HSBC European Works Council v HSBC Continental Europe

A voluntary European Works Council agreement confined to operations in EEA Member States applies to Member States as they exist from time to time, where its terms and purpose show that its operational scope may change automatically. A state's withdrawal from the EEA can therefore remove its operations and representatives from the agreement's scope without a consensual contractual amendment.

Where the agreement links the location of central management for the Directive to the applicable implementing law, designation of a representative agent in an EEA Member State consequentially changes the applicable law. The continued existence of a pre-exit-day EWC does not prevent changes authorised by the particular agreement.

HSBC and the European Works Council entered a voluntary agreement in 2015. It covered HSBC operations in EEA Member States, provided for UK central management, and applied the UK regulations.

Following the UK's withdrawal from the EEA, HSBC designated an Irish representative agent, excluded UK operations and representatives, and amended provisions concerning central management and governing law. The EWC made two complaints to the Central Arbitration Committee. The CAC found both complaints not well-founded.

The EWC appealed both decisions. The central issues were the proper construction of the agreement after exit day, the effect of the restriction on contracting out, and whether the consequential changes required the EWC's consent.

1. Appeals dismissed. The CAC correctly construed the agreement as covering operations in EEA Member States from time to time. Article 5 was clear and unambiguous. Its wording, read with the provisions allowing automatic changes to the operational list and representation, showed that the parties contemplated expansion and contraction of scope.

   That mechanism was not confined to commercial changes. A later change in a state's EEA membership could equally alter the scope. The Appendix recorded the position at a particular date; it did not freeze the states covered. Applying the ordinary contractual construction principles discussed in Arnold v Britton, the court gave effect to the objectively inferred intention rather than subjective intentions.

2. [2023] EWCA Civ 756 established that a pre-existing EWC agreement continued after exit day. That principle applied to voluntary agreements as well as arrangements under subsidiary requirements. It did not determine the separate question whether this voluntary agreement permitted UK operations to fall outside its scope. The agreement continued, but with scope determined by its terms.

3. The restriction on contracting out in Regulation 40 did not assist the EWC. Regulation 18A did not require EWC members to include former UK representatives. Their membership depended on the agreement's scope. Further, if Article 5 had contravened Regulation 40, the consequence would have been that Article 5 was void, not that the court could rewrite it to include “Relevant States”.

4. The CAC's paper procedure was fair. The EWC had not raised Regulation 40 before the CAC, had not sought a further opportunity to make representations, and its complaint was considered in full. The CAC was not obliged to invite submissions on an unraised point.

5. After exit day the UK could not be central management for the purposes of the Directive. HSBC's undisputed designation of Ireland made Ireland the deemed central management. Article 2.3 expressly linked that location to the implementing law. The resulting application of Irish law, and the consequential textual changes, did not override the parties' choice of law or require the consensual-amendment procedure. Prior consultation would have been good industrial relations practice, but was not contractually required.

• Employment Appeal Tribunal: appeals dismissed: [2024] EAT 104.
• Central Arbitration Committee: complaints concerning the exclusion of UK operations and representatives, and consequential amendments to the agreement, held not well-founded in decisions dated 22 June 2021 and 11 August 2021.