C-172/99

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OPINION OF ADVOCATE GENERAL LÉGER delivered on 12 October 2000 1

1. The Korkein Oikeus (Finnish Supreme 3. Article 2 defines the principal terms Court) seeks a preliminary ruling on the used. It states at point (a) that 'transferor' question whether the provisions of Council means 'any natural or legal person who, by Directive 77/187/EEC of 14 February 1977 reason of a transfer within the meaning of on the approximation of the laws of the Article 1(1), ceases to be the employer in Member States relating to the safeguarding respect of the undertaking, business or part of employees' rights in the event of trans- of the business'. Point (b) defines 'trans- fers of undertakings, businesses or parts of feree' as 'any natural or legal person who, businesses, 2are applicable in the case of a by reason of a transfer within the meaning takeover of the operation of seven regional of Article 1(1), becomes the employer in bus lines by a legal person governed by respect of the undertaking, business or part private law, subsequent to a procedure for of the business'. the award of a public service contract conducted in accordance with the proce- dures laid down by Directive 92/50/EEC. 3

4. As is stated in its twentieth recital, Directive 92/50 aims to improve the access of service providers to procedures for the award of contracts with a view to eliminat- I — Legal background ing practices that restrict competition in general and participation in contracts by other Member States' nationals in particu- lar.

2. According to Article 1(1), Directive 77/187 applies 'to the transfer of an under- taking, business or part of a business to another employer as a result of a legal transfer or merger.' 5. Article 1(a) of that Directive defines 'public service contracts' as contracts for 1 — Original language: French. 2 — OJ 1977 L 61, p. 26 (hereinafter 'Directive 77/187' or 'the pecuniary interest concluded in writing Directive'). between a service provider and a contract- 3 — Council Directive of 18 June 1992, relating to the coordi- ing authority. Article 1(b) provides that nation of procedures for the award of public service contracts (OJ 1992 L 209, p. 1). 'contracting authorities' means the State,

I I — Facts and procedure

11. Mr Liskojärvi and Mr Juntunen are two of the 33 drivers who were dismissed 8. Following a call for tenders, the Pääkau- by Hakunilan Liikenne and reengaged by punkiseudun Yhteistyövaltuuskunta Liikenne. As they considered that there had (Greater Helsinki Joint Board, hereinafter been a transfer of a business between the 'YTV') awarded, for a period of three years, the operation of seven regional bus routes, previously operated by Hakunilan 4 — Paragraph 4 of the English translation of the decision to Liikenne Oy (hereinafter 'Hakunilan submit a reference for a preliminary ruling.

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two companies and that they were accord- 14. As it considered that the resolution of ingly entitled to continue to enjoy the the case depended on the interpretation of conditions of employment in force at their Article 1(1) of Directive 77/187, the Kor- former employer, they brought proceedings kein Oikeus, by its order of 27 April 1999, against Liikenne in the Vantaan Käräjäoi- decided to stay the proceedings and to refer keus (Vantaa District Court). Liikenne, for the following question to the Court: its part, denied that any transfer had taken place.

'Is a situation in which the operation of bus routes passes from one bus undertaking to 12. By judgment dated 17 June 1996, the another as a consequence of a tender Vantaan Käräjäoikeus held in favour of Mr procedure under Directive 92/50/EEC on Liskojärvi and Mr Juntunen. The Helsingen public service contracts to be regarded as a Hovoikeus (Helsinki Court of Appeal), by transfer of a business for the purposes of judgment of 23 October 1997, rejected Article 1(1) of Directive 77/187/EEC?' Liikenne's appeal, and the latter then appealed to the Korkein Oikeus.

21. I am in agreement with the majority of the participants in the case, 11 that the 17. If the Court's answer to the first answer to the first question should be in the question is in the affirmative, the national affirmative, as much by reason of the court seeks an answer to a second question wording of the Directives in question as relating to the conditions in which Direc- by their objectives. tive 77/187 applies. 9This second question can be subdivided into two points.

22. According to Article 1(a) of Directive 92/50, public service contracts are defined as 'contracts for pecuniary interest conclu- ded in writing between a service provider 18. First, the Finnish court asks the Court and a contracting authority'. to say whether the concept of 'legal trans- fer' referred to in Article 1(1) of Directive 77/187 necessarily requires that there be a direct contractual relationship between the transferor and the transferee. 10 23. In terms of Annex 1A, referred to in Article 8, land transport services are cov- ered by Directive 92/50. 8 — Hereinafter 'the first question'. 9 — Hereinafter 'the second question'. 10 — As defined by points (a) and (b) of Article 2 of the Directive. 11 — Other than Liikenne.

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26. Reading these provisions together allows one therefore to state that a transac- tion to which Directive 92/50 applies may 30. In order to achieve this, the directives be covered by Directive 77/187 if the other require the implementation of uniformly conditions laid down by the latter directive applicable rules throughout the Commu- are fulfilled. 12 nity by all economic entities.

12 — These points will be developed when the second question is 13 — See paragraph 23 of the English translation of the decision addressed. to submit a reference for a preliminary ruling.

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31. In parallel, Directive 77/187 has the they are placed in unequal competitive objective of ensuring the protection of the conditions. On the contrary, it obliges them workforce in transfers of undertakings, by to observe those same rules. Consequently, guaranteeing the continuity of the contrac- it allows equal treatment of the latter. tual relations which exist in the context of an economic entity independently of any change in its ownership. 14

14 — See Case C-175/99 Mayeur v Association Promotion de l'Information Messine [2000] ECR I-7755, paragraph 44. 17 — See paragraph 27 of this Opinion and the arguments put 15 — See paragraph 27 of this Opinion. forward on Dehalf of Liikenne at the hearing. 16 — 'Tenderer' means the service provider who has submitted a 18 — See further the points made in this Opinion in relation to tender (Article 1(c) of Directive 92/50). the second question.

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guarantees the rights of employees, who are services. Such an arrangement is covered in not to be prejudiced by the change of principle by Directive 77/187. employer by reason of the transfer of the undertaking. Such a reading will therefore fully reconcile the objectives of Directive 77/187 with those of Directive 92/50.

40. It follows from the foregoing that the provisions of Directive 77/187 may be applicable in the context of Directive 37. On the other hand, to hold that Direc- 92/50 if the other conditions stipulated by tive 77/187 is inapplicable for the simple Directive 77/187 apply, and I shall examine reason that Directive 92/50 applies would this point below. do harm to the objective of the protection of workers in the context of the transfer of an undertaking covered by Directive 77/187 and would not properly meet the objectives of Directive 92/50. The aim of this directive is, as I have mentioned, to guarantee the application of rules of equal competition among economic operators. It does not in any way require Member States to prejudice the rights of the workforce. Answer to the second question

43. I pointed out that the Court had consistently taken the view that the deter- 45. In the present case, it is an accepted fact mining factor for establishing whether that there was no direct contractual link there had been a 'legal transfer' for the between Hakunilan Liikenne and Liikenne, purposes of the Directive was that there be but that the latter took over in their entirety a change of the person — legal or natural, the operations previously undertaken by governed by private law or public law — Hakunilan Liikenne. It is also accepted that responsible for the operation of the under- this takeover was possible only through a taking which enters into the relationship of contract for a pecuniary interest, in this employer with the employees of the under- case a concession, between Liikenne, a legal taking taken over. It was my view that the person governed by private law, and YTV, a absence of any direct contractual link legal person governed by public law. between the two undertakings successively having the character of employer towards the workforce could not in itself remove from the latter their rights under the Directive.

19 — See paragraphs 39 to 47 of my Opinion in the Mayeur case, cited above. 46. This factual situation is similar to that 20 — See, in particular, Case 324/86 Foreningen af Arbejdsledere i Danmark v Daddy's Dance Hall [1988] ECR 739, Case which arose in the Hidalgo case. There, as C-29/91 Dr Sophie Redmond Stichting v Bartol and in Mayeur, the Court held that 'While the Others [1992] ECR I-3189, Case C-13/95 Süzen v Zehnacker Gebäudereinigung GmbH Krankenhausservice absence of a contractual link... between the [1997] ECR I-1259, paragraph 11, and Joined Cases C-173/96 and C-247/96 Sanchez Hidalgo and Others v Asociación de Servicios Aser and Zieman v Zieman Sicherheit and Another [1998] ECR I-8237, paragraph 22. 21 — See, in particular, the judgment in Mayeur, cited above, at 22 — Ibid, at paragraph 45. paragraph 44. 23 — Ibid, at paragraph 46.

50. Two conditions must therefore apply in order for the identity of the undertaking to have been maintained after the transfer.

(b) The concept of transfer of an under- taking

51. First, the transferee must carry on the same economic activity as was carried on 48. The Court has consistently held that by the transferor before the transfer, or a 'The decisive test for establishing the exis- tence of a transfer within the meaning of 25 — See the judgment in Mayeur, cited above, at paragraph 44. 26 — Ibid, paragraph 49. 24 — Paragraph 22. 27 — Süzen judgment, cited above, at paragraph 13.

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similar activity. This first condition can be 55. These circumstances comprise 'in par- defined as 'identity of the activity'. ticular the type of undertaking or business, whether or not its tangible assets, such as buildings and movable property, are trans- ferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its goodwill is transferred, the degree of simi- 52. Secondly, there must have been the larity between the activities carried on transfer of the means necessary to under- before and after the transfer, and the take the activity in question, or of the period, if any, for which those activities means required to operate it, having regard are suspended.' 29 to the nature of the entity transferred. This second condition can be defined as 'identity of the entity'.

action, having regard to all the circum- logically, depend on the transfer of such stances 31 and must take into account the assets. That point was made by the Court type of undertaking or business trans- in the Süzen case. 34 ferred, 32 having regard in particular to the sector of activity in which it operates. The national court must therefore deter- mine which are the essential and indispen- sable elements required in order for the economic entity to carry on operating and establish whether these elements have been 61. It is clear, and this point was accepted taken over by the transferee. by all parties participating in these pro- ceedings, that the activity carried on by the successive undertakings in the present case represented the same economic activity. 35 It consisted of the operation of seven regional bus routes. The first condition required by the Court's case law, namely that of identity of economic activity, is 59. Although the Court has held in princi- therefore met. ple that for an economic entity to exist there should be an identifiable group of workers and significant tangible or intan- gible assets, it has nonetheless accepted that such an entity may function even in the absence of any assets belonging to the 62. The participants are, however, not in undertaking which formerly carried on the agreement as to whether the second condi- business. In particular, the Court has found tion, namely the identity of the entity, is to this effect in the case of certain sectors met. such as cleaning and security. 33

65. First of all, it should consider all the 67. The Commission is of the view that the circumstances which characterise the workforce is the key element of the service operation in question. To do this, it should offered in this case, namely bus transport. have regard to the fact that the takeover of The buses, which ultimately were not taken the activity did not involve any transfer of over by Liikenne, were accessory to the tangible assets, but that, on the other hand, exercise. In the final analysis, the Commis- the majority of the personnel engaged in sion considers that bus transport is an carrying on the activity prior to the transfer activity which is fundamentally based on were reengaged by the successful tenderer. manpower. It should also have regard to the specific nature of the undertaking involved in the transfer, that is to say to the fact that it consisted of an undertaking which operated regional bus routes. It may also take other matters into account. For example, it should decide whether the customer base as a whole was taken over by Liikenne and 68. It is not appropriate for the Court of determine the economic value of this ele- Justice to substitute its view for that of the ment of the immovable assets in the context national court, which is the sole judge of of the activity transferred. the question whether, in the present case, the economic entity has kept its identity following the transfer. Replying to that question necessarily involves a purely fac- tual assessment of a particular situation. However, I consider that the national court's attention should be drawn to the 66. Secondly, the national court will have following points. to assess the respective importance to be given to these separate elements. 37 In order to do this, it should form a view as to what characterises, or what distinguishes, the

70. Furthermore, it is appropriate to point out to the national court that this Court has consistently held that in principle the concept of an economic entity presupposes the existence not only of a workforce but 72. In my view, to follow the reasoning of also of tangible and intangible assets. 39 the Commission would render this princi- The Court has equally consistently taken ple devoid of any useful effect. the view that, in specific cases, the fact that an economic entity has no assets and is essentially characterised by its workforce does not prevent the Directive from apply- ing even in the absence of any transfer of assets. 40 The conclusion to be reached, therefore, is that where an undertaking 73. That is why I am of the view that the comprises significant assets which are indis- Commission's argument in its submissions pensable to its operation, the absence of to the Court is not in accordance with the interpretation which the Court has given to the Directive, nor with the economic reality of the entity in question in this case. 38 — My opinion might have been different if the transport activity in question had required special qualifications on the part of the workforce whose task it was to operate it. For example, the transportation of dangerous substances, which require that the personnel involved receive special training. In such a case, the immediate replacement of the workforce of the business transferred by personnel having only normal qualifications would be impossible, as addi- tional training would be required. It follows that in certain cases it cannot be ruled out that the workforce may represent the key element of the economic activity in 74. It follows from the above that the question where there is a transfer of a transport under- taking. In short, I think that, in such cases, the takeover of absence of a transfer of significant assets the workforce in the absence of a takeover of significant from a regional bus transport undertaking assets would not prevent Article 1(1) of the Directive from applying. to another undertaking carrying on the 39 — See, as regards the last point, the Mayeur judgment, cited same type of business does not support a above, at paragraph 32. conclusion that Directive 77/187 is applic- 40 — See the Sitzen judgment, cited above, at paragraphs 17 and able.

(a) it may apply in the absence of a direct contractual link between two undertakings to whom there has been successively granted, following a procedure for the award of a public service contract under Directive 92/50, a concession for the operation of a land transport service (in this case, the operation of regional bus routes) by a legal person governed by public law;

(b)it does not apply in the absence of a transfer of significant assets between the two undertakings.

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