C-41/90

I. Does the provision of business executives by personnel consultants constitute a service within the meaning of the first paragraph of Article 60 of the EEC Treaty and is the provision of 2. The plaintiffs in the main proceedings executives bound up with the exercise are German personnel consultants based in of official authority within the meaning Germany. The defendant is a German of Articles 66 and 55 of the EEC company based in Munich. The parties Treaty? entered into a contract under which the plaintiffs were to assist the defendant in the recruitment of a sales director. The plaintiffs put forward a candidate whom they considered suitable for the post, namely Mr R. Dechert, a German national However, the defendant decided not to engage Mr Dechert and refused to pay the contractually agreed fee to the plaintiffs, II. Does the absolute prohibition on the who thereupon commenced proceedings provision of business executives by before the German courts. It appears that German personnel consultants, laid the plaintiffs cannot succeed under German down by Paragraphs 4 and 13 of the law because the contract is void; in Arbeitsförderungsgesetz, constitute a Germany the Bundesanstalt für Arbeit, which professional rule justified by the public is an organ of the State, has a monopoly interest or a monopoly justified on over recruitment services, and private grounds of public policy and public recruitment agencies are prohibited in security (Articles 66 and 56(1) of the accordance with an ILO Convention. The EEC Treaty)?

* Original language: English.

IV. In connection with the provision of business executives is the Bundesanstalt für Arbeit (Federal Employment Office) subject to the provisions of the EEC Treaty, and in particular Article 4. The Fee-charging Employment Agencies 59 thereof, in the light of Article 90(2) Convention (Revised) ' 1949 (ILO of the EEC Treaty, and does the estab­ Convention No 96; International Labour lishment of a monopoly over the Conventions and Recommendations provision of business executives 1919-1981, p. 102) grants members constitute an abuse of a dominant ratifying the Convention a choice between position on the market within the accepting Part II of the Convention, which meaning of Article 86 of the EEC provides for the gradual abolition of Treaty?' fee-charging employment agencies conducted with a view to profit, or Part III of the Convention, which provides for the regulation of such agencies. Article 5 of the The background to the case Convention, which belongs to Part II, provides that exceptions to the rule requiring the abolition of such agencies 'shall be allowed by the competent authority in exceptional cases in respect of categories (a) The ILO Conventions of persons, exactly defined by national laws or regulations, for whom appropriate placing arrangements cannot conveniently be made within the framework of the public 3. Before those questions can be answered employment service, but only after consul­ it is first necessary to examine the back­ tation, by appropriate methods, with the ground to the case. The German provisions organizations of employers and workers granting a monopoly over recruitment to concerned'. the Bundesanstalt (as I shall henceforth refer to the Bundesanstalt für Arbeit) and prohibiting private recruitment agencies have their origin in international law. The Employment Service Convention 1948 (ILO Convention No 88; International Labour Conventions and Recommendations 5. Convention No 96 has been ratified by 1919-1981, p. 93) requires ILO members all Member States except Denmark and the for which the Convention is in force to United Kingdom. It may be noted that maintain or ensure the maintenance of a Germany chose to be bound by the free public employment service (Article provisions of Part II of the Convention, 1(1)). The essential duty of the employment rather than Part III (Law of 15 April 1954; service is 'to ensure, in cooperation where Bundesgesetzblatt 1954, Teil II, p. 456).

'(1) Recruitment and procurement for 9. Paragraph 23, unlike Paragraph 18, does employment abroad as an employee and not contain any proviso regarding recruitment and procurement abroad for Community law. employment in Germany as an employee are to be carried out by the Bundesanstalt. Other organizations and persons require, in order to be able to carry out those activities, the prior consent of the Bundesanstalt in each individual case, in so far as they have 10. The Bundesanstalt provides its services not been specially commissioned under free of charge in principle. If untoward Paragraph 23(1), second sentence. The expenditure is incurred, it may charge a fee Bundesanstalt shall take a decision, having to the employer (Paragraph 21). The regard to the legitimate interests of German Bundesanstalt is financed by contributions workers and the German economy in the levied on employers and workers light of the state of the labour market ... . (Paragraph 167).

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(c) The de facto situation in the field of 12. Under Paragraph 134 of the German executive recruitment Civil Code, a legal transaction that is contrary to a statutory prohibition is in principle void. The order for reference cites several decisions of the Bundesgerichtshof holding that that provision renders void an employment procurement contract entered into contrary to the terms of the AFG. 14. It became apparent in the 1950s (according to the Commission) that a separate market existed for executive recruitment. As a result private under­ 13. The compatibility of the Bundesanstalt's takings, operating as 'personnel monopoly with German constitutional law consultants', became active in the field of has not gone unchallenged. In particular, it executive recruitment. The Bundesanstalt was argued in a case before the Bundesver­ reacted to that development in two ways: fassungsgericht in 1967 that the monopoly was contrary to Article 12(1) of the Grundgesetz, which confers on all German citizens the freedom to choose their trade or profession, place of work and place of education. By judgment of 4 April 1967 (BVerfGE, vol. 21, p. 245) the Bundesver­ fassungsgericht held that the monopoly was (i) In 1954 the Bundesanstalt set up a not contrary to the Grundgesetz. Although special office for the recruitment of the monopoly interfered with the citizen's executives and other highly qualified freedom to choose his trade or profession, it groups (Kommentar zum AFG, by A. was justified by the public interest in view of Knigge, J. V. Ketelsen, D. Marschall the abuses that had occurred in the past and and A. Wittrock, 2nd edition, paragraph owing to the fact that the global needs of 5 on Paragraph 189, p. 1427). the labour market could more efficiently be According to the Commission's obser­ satisfied by a single entity than by a multi­ vations, its function is to supply highly plicity of undertakings. The court examined qualified personnel to large under-

takings. It is common ground that the of the undertaking, inasmuch as he office is unable to satisfy all the demand performs significant managerial for assistance in the recruitment of functions or highly qualified work executives. According to information involving planning, supervision, design, supplied by the Commission, the office investigation or consultation, essentially assists in the filling of only 28 % of on his own initiative and with a high vacancies for executives advertised on degree of responsibility (point 1.1.1 of the open market in Germany. As a the circular). result, personnel consultants continue to exist and continue to engage in executive recruitment, notwithstanding the restrictions placed on them; according to the plaintiffs, there are between 700 and 800 such firms with a total annual turnover of between DM 15. The agreement then distinguishes 750 million and DM 1 200 million. between personnel consultancy, which private undertakings are allowed to engage in, and employment procurement, which is reserved to the Bundesanstalt. Employment procurement is defined as in Paragraph 13(1) of the AFG. Personnel consultancy is defined as the activity that takes place when a personnel consultant, in the context of a consultancy contract, cooperates inter alia (ii) In 1957 the Bundesanstalt issued a in the search for, and selection of, circular in which it expressed its will­ executives for appointment to vacant posts ingness to permit personnel consultants (point 1.2). A personnel consultant who is to engage in executive recruitment. A commissioned by an undertaking to help to 1970 version of the circular, appended fill executive vacancies in a specific case to the Commission's observations, may place advertisements in newspapers and records the terms of an periodicals for the undertaking (point 2.1). agreement — between the Bunde­ Point 2.2 states that a personnel consultant sanstalt, the Federal Minister for may not inter alia: Employment and two associations representing German employers and German personnel consultants — concerning the 'principles governing the distinction between personnel consultancy and employment procurement in connection with the (i) Assist in the recruitment of persons filling of posts for executives'. The other than executives; agreement purports to be an interpre­ tation of the relevant provisions of the AFG. It begins by defining the term 'executives' (Führungskräfte der Wirtschaft): an executive is a person who, by virtue of being in a special place of trust in relation to the employer, occupies a key position (ii) Assist in recruitment unless engaged affecting the existence and development by an undertaking in a specific case;

The first part of the question 16. Finallv, the agreement provides for certain forms of cooperation between personnel consultants and the Bundes- anstalt! own employment procurement 19. The first part of Question I asks service whether the provision of business executives by personnel consultants constitutes a service within the meaning of the first paragraph of Article 60 of the Treaty. That 17. Although the agreement set out in the provision defines services in the following Bundesanstalt's circular is described as an terms : 'interpretation' of the AFG, it is clear that it reall\· purports to derogate from that law by authorizing personnel consultants to engage in certain activities that appear to constitute employment procurement, within the 'Services shall be considered to be "services" meaning of Paragraph 13(1) of the AFG, within the meaning of this Treaty where and are therefore reserved exclusively to the they are normally provided for Bundesanstalt under Paragraph 4 thereof. remuneration, in so far as they are not But the circular cannot affect the fact that governed by the provisions relating to such activities, when performed by private freedom of movement for goods, capital undertakings, are unlawful and that and persons.'

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24. While on the subject of Article 55, there is another point that merits commentary, even though it is not directly in issue in the 22. I do not see how Article 55 could be present proceedings. When the Bunde­ invoked in relation to employment sanstalt authorizes other persons to engage procurement. As an exception to a funda­ in employment procurement under mental rule of the Treaty, Article 55 must Paragraph 23 of the AFG, that is regarded be construed narrowly: see Case 2/74 in German law as a delegation of public Keyners v Belgium [1974] ECR 631, powers (Delegation hoheitlicher Befugnisse): paragraph 43. The expression 'official see Gagel, Arbeitsfòrderungsgesetz- authority' was defined in the same case by Kommentar, paragraph 13 on Paragraph 23.

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But that does not mean that undertakings 31. It follows that Question III must be established in the State where the monopoly answered in the negative. It is not therefore has been set up may disregard a prohibition necessary to examine Question II. imposed by national law and provide the service that has been entrusted to the monopoly. Otherwise no service industry could ever be made the subject of a State monopoly; that Member States retain the Question IV power to establish such monopolies is, however, clear from the terms of Articles 90 and 222 of the Treaty.

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subject to the rules contained in this Treaty, State. If Anicie 59 cannot have that effect in particular to the rules on competition, in on its own, it cannot do so in conjunction so far as the application of such rules does with Article 90(1), which simply requires not obstruct the performance, in law or in Member States to abolish, in relation to fact, of the particular tasks assigned to public undertakings, measures contran' to them. The development of trade must not be the rules of the Treaty, or in conjunction affected to such an extent as would be with Anicie 90(2), which simply makes such contrary to the interests of the Community. undertakings subject to the rules of the Treaty.

3. ... '

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37. A similar position is adopted by the with the operation of services of general Commission, with the difference that the economic interest', within the meaning of Commission sees the abuse of the Bundes- Article 90(2). As such, it is — contrary to anstalt': dominant position in its failure to the German Government's view — subject satisfy the demand for a type of service to the competition rules and to the other (namely, executive recruitment) over which rules of the Treaty, unless it can be shown it has a monopoly. that the application of those rules would obstruct the performance of its tasks. The tasks of the Bundesanstalt are laid down in Paragraph 3 of the AFG; the most important, for the purposes of the present case, is employment procurement. It cannot 38. The other parties to the proceedings be contended that the Bundesanstalt would have said very little on the subject of Article be obstructed in the performance of that 90. Macrotron, the defendant in the main task, or any other of its tasks, if it were proceedings, merely observes that there can compelled to compete with private operators be no breach of Articles 86 and 90 because in the field of executive recruitment. That is the decision to confer a monopoly on the demonstrated, as the Commission has Bundesanstalt was based on overriding pointed out, by the circular in which the considerations pertaining to the public Bundesanstalt expressed its willingness to interest. The German Government contends allow private firms to engage in certain that there is no room for the application of forms of employment procurement in the the competition rules in relation to guise of personnel consultancy. employment procurement because the whole field has been removed from the sphere of competition law by the decision to create a State monopoly to be run in the public interest on a non-commercial basis.

44. According to the Commission, an abuse may occur if the public undertaking entrusted with a monopoly fails to satisfy the demand for the service covered by the 43. The first point that must be made is that monopoly. The Commission observes that the mere possession of a dominant position the Bundesanstalt has for many years been does not itself constitute an abuse. Taken unable to satisfy the demand for services literally, therefore, the second part of connected with the recruitment of Question IV, which asks whether the estab­ executives, as is evidenced by the fact that it lishment of a monopoly in the provision of provides candidates for only 28% of business executives constitutes an abuse of a vacancies and by the terms of its own dominant position, must be answered in the circular renouncing its monopoly in the negative. Although the Court has held that field of executive recruitment. The an abuse may occur when an undertaking in combined effect of the German legislation a dominant position strengthens that prohibiting private recruitment agencies and position by acquiring control over a of the Bundesanstalt's conduct in failing to competitor (Case 6/72 Europemballage and satisfy a demand that clearly exists is to Continental Can [1973] ECR 215), I do not limit production, markets or technical devel­ see how Articles 86 and 90 can be inter­ opment within the meaning of indent (b) of preted as meaning that an abuse takes place the second paragraph of Article 86. The when a Member State confers a monopoly Commission sees confirmation of its view in on an undertaking or an organ of the State. the Court's judgment in Case 238/87 Volvo The plaintiffs are, in my view, stretching the v Veng [1988] ECR 6211. There the Court wording of Anicie 86 to breaking point held that Article 86 might preclude the when they assert that the mere fact that the proprietor of a registered design for car monopoly extends further than is necessary parts from enforcing his exclusive right if he in the public interest constitutes an abuse of abused a dominant position by ceasing to a dominant position. If that view were produce spare parts for a model of which accepted it would mean that Article 90, in there were still many examples in circu­ conjunction with Article 86, imposes a lation. It may be noted that the Court used general limitation on Member States' power the same formula in Case 53/87 CICRA to place certain sectors of the economy and another v Renault [1988] ECR 6039, in under public ownership; nationalization which judgment was given on the same day. could take place only in so far as it were justified by the public interest. Similar limi­ tations are of course imposed by certain national constitutions (e. g. Article 43 of the Italian Constitution and Article 128 of the Spanish Constitution). But there is no such provision in Community law; on the contrary, Article 222 of the Treaty makes it 45. There is much to commend the clear that it is for national law to determine Commission's view. Admittedly, it may seem

harsh to describe the Bundesanstalt's that failure may amount to abuse ot a conduct as abusive. There is nothing in the dominant position, in which case the file to suggest that it has not endeavoured prohibition laid down in Article 86 will to the best of its ability to satisfy the apply in so far as the abuse is capable of demand for assistance in the recruitment of affecting trade between Member States. The executives. Moreover, it has voluntarily effect of that prohibition is that the relaxed its monopoly by expressing its will exclusive right can no longer be enforced. ingness to tolerate competition from private operators (though, arguably, it could have made more liberal use of its powers under Paragraph 23 of the AFG, which has apparently been used only in relation to agencies for models and performing artists). None the less, the combined effect of the German legislation and the Bundesanstalt's failure to satisfy demand is that the consumer (i. e. the employer in search of executives or the executive in search of employment) is not receiving the sort of 47. It might be thought that a case such as service which he is entitled to expect and the present one does not fall within Article which he almost certainly would receive if 86 if there is no deliberate failure on the the sector in question were subject to the part of the dominant undertaking to make system of free competition envisaged by the available the services in question.

As an objective notion, an abuse may exist independently of any element of fault on 46. Although the connection between the the part of the dominant undertaking. present case and the Volvo and Renault Article 86 is therefore, in my view, capable cases seems remote at first sight, it might be of being properly applied to a situation such possible to regard Volvo and Renault as as the present one. That interpretation is illustrating a general principle to the effect confirmed by the purposes of Article 86, that, where national law confers an which include the protection of the exclusive right on someone — whether in consumer against the adverse consequences the form of a patent, a registered design or which might otherwise follow from a monopoly in the provision of certain excessive market power; Article 86 seeks to services — and he fails to produce the goods ensure, so far as possible, that the behaviour or services covered by the exclusive right, of the dominant undertaking does not result

49. Secondly, there are a number of aspects of the monopoly at issue in the present case that might justify a finding that trade between Member States is capable of being 50. If the national court comes to the affected. Suppose, for example, that a conclusion that there has been an abuse of a company established in France were to set dominant position and that the abuse is up a sales network in Germany, for which capable of affecting trade between Member purpose it required an executive familiar States, the consequences of that finding as with the German market. The obvious regards the enforceability of the contract course of action would be to charge a between the parties to the main proceedings German personnel consultant with the task must be examined in the light of Article of identifying a suitable candidate. But it 90(1). To the extent to which an abuse of a cannot do that if the Bundesanstalt's dominant position has been brought about monopoly is enforced. Instead, it is by the provisions of German law conferring compelled to rely on the Bundesanstalt's a monopoly on the Bundesanstalt, prohi­ inadequate service or to fall back on its own biting other persons from engaging in devices and set about the awkward business employment procurement and rendering of advertising in a foreign press and their contracts unenforceable, those assessing foreign applicants about whose provisions must be regarded as measures educational and other qualifications it may contrary to the rules contained in the Treaty have little understanding. And if recourse and as such may no longer be maintained in were had to the Bundesanstalt, which must force. Member States are, in any event, by definition have a national outlook, would precluded from adopting or maintaining in that organization be in a position to satisfy force measures, even of a legislative nature,

that are capable of destroying the effec­ The Substantive Law of the EEC, 2nd tiveness {effet utile) of the competition rules edition, p. 524. applicable to undertakings: see, for example, Case 267/86 Van Eycke v Aspa [1988] ECR 4769, at p. 4791, paragraph 16. 53. It has sometimes been stated by the Court that Article 90(2) cannot have direct effect, in part because the following paragraph confers a power of appraisal on the Commission with regard to the 51. It cannot be argued that Convention application of Article 90: see, in particular, No 96 precludes the German authorities Case 10/71 Ministère Public v Hein, née from modifying the measures in question. It Müller [1971] ECR 723. However, it is clear is true that Article 234 of the Treaty seeks from the Court's later case-law that what is to preserve the effects of international really meant when Article 90(2) is denied agreements concluded before the entry into direct effect is simply that the partial dero­ force of the Treaty. However, as the gation that it makes from the ordinary rules Commission points out, it is open to the of the Treaty in favour of certain under­ German Government, in accordance with takings does not have direct effect: see Article 5 of the Convention, referred to at Case 155/73 Sacchi [1974] ECR 409, Case paragraph 4 above, to introduce exceptions 172/82 Fabricants rąffineurs d'huile de to the general prohibition in respect of graissage v Inter-huiles [1983] ECR 555 and certain categories of persons. Case 66/86 Ahmeed Saeed v Zentrale zur Bekämpfung unlauteren Wettbewerbs [1989] ECR 803. In so far as Article 90(2) confirms that the undertakings in question are in 52. Finally, a few words must be said about principle subject to rules such as Article 86, the direct effect of Article 90. Paragraph (1) it plainly cannot preclude the national court of that provision must, in my view, have from giving effect to those rules, especially direct effect in so far as it prohibits Member in a case where it is abundantly clear that States from enacting or maintaining in force the application thereof would not obstruct any measure contrary to a rule that itself the performance of the particular tasks has direct effect: see Wyatt and Dashwood, assigned to the undertaking in question.

(4) Where the law of a Member State establishes such a monopoly and the body entrusted with its operation manifestly fails to satisfy the demand for the services in question, that failure may, having regard to Article 90(2) of the Treaty, constitute an abuse of a dominant position, within the meaning of Article 86 thereof, in so far as it is capable of affecting trade between Member States.

(5) In such circumstances, Article 90(1) of the Treaty precludes the application of provisions of national law which would have the effect of prohibiting other persons from providing such services and of rendering their contracts unen­ forceable.

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