C-198/98

2 — In addition to operating in Ireland, the company had * Original language: Spanish. employees and a permanent commercial presence in the 1 — Council Directive 80/987/EEC of 20 October 1980 on the Uniteci Kingdom; it had subsidiaries in France, Germany, approximation of the laws of the Member States relating to Italy and the Netherlands; it had an associated company in the protection of employees in the event of the insolvency of Spain and it operated, although without an office, in Austria their employer (OJ 1980 L 283, p. 23). and Luxembourg.

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responsibility for insolvency matters, the cerning disclosure requirements in respect High Court in England recognised the of branches opened in a Member State by appointment of the liquidator made by certain types of company governed by the 4 the Irish court and appointed joint special law of another State (hereinafter 'Direc­ managers to assist in the winding up of the tive 89/666'). Registration did not give the company's affairs in the United Kingdom. branch corporate status or legal personality under English law.

As the Commission explained at the hear­ ing, the fact that the United Kingdom 6. When the company was declared insol­ judicial authority recognised the appoint­ vent, its employees in the United Kingdom ment in Ireland of a liquidator and were dismissed. The applications which appointed special managers to assist in the they made for payment of their claims for winding up of Bell in the United Kingdom outstanding pay were rejected by the Secre­ was not equivalent to the commencement tary of State on the ground that the of proceedings for the company to be guarantee institution responsible for set­ declared insolvent in that country. tling them was the Irish one. The two cases with which these proceedings are con­ cerned have been selected as test cases in order to decide whether the Secretary of State was entitled to reject the claims.

8. The abovementioned act does not expressly provide for cases in which a company incorporated in another Member State, with a permanent establishment in (i) an employee works in one Member the United Kingdom, where it has employ- State for an employer incorporated in ees, becomes insolvent under the legislation another Member State; and of the first Member State or of another Member State but not under United King- dom law. Nevertheless, the national court dealing with the case has reached the conclusion that, in accordance with the (ii) the employer has a branch in the normal rules of interpretation of English Member State in which the employee law, that act does not oblige the Secretary works, and that branch is registered of State to pay the wages and other under the national provisions imple- amounts claimed by them. menting Council Directive 89/666/EEC (the Eleventh Company Law Direc- tive), although it is not incorporated and does not have legal personality separate from that of the employer, in that Member State; and

III — The question submitted by the national court (iii) both the employer and the employee are required to make social security contributions in the Member State in which the employee works,

9. In the course of the proceedings before it, the Industrial Tribunal, Bristol, decided, at the request of the Secretary of State and in order to avoid differences between the under Article 3 of Council Directive judicial authorities of the Member States in 80/987/EEC of 20 October 1980 on the their interpretation of Directive 80/987, to approximation of the laws of the Member stay the proceedings pending a preliminary States relating to the protection of employ- ruling from the Court of Justice under ees in the event of insolvency of their

10. Article 2 of Directive 80/987 provides:

— or established that the employer's undertaking or business has been definitively closed down and that 'For the purposes of this Directive, an the available assets are insufficient employer shall be deemed to be in a state to warrant the opening of the of insolvency: proceedings.

(a) where a request has been made for the opening of proceedings involving the employer's assets, as provided for under the laws, regulations and admin- ...'

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11. Article 3 thereof, of which the Indus- pursuant to the law of the Member State of trial Tribunal, Bristol, seeks an interpreta- the branch, in accordance with Article 3 of tion, provides: that Directive.

OPINION OF MR RUIZ-JARABO — CASE C-198/98

accordance with disclosure by the matter of the entries in the register company as provided for in Arti- must in every case appear in the file. cle 2(l)(h), (j) and (k) of Directive 68/151/EEC,

— insolvency proceedings, arrange- ments, compositions, or any ana- logous proceedings to which the company is subject;

V — The procedure before this Court

14. Written observations were submitted within the period prescribed by Article 20 of the EC Statute of the Court of Justice by 13. Article 3 of Directive 68/151/EEC 5 to the applicants in the main proceedings, the which the foregoing provisions refer, pro- Governments of the United Kingdom, Ire- vides: land, Italy and the Netherlands, and the Commission.

'1. In each Member State a file shall be opened in a central register, commer- At the hearing, which was held on 6 July cial register or companies register, for 1999, oral argument was presented by each of the companies registered representatives of the applicants in the therein. main proceedings, the Governments of the United Kingdom, Ireland, Italy and the Netherlands, and the Commission.

having a permanent commercial presence. pretation, given by the Court of Justice in The reasons which they put forward its judgment in Mosbæk,6 is of general include the following: Bell contributed to application and must be relied on for the the social security system in the United decision to be given in these proceedings, Kingdom in respect of the workers which it being a simple rule which gives a clear employed there, but did not contribute in answer in each case. respect of them in Ireland; Directive 80/987 provides for no system of set-off or reim- bursement between the guarantee institu- tions of the Member States for sums paid by one of them on behalf of another; and it would be contrary to the principle of legal certainty for a worker in respect of whom contributions had been paid to the guaran- tee institution of a Member State to have to VI — Consideration of the question apply to the guarantee institution of another State in order to receive arrears, of pay, without knowing whether he would be compensated in accordance with the laws of the State of employment or those of the State in which he made his claim. 17. The question submitted by the Indus- trial Tribunal, Bristol, seeks to ascertain which guarantee institution, under Arti- cle 3 of Directive 80/987, must be respon- sible for the outstanding wage claims of the applicants in the main proceedings.

19. In view of that difference of opinion, I 21. After one year, Colorgen Limited was shall examine the factual context in which declared insolvent and its employees, that judgment was delivered, where the including Mrs Mosbæk, were dismissed. Court had to decide which guarantee For the purposes of Article 3 of Directive institution was required, in the event of 80/987, Mrs Mosbæk declared, both to the the employer's insolvency, to settle the Danish guarantee institution and to the outstanding claims of a worker in a situa- English receiver of the company, an out- tion in which the employer was not estab- standing claim of DKK 471 996 in respect lished in the Member State where the of wages, commission and disbursements. employee resided, and was only represented The Danish guarantee institution refused to there through the activity of that employee, pay the claim, on the ground that that who worked in offices rented by the responsibility attached to the guarantee employer. institution of the State where the employer was established, namely the United King- dom. In the subsequent proceedings, the Danish Østre Landsret sought a prelimin- ary ruling from this Court.

23. At the outset, I would observe that the differences in the facts of the two cases are considerable. Indeed, the only similarity appears to be that in each case a company employed someone in a Member State other than that in which it had its registered office. A. The application of Directive 80/987 to branches set up in a Member State by companies incorporated in another Mem- ber State, and the right of establishment

The differences, however, are more numer- ous: first, Colorgen had only rented an office so that Mrs Mosbæk could work 24. One of the purposes of Directive there as its only employee, whereas Bell had 80/987 is indeed to guarantee employees, more than 200 employees in the United in the event of their employer's insolvency, Kingdom. Second, Colorgen was neither minimum protection by reducing the dif- established nor registered as an undertak- ferences as between Member States in the ing in Denmark, for either tax or customs scope of such protection, without imping- purposes, whereas Bell had at least one ing on their right to adopt more favourable branch in the United Kingdom which provisions. The Directive requires the fulfilled the disclosure requirements Member States to set up institutions to imposed by Directive 89/666. Third, Color- guarantee to workers the payment of at gen made no deductions for social security least part of the remuneration that they contributions under Danish legislation have not received because of their employ- whereas Bell made social security payments er's insolvency. The general rule laid down

25. For Directive 80/987 to be applicable, the employer who employed the workers affected must be in a state of insolvency. The Directive does not define the terms 27. In my opinion, that situation cannot worker and employer, so that the meaning prevent the claims in respect of unpaid thereof is a matter for the various national wages of workers employed in the United laws. Kingdom by a branch of a company established in another Member State from being upheld if the conditions laid down by the Court for an employer to be regarded as insolvent are met. Those requirements are: that the laws, regulations and administra- tive provisions of the Member State con- On the other hand, it is made clear in cerned must provide for insolvency pro- Article 2 that an employer is to be deemed ceedings; that employees' claims resulting to be in a state of insolvency (i) where a from contracts of employment or employ- request has been made for the opening of ment relationships may be taken into proceedings involving the employer's consideration in such proceedings; that a assets, as provided for under the laws of request has been made for such proceedings the Member State concerned, to satisfy to be opened; and that the competent collectively the claims of creditors and (ii) authority has either decided to commence where the competent authority has either proceedings or established that the employ- decided to open proceedings or has estab- er's undertaking or business has been lished that the employer's undertaking or definitively closed down and that the business has been definitively closed down available assets are insufficient to warrant and that the available assets are insufficient the opening of proceedings. 8 to warrant the opening of proceedings.

requirement that a company which has I see nothing to prevent, for the purpose of been declared insolvent in a Member State applying Directive 80/987, an application must also be declared insolvent in another being made in a Member State for the Member State under the latter's law does opening of insolvency proceedings for the not appear in Directive 80/987. Second, benefit of creditors against the branch of a although no request was made in the company whose registered office is in United Kingdom for Bell to be the subject another Member State and which ceases of proceedings for the satisfaction of cred- discharging its day-to-day financial obliga- itors' claims and it was never decided to tions, or to prevent the competent authority initiate such proceedings, the fact is that the in the first Member State from establishing High Court in England recognised the that the branch has definitively been closed appointment of the liquidator made by down and has insufficient assets available. the Irish court and appointed joint special managers to assist in winding up the company in the United Kingdom. I believe that the High Court would not have followed that course if it had not consid- ered that Bell had ceased business at its 29. In Mosbæk, the Court held that, in trading addresses in the United Kingdom. practice, the opening of proceedings to Third, pursuant to Article 2(l)(f) of Direc- satisfy creditors' claims collectively, thus tive 89/666, the commencement of insol- making it possible for salary claims to be vency proceedings in respect of Bell in taken into consideration, is most often Ireland and the order that it be wound up requested in the State in which the had to be disclosed in the United Kingdom. employer is established. 10 Finally, although Directive 80/987 does not affect the definition of 'employer' under national law, it seems to me to be clear that insolvency proceedings are not necessarily required to be commenced against an undertaking, whether or not it is in the 30. The United Kingdom Government form of a company, in its entirety since seems to take the view that an undertaking Article 2(l)(b) states that 'the authority is established only in the Member States in which is competent ... has ... established which it was incorporated and where it has that the employer's undertaking or busi- its registered office. I think that is why it ness9 has been definitively closed down'. asserts that the only guarantee institution responsible for payment will be, for all Bell's workers, that of Ireland, regardless of the Member State in which they worked

and in which they paid social security creation of a subsidiary, is one of the contributions. The other parties consider, possibilities currently open to companies on the other hand, that a company which in the exercise of their right of establish- was incorporated in a Member State, where ment in another Member State. it has its registered office, may also be established in another Member State, all that is needed for that purpose being the fact of having a branch there or, as the applicants in the main proceedings say, a 'permanent commercial presence'. 32. For the reasons given above, I consider that, in contrast to the position in Mosbæk, where the presence of the United Kingdom company in Denmark was no more than a rented office and one employee, a branch opened in a Member State by a company incorporated and having its registered office in another Member State may be regarded as an insolvent employer for the 31. I concur with that second contention. purposes of the Directive provided that, in Article 52 of the EC Treaty (now, after the first State, application has been made amendment, Article 43 EC) contemplates for the commencement of proceedings the setting up of agencies, branches or leading to a declaration of insolvency and subsidiaries in a Member State by Com- the competent authority has established munity nationals established in another that it has been definitively closed down Member State as an essential feature of and that the available assets are insuffi- the right of establishment. Consequently, cient. for the purposes of applying Community law, a company which has been incorpo- rated in a Member State is just as estab- lished in it as a company which, having been incorporated in another Member State, exercises its right of establishment in the first State by opening a branch there. B. The importance, when identifying the competent guarantee institution, of the fact that the employer contributed to its finan- cing

34. That did not happen in the case of the Danish guarantee institution because, although the worker lived and had worked in Denmark, the employer was neither established nor registered there as a com- That is in fact an option open to the pany or for any other purpose with the Member States in deciding how to finance tax 12 or customs administration, nor did it their guarantee institutions. However, the deduct from the salary it paid her any tax United Kingdom's objection can be easily or social security contribution for retire- rebutted since, as I stated earlier, under ment or other contingencies under Danish Article 5(c) of the Directive, the guarantee law. institution's obligation to pay exists even where the employer who was required to contribute failed to do so. The lack of contributions by an employer will be felt just as much by an institution financed entirely by the public authorities as by one In the present case, in contrast, the under- which, financed in part by employers, taking which became insolvent not only failed to receive the contributions that had a branch in the United Kingdom but should have been paid by an employer also participated, through its contributions, who has been declared insolvent. And yet as did its employees, in the financing of the both have an obligation to pay outstanding social security system of that Member claims of workers in respect of remunera- State. tion.

35. I do not agree with the United King- dom Government's assertion that it cannot

36. I must therefore conclude that the 11 — Mosbæk, cited in footnote 6 above, paragraph 24. responsibility for paying the outstanding 12 — The Danish guarantee institution was financed directly by the State. However, since the financing was calculated on a claims of workers affected by their employ- basis of one per mil of the taxable amount for VAT er's insolvency will attach to the guarantee purposes, it can be said that employers subject to that tax made a contribution, albeit indirect. institution which levied, or at least should

13 — It is in the sphere of social security for migrant workers 38. On the basis of that statement, the that, because of the system of coordination of national social security schemes, recourse is had to aggregation of United Kingdom Government contends insurance periods completed in the various Member States for recognition of entitlement to benefits. It is in that that the sole institution which should pay sphere too that a system has been set up for the the outstanding claims of workers reimbursement of benefits paid by a social security institution in one Member State on behalf of another employed in branches in various Member Member State.

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antee institution of that State for payment State who are employed by undertakings of arrears of wages due to him as a result of whose headquarters are located in that his employer's insolvency, in accordance State, which would not happen if he were with the laws of that State, with which the obliged to make a claim to the guarantee worker is familiar. It would be contrary to institution of another Member State. that principle for him to have to apply to the guarantee institution of another Mem- ber State in order to be compensated in accordance with provisions and scales in force in that other State which would be alien to him.

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VE — Conclusion

43. In view of the foregoing considerations, I suggest that the Court of Justice give the following answer to the question submitted by the Industrial Tribunal, Bristol:

Where workers employed in one Member State by a branch of a company incorporated in another Member State, where it had its registered office and where insolvency proceedings were commenced, under Article 3 of Council Directive 80/987/EEC of 20 October 1980 on the approximation of the laws of the Member States relating to the protection of employees in the event of the insolvency of their employer, the guarantee institution which must accept responsibility for outstanding claims is that of the State in which the workers are employed and in which the employer pays, or ought to pay, contributions to the financing of the institution.

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