EU Commission threatens contract violation proceedings against Germany

Background

The EU Commission has demanded that Germany provides information on the measures it has taken to implement its ECJ Judgment of 15 July 2010 (C-271/08). Briefly, the judgment involved the following situation: The Federation of Local Authority Employer Associations had concluded a collective bargaining agreement with the United Service Sector Union (ver.di) in 2003. On the basis of this agreement, German local authorities and local authority undertakings had awarded group agreements on occupational pensions directly to selected public providers without putting them out for tender. In 2007, the Commission filed a complaint against Germany before the ECJ, which found that service contracts for occupational pensions that cover more than the designated number of employees (as set in Directive 2004/18/EG) must be put to tender at the European Union level. (Click here for our e-bulletin summarising the judgment)

According to the Commission, the German authorities have still not taken measures to implement this judgment because the underlying collective bargaining agreement and the group insurance contracts with the public providers are still in force. The Commission has accordingly threatened contract violation proceedings against Germany and the imposition of a fine.

Comments

The Commission’s demand is difficult for the federal government to meet. The federal government cannot force local authorities and local authority undertakings to terminate the collective bargaining agreement (much less the union that concluded the agreement).

However, the prevailing legal view is that the clause in the collective bargaining agreement which requires local authorities to select state-owned pension providers to provide occupational pensions is invalid as it violates EU law. On that basis, it would not be necessary to terminate the collective bargaining agreement. However, local authority employers would be obliged to take appropriate measures to remedy the violation of European law by terminating existing contracts and tendering the contracts anew. It is not known how many local authority employers have already set this process in motion. The federal government's hands are more or less tied, in this regard, since it has no right to instruct the local authority employers. It will be very interesting to see what measures the federal government will take and how the Commission will react to them.