-accession pact to fight organised crime in the Central and Eastern European countries.

2000: The European Council approved Regulation (EC) No 44/2001 (Brussels I Regulation), thereby incorporating the 1968 Brussels Convention on Jurisdiction and the Enforcement of Judgements in Civil and Commercial Matters into Community law.

The European Council adopted the convention on mutual assistance in criminal matters, which the Commission had first proposed in 1996, aiming to improve procedures between the Member States. All Member States signed it immediately. The Council also gave its agreement in principle to setting up a provisional judicial cooperation unit (Eurojust), aimed to improve cooperation between the relevant national authorities on serious crime, particularly organised crime, involving two or more Member States.

2002: Latest EU regulation builds upon the original Treaty of Rome, along with all the various Conventions, by incorporating it into EU law.