C-493/99

None the less, the second sentence3 pro- vides that there is no hiring out of employ- ees where it takes place within a construc- tion consortium, of which the employer is a member, provided the collective agreements for the sector apply to all the members of the group and they are independently bound by the obligations arising under the The infringement complained of includes contract governing the consortium. the following infractions: hindering the hiring out of construction workers for building work, to the detriment of under- takings of other Member States; limiting the hiring out of employees in the con- struction industry to those undertakings party to the same collective agreement; and 3. Under the second sentence of Paragraph regarding construction undertakings only lb, the hiring out of labourers among those which employ on sites their own workers in excess of 50% of the working hours. 2 — BGBl. I, 1972, p. 1393. 3 — The German Government points out, in the defence, that the version at issue is the seventh Law amending the Arbeits- förderungsgesetz (Law on the promotion of employment) of 1 — Original language: Spanish 20 December 1985.

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COMMISSION v GERMANY

5. The reply which the Government trans- mitted to the Commission towards the end of the year explained that the undertakings which participate in temporary consortia 7. The competent state secretary in the are not required to have their principal Ministry of Labour and Social Affairs in office in Germany; it suffices that the collective agreements for the sector apply to all the members of the consortium. In 5 — Directive 96/71/EC of the European Parliament and of the order for them to apply, it suffices, accord- Council of 16 Deceniher 1996 concerning the posting of workers in the framework of the provision of services ing to the case-law, that an undertaking has (OJ 1997 L 18, p. 1). That directive is not at issue in this case. When the Commission sent its reasoned opinion in December 1998 to Germany, the period in which the Member States were to adapt their legislation had not yet expired. The time-limit expired in December of the follow- 4 — BGBI. I, No 20, of 27 March 1997. ing year.

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OPINION OF MR RUIZ-JARABO — CASE C-493/99

June 1999 sent Mr Monti, Member of the IV — Examination of the application Commission, a letter announcing that the national legislation was to be amended. He appended a copy of the draft of the expected amendment and asked the Com- mission to delay bringing its action before the Court of Justice. A. Infringement of Article 49 EC

11. The Commission is of the view that the 8. In view of the fact that they were draft German legislation infringes the freedom to amendments and that the planned changes provide services on two grounds: first, did not suffice to remove the infringement because it hinders the participation of of the Treaty, the Commission decided to undertakings from other Member States in bring the present action. consortia established in order to carry out construction work; and, secondly, because it prevents the hiring out of employees among construction undertakings, unless they are party to the collective agreements for the industry. I shall examine those two grounds in that order.

The fact of the matter is that it is impossible for them to post workers from their 13. The German Government agrees with principal place of business or from sub- the facts and with the description of the sidiaries in other Member States to con- pre-litigation procedure as set out in the sortia established in Germany, which nor- application. However, it does not agree mally take the form of a private-law with the legal assessment it contains. company, without those consortia thereby forfeiting the possibility of invoking the second sentence of Paragraph 1(1) of the law on the supply of temporary workers, which requires that the German collective agreements for the sector apply to all the members of the consortium, if that opera- tion is not to be regarded as the hiring out of employees. That is why undertakings from other States of the European Union It points out, first, that the requirement which do not meet that requirement are not that an undertaking be party to a collective allowed to participate in such consortia, agreement does not discriminate against with the result that they cannot exercise the foreign undertakings, since German under- freedom to provide services provided for in takings are subject to the same require- the Treaty. ment. Secondly, it states that because collective agreements apply only within the national territory, it is essential that foreign undertakings should have a sub- sidiary in Germany which is covered by the collective agreements for the sector. Such a subsidiary has to be entirely separate from the main undertaking established in another Member State and must employ Thus small and medium-sized undertakings construction workers, although it is not from other Member States are prevented essential that it employ the workforce on its from participating in long-term construc- own behalf. In any event, it considers that tion projects in Germany since, in most the legislation at issue, which is intended to cases, it is possible to carry out such a authorise, by way of exception and under project only by the grouping of various very strict conditions, the commercial sup- undertakings of that type within a consor- ply of workers to the construction industry, tium, and large-scale construction work is not contrary to Community law.

15. The obligation to abolish restrictions on the freedom to provide services was interpreted by the Court of Justice as the prohibition of all discrimination against the person providing the service by reason of his nationality or the fact that he is established in a Member State other than that in which the service is to be provided. The principle of equal treatment, of which It is true that German undertakings are not Article 49 EC embodies a specific instance, required to conclude a collective agree- prohibits not only overt discrimination by ment, so that they are not all in the same reason of nationality, but also all covert legal situation. However, those which wish forms of discrimination which, by the to form part of a consortium need only application of other criteria of differentia- subscribe to the agreement governing the tion, lead in fact to the same result.6 remaining undertakings in the group, whereas undertakings from other Member States have to establish a permanent sub- sidiary, which must be more than a branch since, moreover, they must employ con- struction workers in Germany. Further- more, according to the interpretation of 16. The German legislation applies both to the Court of Justice, if the requirement of national undertakings and to those estab- an authorisation constitutes a restriction on lished in other Member States, but it the freedom to provide services, the imposes a condition which is met by most requirement of a permanent establishment of the former but by very few of the latter. is the very negation of that freedom. It has In practice, in order to hire out employees the result of depriving Article 49 EC of all for the purpose of carrying out construc- effectiveness, a provision whose very pur- tion work in the framework of a consor- pose is to abolish restrictions on the free- tium, an undertaking established in another dom to provide services of persons who are Member State is obliged to establish a not established in the State in which the permanent subsidiary and employ con- service is to be provided.7 struction workers in Germany as, other- wise, it would not be complying with the condition laid down by the Law that all the 7 — Case C-222/95 Parodi [1997] ECR I-3899, paragraph 31. See also Case 220/83 Commission v France [1986] ECR 3663, paragraph 20; Case 205/84 Commission v Germany [1986] ECR 3755, paragraph 52; Case 252/83 Commission 6—Joined Cases 62/81, 63/81 Seco and Others [1982] ECR v Denmark [1986] ECR 3713, paragraph 20; Case 206/84 223, paragraph 8; Case C-3/88 Commission v Italy [1989] Commission v Ireland [1986] ECR 3817, paragraph 20; and ECR 4035, paragraph 8; and Case C-360/89 Commission v Case C-101/94 Commission v Italy [1996] ECR I-2691, Italy [1992] ECR I-3401, paragraph 11. paragraph 31.

17. The Commission submits, in this respect, that, by restricting authorisation for the hiring out of employees among construction undertakings to those which are party to the same framework collective agreements, social fund agreements or are 19. As the Commission quite rightly points generally bound by such agreements, the out in its reply, the fact that the German second sentence of Paragraph lb of the legislature adopted provisions such as those Law on the supply of temporary workers contained in the second sentence of Para- imposes a condition which can be met only graph 1(1) and in the second sentence of by undertakings established in Germany Paragraph 1b of the Law on the supply of and which employ workers in that State. In temporary workers shows that there is a practice, a construction undertaking which need for hiring out employees among is active in another Member State cannot construction undertakings, in an industry hire out employees to German undertak- which is characterised by cyclical and ings, nor even to undertakings in Germany fluctuating demand, depending on the belonging to its own group.

8 — The Commission pointed out, in its reply, that Italy abolished the prohibition in 1997, although the leasing of employees is subject to authorisation, which is only granted if the undertaking has its registered office in Italy. It states that, on account of this, it has initiated infringement proceedings against that Member State. 9 — The Commission states that the prohibition on the leasing of employees was abolished in the Netherlands, including in 18. The defendant Government acknowl- respect of the construction industry, on I July 1998. That edges that the prohibition on the hiring out Member State had sought leave to intervene i n the proceedings in support of the Commission, but decided of employees at issue is a restriction, albeit not to do so after leave was granted.

This assessment follows from Article 1, Section IV, paragraph 4 of the Framework Collective Agreement and from Article 1, Section IV, of the Social Fund Collective Agreement for that industry. They also cover those undertakings which, in the context of a consortium with construction 20. I therefore take the same view as the undertakings, carry out, exclusively or Commission in considering that the Ger- principally, on behalf of its members, tasks man provisions at issue discriminate relating to management, sales, planning, against construction undertakings estab- research or accounting, on condition that lished in other Member States. those undertakings are not party to a specific collective agreement. Thus, a Ger- man branch which employs essentially technical and commercial staff and which is associated with construction undertak- ings, whose labour force is made up of more than 50% of construction workers, may invoke the second sentence of Para- graph lb of the Law on the supply of temporary workers and hire out employees, whilst a branch of an undertaking estab- B. Infringement of Article 43 EC lished in another Member State and which employs only technical and commercial staff in Germany, cannot do so, since the construction undertakings with which it is associated are abroad.

21. The Commission submits that, accord- ing to the German legislation, only those undertakings in which more than 50% of working time on sites is accounted for by its own employees are regarded as con- struction undertakings. As a result of that 22. The German Government admits that, requirement, there is no advantage to in order for the provision at issue to apply, construction undertakings from other it is a requirement that the hiring-out takes Member States in establishing branches in place in order to carry out work which the

It argues that the provision of the Frame- work Collective Agreement for the con- struction industry referred to by the Com- mission is irrelevant. It is a provision adopted by the two sides of industry, the I am of the opinion, therefore, that the purpose of which is to prevent workers in legislation at issue is discriminatory inas- the construction industry from being exclu- much as it provides for different treatment ded from the Agreement in the event of as between branches of German undertak- their branch of industry being cut off, but it ings and those of undertakings established is not intended to facilitate the hiring out of in other Member States, to the detriment of employees. The provision is not applicable, the latter. since the activities it envisages are not carried out by the labourers. Accordingly, those undertakings in Germany employing exclusively or mainly commercial and tech- nical staff do not, as such, fall within the scope of Paragraph lb of the Law on the supply of temporary workers and cannot dedicate themselves to the hiring out of employees, since they do not employ their C. Whether the discriminatory German own construction workers. legislation is justified

24. In view of the fact that the second sentence of Paragraph 1(1) and the second 23. I also agree with the Commission in sentence of Paragraph 1 b of the Law on the this respect. There is discrimination against supply of temporary workers contain cov- undertakings established in other Member ert discrimination on the ground of nation- States which seek to establish themselves in ality, prohibited by Articles 49 EC and 50

25. The German Government dedicates a sizeable proportion of its pleadings to They are suitable because they avoid the justifying the different treatment described. presence on sites of workers not covered by It starts by arguing that the freedom to collective agreements for the construction provide services is a right which may be industry. They make it impossible for pay- limited by provisions intended to protect related dumping to take place which gives the general interest. By prohibiting the rise to distortions of competition since, hiring out of employees in the construction otherwise, undertakings which hire out industry, and imposing restrictive condi- employees would enjoy the advantage of tions before authorising exceptions, the not being required to contribute in respect legislature sought to protect the rights of of their workers to the industry's social workers from the abuses to which they are funds. exposed as precarious workers in that sector of industry, and secure for them the necessary social protection.

which hire out employees in the construc- tion of abolishing restrictions on the free- tion sector to be party to the collective dom to provide services and on the right of agreements for the industry amounts to a establishment. The third paragraph of minimal and adequate restriction on the Article 50 EC confers on the person pro- freedom to provide services, as well as on viding a service the right to pursue his the right of establishment. activity temporarily in another Member State under the same conditions as are imposed by that State on its own nationals, while, under the second paragraph of Article 43 EC, freedom of establishment includes the right to take up and pursue activities as self-employed persons and to 26. I would not deny that I sympathise set up and manage undertakings under the with the reasoning deployed by the German conditions laid down for its own nationals. Government in that respect. I would dis- Both provisions have direct effect and may agree with it, however, insofar as it con- be relied upon before national courts, from siders that the threat to workers' rights in the end of the transitional period. 11 the hiring out of employees, which is particularly acute in the construction indus- try, is sufficient to justify covert discrimi- nation.

30. As regards the ground of public policy, 32. There are none, therefore, in my view, according to the interpretation of the of the grounds provided for in Article 46 Court, the concept assumes a genuine and EC which would justify legislation which sufficiently serious threat affecting one of discriminates against undertakings, estab- the fundamental interests of society. Like lished in other Member States, which seek all derogations from a fundamental princi- to exercise the right of establishment or to ple of the Treaty, the public policy excep- provide services in Germany. tion must be interpreted restrictively. 13 In any event, the right of Member States to restrict the free movement of persons and services on grounds of public policy, public security or public health is to allow Mem- ber States to refuse access to their territory 33. For the reasons set out above, I am of or residence there to persons who might the opinion that the Commission's applica- endanger the safeguarding of such general tion is well founded and must be upheld. interests. 14

(2) order the Federal Republic of Germany to pay the costs.

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