C-381/89

In order to give a better idea of the scope of Article 10 of the law likewise concerns the questions referred I shall give a brief increases in the company capital; however, resume of the national legislation at issue unlike the provisions of Article 8(8), the and of the background to the dispute measure provided for by Article 10 is not pending before the national court. part of the temporary administration; it is a permanent rationalizing measure which does not confer on existing shareholders a genuine pre-emptive right over the new shares, although they are not entirely Greek Law No 1386/1983 of 5 August without protection. 1983 2 established the Organismos Ikon- omikis Anasinkrotiseos Epikhiriseon (Organization for the Restructuring of Undertakings, hereinafter referred to as 'the OAE'), which is a public limited liability Law No 1386/1983 was the subject of company whose capital is entirely subscribed Commission Decision 86/167/EEC of 7 October 1987, 3 adopted as part of the * Original language: Italian. procedure under Article 93 of the EEC 1 — OJ 1991 L 26, p. 1. 2 — Greek Official Journal No 107 of 8 August 1983, p. 1926. 3 — OJ 1987 L 76, p. 18.

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Treaty. In that decision the Commission the administration of EPAS and on stated that it had no objection to the 26 March 1986 decided to increase the implementation of the law, provided inter capital of the company by DR 650 million alia that the Greek Government amended the provisions relating to increases in capital so as to bring them into conformity with Articles 25 and 26 and Article 29 and 30 of As the existing shareholders did not exercise the Second Directive. In particular, Article 1 their pre-emptive right within the time of the decision required the Greek allowed, the OAE declared itself the Government to make the necessary purchase of the new shares with the result amendments to the relevant provisions of that it held approximately 68% of the Law 1386/1983 by 31 December 1987. company capital.

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5 judgment in Karella, where the Court, with established by Law No 1386/1983 and the reference to the same Greek legislation inaction of the shareholders, allow a certain which is at issue in the present case, stated consent to be assumed on the part of the firstly that Article 25 of the Second shareholders to the full application of the Directive is formulated in clear and precise law in question and to the resulting increase terms and establishes unconditionally the in capital. Moreover, the Commission, by principle that it is the general meeting of Decision 86/167/EEC of 7 October 1987, shareholders that is competent to decide on cited above, authorized the Greek auth increases in capital, so that the provision orities to apply the legislation at issue at may be relied on by an individual against least until 31 December 1987. Finally, the the public authorities before a national provision of Community law is not

In States may derogate in particular from Articles 25 and 29 that judgment, the Court stated that the to the extent that such derogations are necessary for the adoption or application of provisions designed to objective of ensuring a minimum level of encourage the participation of employees, or other groups protection for shareholders in all the of persons defined by national law, in the capital of under takings. Member States, pursued by the Second

That finding does not mean, according to the Court, that Community law prohibits the Member States from derogating from The Court added, secondly, that to the provisions of the directive under any recognize the existence of a general reser­ circumstances. In fact, the Community legis­ vation in the case of exceptional circum­ lature has expressly provided both for stances, beyond the express provisions of specific derogations and for procedures the Treaty and of the Second Directive, which can permit derogations in exceptional would be to undermine the mandatory circumstances (see Article 19(2) and (3), nature and uniform application of Article 40(2), Article 41(2), and Article Community law. 43(3) of the Second Directive). However, neither the EEC Treaty nor the directive itself makes provision for the possibility of derogating from Article 25(1) when under­ takings are in difficulties. On the contrary, Article 17(1) expressly states that, in the 5. That interpretation, with which I entirely case of a serious loss of the subscribed agree, as, moreover, can be seen from my capital, a general meeting of shareholders Opinion in the abovementioned case, is in must be called within the period laid down my view entirely consistent with the by the laws of the Member States, to previous case-law of the Court of Justice consider whether the company should be 7 which, in the judgment in Abels, with wound up or any other measures taken; and reference to Council Directive 77/ 187/EEC that confirms that the principle laid down of 14 February 1977 on the approximation by Article 25(1) applies even when a of the laws of the Member States relating to company is in serious financial difficulties. the safeguarding of employees' rights in the event of transfers of undertakings, busi­ 8 nesses or parts of businesses, held that that directive applied to a procedure such as that of 'surséance van betaling' (suspension of

payments) in the Netherlands even though it It should be added that it appears at least has certain features in common with liqui­ contradictory to maintain that it was dation proceedings. The Court held that the decided to increase the capital of the under­ reasons for not applying the directive in the taking in order to then wind it up. event of liquidation proceedings were not Increases in capital are usually made not in applicable when the proceedings in question order to wind up an undertaking but to comprised judicial supervision which was restructure it and to allow it to continue more limited than in liquidation proceedings trading. and sought primarily to safeguard the assets of the insolvent undertaking and, where possible, to continue the business of the undertaking by means of a collective suspension of the payment of debts with a view to reaching a settlement which would ensure that the undertaking was able to 6. As for the argument that in the present continue operating in the future. case Article 25 of the Second Directive was not infringed since that provision does not specify how the general meeting is to decide on the increase in capital, and the share­ holders, by requesting that the company be made subject to Law No 1386/1983, expressed their tacit consent to the full application of the legislation in question and Similarly, in the recent judgment in d'Urso to the consequent increase in capital case, 9 the Court held that Directive provided for by administrative measure, in 77/187/EEC applied when, in accordance my view it is only too evident that that with a body of legislation such as that interpretation of the legislation at issue is governing, in Italy, special administration not borne out by its wording and would be for large undertakings in difficulties, it had likely to compromise seriously the been decided that the undertaking was to achievement of its objective, which is to continue trading and as for as long as that guarantee a minimum level of protection for decision remained in effect. In the Court's shareholders. view, when the decree confirming the application of the special administration procedure provided at the same time that the undertaking was to continue trading under administration by a commissioner, the objective of that procedure was above all to restore to the undertaking an equilibrium Article 25 lays down a general principle which would enable its future trading to be applicable to public companies limited by guaranteed; therefore the economic and snares, providing in Article 25(1) that any social objective so pursued could not explain increase in capital must be decided upon by or justify the fact that, when all or part of the general meeting and in Article 25(2) that the undertaking concerned was transferred, the statutes or instrument of incorporation its workers lost rights which the directive or the general meeting may authorize conferred upon them under the conditions another company body to decide on the which it laid down. increase in the subscribed capital, but only up to a pre-determined maximum amount 9 — Judgment in Case C-362/89 d'Urso and Others v Ercole and having regard to any limit provided for Marelli Elettromeccanica Generale SA and Others [1991] ECR I-4105, paragraphs 32 and 34. by law.

It is clear that the Commission, far from endorsing, even for a transitional period, an infringement of Community law, simply intended to set a final time-limit for the competent authorities to adopt the necessary measures to bring the infringement to an end and, secondly, the Commission itself Otherwise, the Court could in fact be had no power to suspend temporarily the persuaded to consider questions whose applicability of provisions which are contained in a Council Directive and which 10 — Judgment in Case 299/84 Neumann v Balm [1985] ECR 3663, paragraph 12; judgment in Case 311/84 CBEM v are directly effective. C LT and IPB [1985] ECR 3261, paragraph 10.

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answers are entirely irrelevant as far as the that, whenever the subscribed capital is national court is concerned, with the further increased by consideration in cash, the disadvantage that the Member States, which shares must be offered on a pre-emptive base their decision to submit observations basis to shareholders in proportion to ' the during the procedure for a preliminary- capital represented by their shares. ruling solely on the order making the reference, would be deprived of precise points of reference.

Such a rule does not seem to be qualified by the provisions of Article 29(4), which Should the national court, having regard to provides that the restriction or withdrawal developments in the case pending before it, of the right of pre-emption may be decided consider that it is necessary to obtain a upon, under certain conditions, by the further ruling on the interpretation of general meeting. That is a specific and Community law, it may in any case make a clearly defined derogation from the fresh reference to the Court for that principle set out above and it therefore purpose. precludes the possibility of the national legislature derogating from such a principle except in that specific case.

1. Article 25(1) and Article 29(1) of Council Directive 77/81/EEC may be relied upon by an individual before a national court against the public authorities.

2. Article 25(1) and Article 29(1) of Council Directive 77/91 /EEC must be inter­ preted as meaning that they preclude the application of legislation which, designed to ensure the rationalization and continued trading of undertakings which are particularly important from an economic and social point of view and are in an exceptional situation because of their liabilities allow,

(a) an administrative decision to be made to increase the company capital without consideration by the general meeting;

(b) an administrative decision to be made to allocate the new shares without taking account of the proportions of the capital held by the existing share­ holders.

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