The British government has agreed, as part of a secret deal with Germany, to back European Union legislation that could increase worker representation on company boards.
The provisions, which are intended to secure worker participation in companies created by cross-border mergers, are opposed by the EU's main employers' federations.
Tony Blair, the UK prime minister, is believed to have agreed with Chancellor Gerhard Schröder to back German demands to make the draft legislation tougher, in return for Berlin's support for Britain's continued exemption from European working time rules.
This deal goes against the EU's internal market, which should
be about making it easier for companies to merge, said Peter
Wiesner, the representative in Brussels of the BDI, the German
A spokesman for the UK government declined to confirm or deny that an agreement had been reached with Germany.
The UK government wants to maintain its opt-out from the EU's working time directive, which sets a maximum working week of 48 hours, while Mr Schröder's defence of Germany's worker representation system is a keystone in his otherwise difficult relationship with the country's trade unions.
Under the Commission's proposals on cross border mergers, made last year, if a German company merged with a British one, German-style rules on worker representation would apply. Britain backs a German move to strengthen the legislation, so that if the companies in a merger both came from jurisdictions with worker representation rules, the tougher rules would apply.