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European co-ops – who’s using them, why and for what? 18 February 2014

Posted by cooperatoby in cooperative, EU.
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SCEr illoAt the end of January I went to the final seminar of the SCEr project (conveniently pronounced Share in Italian). Luca Pastorelli of DIESIS had structured the seminar as an opera, but the ECS story seems to be more of a comedy than a tragedy. Nobody got killed, and the world carries on much as it did before.
The SCEr study was taking the temperature of that too-rare beast the European Co-operative Society. This legal status, part of the level playing field that the EU guarantees for the social economy, has existed since 2006, but few co-ops have opted to use it. Why is this? Is it any use?
Research by the ETUC and DIESIS found that in the last seven years, precisely 45 European Co-ops have been set up (there is no central registry, so there may be few more still undiscovered). Of these, a mere ten are operating with employees and a genuine business activity. The rest are shelf co-operatives or ‘UFOs’. (This is actually quite a high proportion, when you think that only 284 of the 2,052 registered European Companies (SEs) are trading actively.) There is no evidence that being an ECS confers any commercial benefits – indeed Co-operatives Europe considers that it will not be a useful tool unless and until it is simplified.

Advantages of the ECS

I set myself the objective of recording as many advantages of the ECS as I could, and some unexpected new ones cropped up. Here they are:
• when a new member joins, you don’t have to go to the bother of reconfiguring or dividing your share capital
• having one ECS is simpler to administer than having and association plus a trading company
• it enables you to exclude members if they break the rules
• it is symbolic of international values and activities
• it enables mutuals to operate in countries where it is impossible to establish one
• you can incorporate in the country where start-up assistance is best (what might be called “start-up shopping”
• it is easy to expand your brand to more countries
• it provides an upgrade path, within which peer support can deepen into common management
• it’s exciting and ’sexy’ (no one knows what it is but they are impressed)
• even if it’s not much of a practical tool for business, it enables cultural change
If there’s a disadvantage, it’s the teething problem that registration can take months, since national registrars are still unfamiliar with the beast. And, note, when the founder members gather to sign the papers, if you have a notary on the spot it can save months of delay.

Wonderful variety

They pursue a wonderful variety of activities. In the cases presented there was an interesting contrast between the pragmatic northern and image-conscious southern styles and motivations.
Euromovers, headquartered in Hamburg, enables 70 removals companies across Europe to manage transnational shipments easily. It merged its association and its share company into one ECS to cut bureaucracy.
Barcelona-based IES-MED promotes and manages transnational social economy projects across the Mediterranean, to give investors something to invest in. With 10 employees, it is working on 50 initiatives in 12 countries, and organises the MEDESS forum. It incorporated its ECS in France, where start-up help was better.
Fondo Salute was set up in 2010 in Milan and has the longest experience of being an ECS. Founded by French and Italian health insurance mutuals, it provides integrated healthcare insurance on a non-discriminatory basis.
Harmi operates a local currency in Pannonia, on the Hungarian-Austrian border.
Flandria was formed by Christian mutuals in Belgium and Poland to offer health shops and social pharmacies in Poland. It may expand to cover Romania.
Wecoop, in Reggio Emilia, is a co-operative among the 1,200 employees of the CCPL Group, through which they appoint a worker director. It gives its members a strong sense of identity, and includes members from Spain, France, Italy and Slovakia.
Ikastolen Elkartea organises Basque schools across the French-Spanish border.
The funniest moment came when Luca and Dorotea were asked why DIESIS itself is not a European co-op! Although in practical terms it is the epitome of European co-operation, it is constituted as Belgian co-operative with a social objective. This is because the regulation says that if you want to convert an existing body into an ECS, you have to have permanent offices in at least two countries – and they can’t afford that!

Worker participation

There is one issue which causes a lot of concern to lawyers – especially those who are drawing up the future European mutual statute – which is worker participation. The ECS regulation comes along with a directive which obliges ECSs with more than 50 employees to set up a European works council (below this threshold national consultation arrangements apply). It was devised in order to avoid ECSs being used as a ruse by globalising multinationals to escape this rule. The biggest ECSs have an underlying workforce of 2,000 – indeed some ECSs adopted the form precisely as a platform for involving them. The irony is they are mostly in fact employees of the member businesses, and no existing ECS has more than 50 employees. So the directive is a dead letter. The ETUC knows of no trade union agreements with ECSs – but there are no conflicts either. In any case the national registries seem to be registering ECSs without checking whether they comply with the worker participation directive.

Market it!

What can one draw from this? The purpose of the statute was that the co-operative identity could thrive in the Europe’s single market. But the framework we actually have derogates extensively to differing national laws, and thus lacks a real identity of its own. The (co-operative enterprise) dot-coop internet domain has proved a far better label, and it’s global to boot.
On the bright side, the framework seems to work in practice. The worker participation directive has not proved to be any hindrance. It seems that what is required is some marketing! Apostolos Ioakimidis, who looks after the ECS on behalf of the Enterprise DG, suggested that there might be a website along the lines of DG MARKT’s site on the European Company statue, and that would be a good start.

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