Cross-Border Transactions

EU Directive.

EU Member States have some flexibility in how to implement the Directive and differences between EU Member States are sometimes significant.  Such differences give rise to legal uncertainty in case of cross-border transfers as the Directive does not provide for solutions in case of conflicting laws.


CBA 32bis is generally applicable in cases of a transfer of undertaking to a transferee located abroad. However, the move to another country will generally result in a significant change of an essential element of the employment contract (place of employment, possibly new set of legal rules governing the contract, etc.).  If such change is not accepted by the employees, it cannot be unilaterally imposed  by the employer (constructive dismissal, see “Substantial Changes in Working Conditions”). Hence, is such a situation, the transferor may have to engage, prior to any decision about the contemplated cross-border transfer, in information and consultation with its employee representatives as required whenever an employer faces a collective dismissal.


Section 613a of the German Civil Code is generally applicable in cases of a transfer of undertaking from a transferor located in Germany to a transferee located abroad (irrespective of whether the transferee is located within the EU or not).  However, if the essential means of production (e.g., real estate, production facilities, business premises) are being transferred to a location of transferee which is a substantial distance (generally more than several hundred kilometers) away from the transferor’s location, a transfer of undertaking within the meaning of Section 613a of the German Civil Code may not be assumed.  If the employment agreement does not provide for a choice of law, the agreement will be governed by the law of the transferee after the transfer.