1. OJ 1977 L 61/27, the ‘Acquired Rights Directive’.

2. Article 3(1).

3. Article 3(3), however, excludes the automatic transfer of ‘employees’ rights to old-age, invalidity or survivor's benefits under supplementary company or inter-company pension schemes'.

4. Article 4(1).

5. Ibid.

6. In the UK, the government introduced the implementing Transfer of Undertakings (Protection of Employment) Regulations, SI 1981/1794 with a declared ‘remarkable lack of enthusiasm’: David Waddington, Under Secretary of State for Employment, 991 Hansard HC Deb col 680.

7. Infringement proceedings have been brought by the Commission against Belgium, Case 237/84 [1986] ECR 1247: Italy, Case 235/84 [1986] ECR 2291: and the UK, Case C-382/92 [1994] ECR 1–2479.

8. More, G ‘The Concept of “Undertaking” in the Acquired Rights Directive: the Court of Justice under Pressure (Again) 15 Yearbook of European Law (1995) 135–155 at 135.CrossRefGoogle Scholar

9. McMullen, J ‘Atypical Transfers, Atypical Workers and Atypical Employment Structures - a Case for Greater Transparency in Transfer of Employment Issues’ (1996) 25 ILJ 286 at 287.CrossRefGoogle Scholar

10. J McMullen, (1997) Financial Times, 26 February.

11. See Expert's Report commissioned by Commission DGV: P L Davies Interim Report on the Application of the Acquired Rights Directive in the context of contracting out in UK. Ireland, and Denmark October (1993) p 42 (on file with author).

12. See Rask Case C-209191 [1992] ECR 1–5755; Schmidt Case C-392/92 [1994] ECR 1–1311.

13. See Local Government Acts 1988 and 1992.

14. In Case C-382/92 the ECJ held that the UK's exclusion of public sector workers from the protection offered under the implementing TUPE Regulations infringed EC law. In fact, the earlier decision in Dr Sophie Redmond Case C-29/91 [1992] ECR 1–3189 had already suggested that this was the case, and in response to this decision, and intensive lobbying by public sector unions, the UK had amended this provision of the law through the Trade Union Reform and Employment Rights Act 1993. In November 1997, the government conceded that, previously, public sector workers whose contracts had been transferred to private companies during the 1980s, had the right to bring a Francovich action against the government for its failure to meet its obligations under EC law during this period: see (1997) Times, 17 November.

15. G More ‘The Acquired Rights Directive: Frustrating or Facilitating Labour Market Flexibility’ in J Shaw and G More (eds) New Legal Dynamics of European Union (Oxford: Clarendon Press, 1995) p 138.

16. See eg the Commission's 1993 White Paper, Growth, Competitiveness, Employment: The Challenges and Ways Forward into the 21st Century (Bull EC, Supp 6/93; COM(93)700); the Conclusions of the Essen European Council (9/10 December 1994); Commission DG V (Employment, Industrial Relations and Social Affairs) Medium Term Social Action Plan 1995–1997 (Social Europe 1/1995); the Commission's 1997 Green Paper, Partnership for a New Organisation of Work COM(97)127 final, and the new Employment Policy chapter (Title VIa) agreed upon at the Amsterdam Intergovernmental Conference, which calls for inter alia ‘adaptable workforces’ and ‘labour markets responsive to economic change’: at art 109n (old numbering).

17. In 1994, the Commission introduced a proposal for a replacement directive (see COM(94) 300). In February 1997 the proposal was formally amended, and a less ambitious course of legislative revision decided upon (see COM(97)60 final).

18. See Rygaard Case C-48/94 [1996] IRLR 51; Süzen Case C-13/95 [1997] IRLR 255.

19. Cliff Davis-Colman, Chief Executive of the Public Contractors Association: (1997) Financial Times, 12 March.

20. See, in particular, the work of H Rasmussen On Law and Policy in the European Court of justice (Dordrecht/Lancaster/Boston: Martinus Nijhoff, 1986); M Shapiro and A Stone ‘The New Constitutional Politics of Europe’ (1994) 26 comparative Political Studies 397–420; J Weiler ‘A Quiet Revolution: The European Court of Justice and its Interlocutors’ (1994) 26 Comparative Political Studies 510–534; and the discussion in L Conant ‘Enduring Borders: The Politics Separating Law from Policy on National Discrimination’ (paper delivered at 5th Biennial Conference of the European Community Studies Association, Seattle, WA, May/June 1997, below).

21. See, eg the chapters on the ECJ in M Volcansek (ed) Judicial Politics and Policy-Making in Western Europe (London: Frank Cass, 1992) and see further the discussion and references contained in section 1, below.

22. Alter, K and Meunier-Aitsahalia, A ‘Judicial Politics in the European Community: European Integration and the Path breaking Cassis de Dijon Decision’ (1994) 26 Comparative Political Studies 535–561.CrossRefGoogle Scholar

23. More above n 8 at 153.

24. Ibid.

25. See, in particular, the work of K Armstrong ‘New Institutionalism and EU Legal Studies’ in P Craig and C Harlow (eds) The European Lawmaking Process (Dordrecht: Kluwer, 1998, forthcoming); S Bulmer ‘The Governance of the European Union: A New Institutionalist Approach’ (1994) 13 J Public Policy 351–380; D Wincott ‘Institutional Interaction and European Integration: Towards An Everyday Critique of Liberal Intergovernmentalism’ (1995) 33 J Common Market Studies 599.

26. R Dehousse and J Weiler ‘The Legal Dimension’ in W Wallace (ed) The Dynamics of European Integration (London: Pinter, 1990) p 242.

27. Shapiro, M ‘Comparative Law and Comparative Politics’ (1981) 53 Southern Calif LR 537–542 at 538.Google Scholar

28. Alter and Meunier-Aitsahalia above n 22 at 547.

29. See eg the work of F Snyder New Directions in European Community Law, (London: Weidenfield, 1990); and J Weiler, eg ‘Community, Member States and European Integration: Is the Law Relevant?’ (1982) 21 J Common Market Studies 39; ‘The Transformation of Europe’ (1991) 100 Yale LJ 2504.

30. Burley, A and Mattli, W ‘Europe before the Court: a Political Theory of Legal Integration’ (1993) 47 International Organization 41–76 at 48–49.CrossRefGoogle Scholar

31. A number of scholars have operationalised principal-agent theory in the context of the EU and the ECJ/member state relationship: see, inter alia G Garrett and B Weingast ‘Ideas, Interests and Institutions: Constructing the European Community's Internal Market’ in J Goldstein and R Keohane (eds) Ideas and Foreign Policy: Beliefs, Institutions and Political Change (Ithaca, NY: Cornell University Press, 1993); M Pollack ‘Delegation, agency and agenda setting in the European Community’ (1997) 51 International Organization 99; A Moravcsik ‘Liberal Intergovernmentalism and Integration: A Rejoinder’ (1995) 33 J Common Market Studies 611, esp s II et seq. See also K Alter ‘Who Are The ‘Masters of the Treaty?’ European Governments and the European Court of Justice’ (1998) 52 International Organization 121.

32. Term suggested by Weiler above n 29.

33. S Scheingold The Law in Political Integration: The Evolution and Integrative Implications of Regional Legal Processes in the European Community Occasional Papers in International Affairs No 27 (Cambridge, Mass: Harvard University Press, 1971) cited by Burley and Mattli as being located within this tradition (above n 30) at 49.

34. See Garrett, G ‘International Co-operation and Institutional Choice: the European Community's Internal Market’ (1992) 46 International Organization 533; Garrett and Weingast above n 31; G Garrett ‘The Politics of Legal Integration in the European Union’ (1995) 49 International Organization 171.CrossRefGoogle Scholar

35. The underlying assumption of rational choice theory is that political behaviour can be understood as the result of choices made by self-interested individuals.

36. Comprehensive and convincing critiques of Garrett's work have been advanced by Slaughter, A and Mattli, W ‘Law and Politics in the Eu: a Reply to Garrett’ (1995) 49 International Organization 183; Alter above n 31.Google Scholar

37. As in Garrett's work above n 34.

38. Alter and Meunier-Aitsahalia above n 22.

39. Conant above n 20. Conant draws on the work of, inter alia, M Shapiro Law and Politics in the Supreme Court: New Approaches to Political Jurisprudence (New York: Free Press, 1964); J Choper Judicial Review and National Political Process: A Functional Reconsideration of the Role of the Supreme Court (Chicago: Chicago University Press, 1980); L Fisher Constitutional Dialogues: Interpretation as Political Process (Princeton: Princeton University Press, 1988).

40. A similar view of the court is propounded by D Wincott ‘The Court of Justice and the European Policy Process’ in. J Richardson (ed) European Union: Power and Policy Making (London: Routledge, 1996).

41. R Rhodes ‘The Institutional Approach’ in D Marsh and G Stoker (eds) Theory and Methods in Political Science (Basingstoke: Macmillan, 1995) p 43.

42. Ibid, p 48.

43. R Macridis ‘A Survey of the Field of Comparative Government’ in H Eckstein and D Apter (eds) Comparative Politics: A Reader (London: Macmillan, 1963) pp 47–48.

44. See further J March and J Olsen Rediscovering Institutions: The Organizational Basis of Politics (New York: Free Press, 1989).

45. K Thelen and S Steinmo ‘Historical Institutionalism in Comparative Politics’ in S Steinmo, K Thelen and F Longstreth (eds) Structuring Politics: Historical Institutionalism in Comparative Analysis (Cambridge: Cambridge University Press, 1992) p 2, citing G Ikenberry ‘Conclusion, An Institutional Approach to American Foreign Economic Policy’ in G Ikenberry et al (eds) The State and American Foreign Economic Policy (Ithaca: Cornell University Press, 1988) pp 222–223.

46. S Bulmer ‘New Institutionalism, The Single Market and EU Governance’ paper presented at the 5th Biennial ECS A Conference, Seattle, WA, 29 May-I June 1997.

47. Armstrong above n 25. Armstrong draws attention to the distinction between the role of endogenous and exogenous forces in the context of the policy process. He submits that a historical institutionalist approach provides scope for an examination of ‘the extent to which the institutionalisation of decision making creates the possibility of path dependent, evolutionary change [endogenous] or whether changes in decision making contexts are instead referable to exogenous, revolutionary change’.

48. K Armstrong ‘Regulating the Free Movement of Goods: Institutions and Institutional Change’ in Shaw and More (eds) above n 15, p 167.

49. Ibid, p 168.

50. Armstrong above n 25 and 49; see also Bulmer above n 25 and S Bulmer Four Faces of EU Governance: A New Institutionalist Research Agenda Manchester Papers in Politics: EPRU Paper 2/95.

51. This point is explored by D Wincott ‘Political Theory, Law and European Union’ in Shaw and More (eds) above n 15. 52. Armstrong above n 25.

53. See eg the work of Pierson, P ‘The Path to European Integration: a Historical Institutionalist Analysis’ (1996) 29 Comparative Political Studies 123.CrossRefGoogle Scholar

54. Armstrong above n 25.

55. Ibid.

56. COM(90) 300 final, p 1.

57. E Benson ‘The Employment Protection Directives’ in M Gold (ed) The Social Dimension: Employment Policy in the European Community (London; Macmillan, 1993).

58. C Barnard EC Employment Law (Chichester: Wiley, rev edn, 1996) p 353.

59. Article 3(1).

60. Article 4.

61. Article 4(1).

62. This division of competence between the ECJ and the national courts, first established by the court in Merckx and Neuhuys 171/94 and C-172/94 [1996] All ER (EC) 667. See further the discussion in I Higgins ‘Application of the Directive on the Transfer of Undertakings to Dealerships. Consideration of Joined Cases C-171/94 and C-172/94 Merckx and Neuhuys v Ford Motors’ (1997) Web Journal of Current Legal Issues (at http://ncl.ac.uk/wjcli).

63. Ny Molle Kro Case 287/86 [1987] ECR 5465, para 13.

64. The court has readily admitted the directive's application to such a ‘typical’ form of transfer, using it as the paradigmatic example: see Barnard above n 59 p 360.

65. Daddy's Dance Hall Case 324/86 [1988] ECR 739; Ny Molle Kro above n 64.

66. See eg Rusk Case C-209191; Schmidt Case C-392/92 above n 12.

61. Dr Sophie Redmond Case C-29/91 above n 14.

68. Bork International Case 101/87 [1987] ECR 3057.

69. As in the controversial decision of Schmidt above n 12.

70. See Spijkers Case 24/85 [1986] ECR 1119; Dr Sophie Redmond Case C-29/91 above n 14 and Schmidt Case C-392/92 above n 12.

71. See in particular the discussion of the concept of an undertaking in the opinions of Advocate General Van Gerven in Dr Sophie Redmond Case C-29/91 (above n 14) at paras 6–10; Rask Case C-209/91 above n 12 at paras 8–10; and Schmidt Case C-392/92 above n 12 at para 8.

72. In this case the services of a cleaner.

73. The potential scope of the directive's coverage at this ‘high point’ is well illustrated by Rubenstein's observation that the reductio ad absurdum of the Schmidt decision is that the Ard would apply ‘when I change the contractor who cut my lawn. Absurd or not, there is nothing in Schmidt which provides a basis for concluding that this is not the case’: M Rubenstein editorial comment at [1994] IRLR 257. See, on the Schmidt judgment, J McMullen ‘Contracting Out and Market Testing: The Uncertainty Ends’ (1994) 23 ILJ 230.Google Scholar

74. Barnard above n 59 p 363.

75. Armstrong above n 49 p 169.

76. Expert's Report commissioned by Commission DGV: R Birk Contracting Out in the Context of the Provisions of Community Law and National Law Relating to the Transfer of Undertakings: Belgium, France, Germany, Luxembourg and the Netherlands (1993) pp 29–30 (on file with author).

77. Armstrong above n 49 p 175.

78. Alter above n 31.

79. Alter (above n 31) argues that ‘[i]f a Member State can accommodate the ECJ's decision on its own, by interpreting it narrowly or by buying off the people the decision effects, such an approach is easier than mobilizing other member states to re-legislate’.

80. See further on the possible impact of the directive and its interpretation on the UK government's policy of contracting out and market testing: B Napier CCT, Marker Testing and Employment Rights: The Effects of TUPE and the Acquired Rights Directive (London: Institute of Employment Rights, 1993).

81. It should not, of course, be assumed that the present UK government would willingly accept the protectionist approach of the court. Whilst the new administration has signalled that it intends to replace CCT, and a moratorium has been placed on CCT regulations by the Scottish and Welsh Offices (see The Guardian 18 June 1997, Society supplement at p 11). its current emphasis on the need for more flexible labour markets as against more regulation may indicate that the stance it takes in Council on the revision of the Directive will be little different from that expected of its predecessor.

82. Francovich v Italian State Cases C-6/90 and 9/90 [1991] ECR 1–5357.

83. For a detailed account of the UK Conservative government's response to the Acquired Rights Directive and its interpretation by the court, see Radford, M and Kerr, A ‘Acquiring Rights -Losing Power: a Case Study in Ministerial Resistance to the Impact of European Community Law’ (1997) 60 MLR 23–44.CrossRefGoogle Scholar

84. In fact, the Commission's decision to instigate the process of legislative revision predated the more controversial of the court's decisions. Whilst the initiation of the revision process was therefore not wholly referable to the court's activities and the political opposition they encountered, the material content of the Commission's proposed amendments (especially art 1(1)) most definitely were.

85. Above n 12.

86. Above n 12.

87. It was initially the intention of the Commission to replace the directive. However, the difficulties in gaining agreement on a replacement text led the Commission to propose that the directive should instead be amended.

88. COM(94) 300 final, at p 7.

89. Ibid.

90. Ibid, at p 8.

91. Ibid.

92. This condemnation has come not only from the participants in the legislative revision (see below), but also from practitioners, contractors, union representatives and academic commentators. For example, see the evidence before the HL Select Committee on the European Communities Session 1995–96 5th Report (HL Paper 38); and for comment, Hardy, S and Painter, R ‘Revising the Acquired Rights Directive’ (1996) 25 ILJ 160.Google Scholar

93. ECS Opinion adopted 9 March 1995, CES 317/95.

94. In January 1996, Parliament adopted a resolution calling for the controversial art 1 (1)(2) of the Commission's proposal to be withdrawn B4-0033/96. See also the proposed amendments to the Commission text, adopted in Plenary on 15 January 1997 A4-0367/96.

95. Ibid, Appendix ii.

96. UNICE position in the proposal for a directive amending Directive 771187/EEC, 23 December 1994.

97. Birk aboven 77 p 31.

98. As the 1977 Directive was originally introduced under Article 100, there was no question of any alternative legal base being used for the replacement Directive. This point was recognised by the Commission in its proposal COM(90) 300 at p 16.

99. The other possibility being the general law making provision under art 235, which also requires unanimous approval by government ministers in the Council of the EU.

100. This fragmented basis for the introduction of social policy measures is, of course, set to end following the Amsterdam Igc, where agreement was reached on ending the Uk's opt-out. See further C Barnard ‘the United Kingdom, the “Social Chapter” and the Amsterdam Treaty’ (1997) 26 ILJ 275.Google Scholar

101. The formal proposal is now contained in COM(97) 60 final.

102. Transcript of speech delivered by Commissioner Flynn to the European Parliament (on file with author).

103. Alter above n 31.

104. Discussed below.

105. P Teague ‘Human Resource Management, Labour Market Institutions and European Integration’ (1992) 2 Human Resource Management J 1 at 17.

106. This situation is, of course, set to change following the agreement reached at the June 1997 Amsterdam Intergovernmental Conference. This will, however, have no bearing on the legal basis which is being used for the revision of the ARD.

107. Cram, L ‘Calling the Tune without Paying the Piper? Social Policy Regulation: the Role of the Commission in European Community Social Policy’ (1993) 21 Policy and Politics 135–146.CrossRefGoogle Scholar

108. Teague above n 106 at 14.

109. Ibid.

110. Ibid.

111. Ibid at 19.

112. M Rhodes ‘A Regulatory Conundrum: Industrial Relations and the Social Dimension’ in S Leibfried and P Pierson (eds) European Social Policy: Between Fragmentation and Zntegration (Washington DC: Brookings Institute, 1995) p 210.

113. ‘Cec, Social Aspects of the Internal Market Social Europe 88/7, p 14.Google Scholar

114. Rhodes above n 113 p 120.

115. ‘A resume of the findings from this investigation are contained in Social Europe 88/7.Google Scholar

116. Ibid, pp 14–15.

117. Conclusions of the Essen European Council, 9/10 December 1994.

118. CEC White Paper, Growth, Competitiveness, Employment above n 16 p 140. This ‘balancing act’ is returned to in both the 1995–97 Medium Term Social Action Programme Social Europe 1/95; and in the report produced by DGV of Commission Progress Report on the Implementation of the Medium Term Social Action Programme, Social Europe Supplement 4/96, p 27; Commission Green Paper, A New Partnership on Work Organisation COM(97) 127.

119. Council Directive 93/104/EC of 23 November 1993 concerning certain aspects of the organisation of working time (OJ 1993 L307/18).

120. Council Directive 9 1/383/EEC(OJ 1991 L206/19/19).

121. Pending the ratification of the Amsterdam Treaty by the 15 member states, the UK now participates in the processes of law making in relation to measures introduced under the Social Policy Agreement. The methods of SPA, originally foreseen for the 14, will be formally incorporated for the 15 under the revised Social Policy title of the Amsterdam Treaty (new art 117 et seq).

122. An approach which may be shared by the UK Labour government, with Prime Minister Tony Blair advocating ‘the third way: not old left or new right. A new centre and centre-left agenda’: Report of Blair's speech to the European Socialists Congress, Malmo, 6 June 1997, in Financial Times 7/8 June 1997.

123. Freedland defines ‘EC employment policy’ as being located in the ‘substantial contested zone between EC economic policy and EC social policy’: see further M Freedland ‘Employment Policy’ in P Davies, A Lyon-Caen, S Sciarra and S Simitis (eds) European Community Labour Law: Principles and Perspectives Liber Amicorum Lord Wedderbum of Charlton (Oxford: Clarendon Press, 1996) p 287.

124. See further More above n 15.

125. Rygaard Case C-48/94 above n 18.

126. Süzen Case C-13/95 above n 18.

127. Whilst the ECJ has been called upon to exercise its interpretative jurisdiction in relation to the Acquired Rights Directive in cases other than these, Rygaard and Süzen are the only two which deal explicitly with the practice of contracting out. The ‘orthodox’ (‘strong’ employee protection) interpretation offered in the Merckx judgment (which involved the transfer of a car dealership) may suggest that the court is reigning in its jurisprudence only in relation to contracting out matters: see Merckx and Neuhuys v Ford Morors Joined Cases C- 171/94 and C-172/94 [1996] All ER (EC) 667.

128. Emphasis added.

129. Henke Case C-298/94 [1996] IRLR 701.

130. Sargeant, M ‘New Doubts about Transfers in the Public Sector’ (1997) 26 LJ 265 at 265.Google Scholar

131. [1996] IRLR 701 at para 14 of judgment.

132. At para 17 of the judgment. Arguably, the court has applied a stricter test than that suggested by the Commission in its observations.

133. Sargeant above n 131 at 269.

134. [1997] IRLR 255 at para 23.

135. Ibid at para 15.

136. Ibid, reiterated at para 10.

137. M Rubenstein, Editorial Comment concerning Suzen [1997] IRLR 197.

138. Süzen above n 18 at para 21.

139. Ibid at para 13.

140. Of course, such ‘legal space’ already exists to some extent under the terms of the directive, which states that dismissals undertaken for ‘economic, technical, organizational reasons’ are not to be regarded as dismissals in connection with a transfer (art 4(1)).

141. Case C-13/95 [1995] IRLR 255.

142. Case C-298/94 [1996] IRLR 701.