C-145/01

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OPINION OF MR LÉGER — CASE C-145/01

6. Article 4(1) of the directive provides that of crisis. 4 The Council therefore intro- the transfer of an undertaking, business or duced derogations from the regime part of a business is not in itself to provided for under Articles 3 and 4 of constitute grounds for dismissal by the Directive 77/187/EEC by inserting transferor or the transferee. That provision Article 4a, which provides as follows: however does not preclude dismissals that may take place for economic, technical or organisational reasons entailing changes in the work-force. ' 1 . Unless Member States provide other- wise, Articles 3 and 4 shall not apply to any transfer of an undertaking, business or part of an undertaking or business where the transferor is the subject of bankruptcy proceedings or any analogous insolvency 7. Article 4(2) of Directive 77/187 pro- proceedings which have been instituted vides, furthermore, that if the contract of with a view to the liquidation of the assets employment or the employment relation- of the transferor and are under the super- ship is terminated because the transfer vision of a competent public authority... involves a substantial change in working conditions to the detriment of the employee, the employer is to be regarded as having been responsible for termination of the contract of employment or of the 2. Where Articles 3 and 4 apply to a employment relationship. transfer during insolvency proceedings which have been opened in relation to a transferor (whether or not those proceed- ings have been instituted with a view to the liquidation of the assets of the transferor) and provided that such proceedings are under the supervision of a competent public 8. During the pre-litigation procedure authority..., a Member State may provide Directive 77/187 was replaced by Council that: Directive 98/50/EC of 29 June 1998. 3

11. The provisions of Directive 77/187 were implemented in Italian law by Article 2112 of the Civil Code. That article, and, or alternatively, that in the version relevant for the purposes of the present proceedings, provided that in the event of the transfer of an undertaking, the employment relationships continued with the new owner and that the employees' rights arising from those rela- (b) the transferee, transferor, or person or tionships were maintained. It also laid persons exercising the transferor's down that the transferor and the transferee functions, on the one hand, and the were jointly and severally liable for all representatives of the employees on the debts owing to the employees at the time of other hand may agree alterations, in so the transfer. far as current law or practice permits, to the employees' terms and conditions of employment designed to safeguard employment opportunities by ensuring the survival of the undertaking, busi- ness or part of the undertaking or 12. However the Italian legislature intro- business. duced an exception to that principle in respect of transfers taking place in the context of certain administrative or judicial procedures.

3. A Member State may apply paragraph 2(b) to any transfers where the transferor is in a situation of serious economic crisis, as defined by national law, 13. Thus, Article 47(5) and (6) of Law provided that the situation is declared by a No 428 of 29 December 1990, laying down competent public authority and open to judicial supervision, on condition that such provisions already exist in national law by 5 — Article 3 of Directive 98/50. 17 July 1998...' 6 — Idem, Article 2(1).

'Where the transfer concerns an undertak- ing or production unit declared by the Comitato di ministri per il coordinamento della politica industriale [Ministerial Com- mittee for the coordination of industrial policy, "CIPI"], pursuant to Article 2(5)(c) I I — The pre-litigation procedure of Law No 675 of 12 August 1977, 8to be in a situation of crisis, or an undertaking which has been declared insolvent or is the subject of an approved composition con- 14. The Commission considered that the sisting in the disposal of assets, or an derogations laid down by Article 47(5) and undertaking the compulsory liquidation of (6) of Law No 428/90 were incompatible in which has been published or which has part with Directive 77/187. been made subject to the special adminis- tration procedure — whether or not provi- sion has been made for the continuation of the business, or business has been sus- pended, or the consultation referred to in the foregoing paragraphs has resulted in 15. The Commission took the view that the any agreement providing for the continued Italian authorities could not exclude appli- employment of personnel, even in part —, cation of the safeguards provided for by Article 2112 of the Civil Code shall not, Article 2112 of the Italian Civil Code unless the agreement lays down more where the transfer of an undertaking took favourable conditions, apply to employees place in the context of procedures for whose employment relationship continues declaring undertakings to be in a situation with the transferee. Such an agreement may of crisis, special administration procedures additionally provide that surplus personnel and approved composition procedures con- are to be excluded from the transfer and sisting in the disposal of assets. that the latter are to continue, wholly or in part, in the service of the transferor.

17. As it was not satisfied with the reply which the Italian authorities gave to this letter, the Commission issued a reasoned (a) allow for the non-application of the opinion on 4 August 1999. automatic transfer of all contracts of employment or employment relation- ships, from the transferor to the trans- feree, in respect of undertakings subject to an approved composition procedure involving the transfer of asset[s], or a 18. In its opinion the Commission began by special administration procedure, pointing out that Article 47(5) and (6) of where these undertakings pursue their Law No 428/90 infringed Directive 77/187. business after the transfer; Next, the Commission 'state[d] that the new directive 98/50/EC, [adopted after the letter of formal notice], had not enabled Italian law to be harmonised in such a way as to render it fully consistent with Com- munity law...'. 9 The Commission thus (b) in respect of undertakings declared to considered that although Article 4a per- be a situation of "economic crisis", do mitted a certain flexibility in respect of not provide for the transfer, from the transfers of undertakings in difficulty, it did transferor to the transferee, of the not cover the hypotheses referred to in employees and the debts arising from Article 47(5) and (6) of Law No 428/90. 10 a contract of employment or employ- ment relationship,

19. The Italian Government responded to the reasoned opinion on 15 October 1999. the Italian Republic has failed to fulfil its obligations under Council Directive 77/187 9 — See Annex 3 to the application (paragraph 5). of 14 February 1977... and in particular 10 — See the reasoned opinion (paragraph 6). Articles 3 and 4 thereof.'

I I I— The admissibility of the application 25. The Commission admits that, unlike the letter of formal notice, the reasoned opinion and the application refer to Direc- tive 98/50. However, it states that this addition was not intended to alter the A — Arguments of the parties subject-matter of the dispute, but to strengthen its position by demonstrating that the failure to fulfil obligations had not disappeared with the entry into force of 22. The Italian Government submits that Directive 98/50. The Commission notes, the application is inadmissible. moreover, that the statement of complaints in the letter of formal notice, the operative part of the reasoned opinion and the form of order sought in the application concern an identical matter, namely an infringe- ment of Articles 3 and 4 of Directive 23. It points out that Directive 98/50 was 77/187 (alone). adopted on 29 June 1998, after the letter of formal notice was sent, but before notifi- cation of the reasoned opinion. Con- sequently, in its letter of formal notice the Commission examined the compatibility of Law No 428/90 solely with respect to the B — Assessment provisions of Directive 77/187. However, in its reasoned opinion and in its appli- cation initiating the proceedings, the Com- mission extended this examination to 26. By virtue of Article 226 EC the Com- Directive 98/50. mission may bring an action before the Court for failure to fulfil an obligation only after it has invited the Member State concerned to submit its observations.

24. The Italian Government is accordingly of the opinion that the Commission extended the subject-matter of the dispute, 27. The Court has consistently held that as defined in the letter of formal notice. the purpose of the letter of formal notice is I - 5588

32. However, unlike the Italian Govern- 30. It is true, as the Italian Government ment, I think that these factors are not points out, that the grounds of the reasoned sufficient for the present action to be opinion and the application are appreciably declared inadmissible.

11 — See Case 211/81 Commission v Denmark [1982] ECR 4547, paragraph 8; Case 274/83 Commission v Italy [1985] ECR 1077, paragraph 19; Case 229/87 Commis- sion v Greece [1988] ECR 6347, paragraph 12; Case C-289/94 Commission v Italy [1996] ECR I-4405, paragraph 15, and Case C-279/94 Commission v Italy 33. Firstly, it is important to point out that [1997] ECR I-4743, paragraph 14. as to the substance of the case, the Com- 12 — See, inter alia, Case 124/81 Commission v United King- dom [1983] ECR 2 0 3 , paragraph 6. 13 — See, inter alia, Case C-191/95 Commission v Germany [1998] ECR I-5449, paragraph 5 5 . 16 — See paragraph 16 of this Opinion. 14 — See, inter alia, Case 51/83 Commission v Italy [19841 ECR 17 — See the reasoned opinion (paragraphs 1 to 4) and the 2793, paragraph 6, and Case C-159/99 Commission v application (paragraphs 10 to 16). Italy [20011 ECR 1-4007, paragraph 54. 18 — See the reasoned opinion (paragraph 5) and the application 15 — See Case 193/80 Commission v Italy [19811 ECR 3019, paragraph 12, and Case 124/81 Commission v United (paragraph 17). Kingdom, cited above, paragraph 6, and Case C-191/95 19 — See the reasoned opinion (paragraphs 6 to 7) and the Commission v Germany, cited above, paragraph 5 5 . application (paragraphs 18 to 21).

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34. In the statement of complaints in the letter of formal notice, 20 the Commission objected that the Italian Republic had infringed Articles 3 and 4 of Directive 77/187 on the ground that Article 47(5) and (6) of Law No 428/90 did not apply 36. It follows that, contrary to what the the safeguards prescribed by Article 2112 Italian Government maintains, the Com- of the Italian Civil Code to transfers of mission did not extend or alter the subject- undertakings taking place in the context of matter of the dispute, as defined by the procedures for a declaration of crisis, letter of formal notice. Notwithstanding special administration procedures and com- the reference made to Directive 98/50 in the position procedures consisting in the dis- reasoned opinion and in the application, posal of assets. the Commission neither found nor sought a finding that the Italian Republic had failed to fulfil its obligations under that directive. Nor did the Commission extend its com- plaints to transfers of undertakings taking place in the context of national procedures 35. In the operative part of the reasoned other than procedures for a declaration of opinion 21 and in the form of order sought crisis, special administration procedures or in the application 22 the Commission's composition procedures consisting in the complaint was strictly identical. The Com- disposal of assets. mission found — or requested the Court to find — that 'by maintaining in force the provisions in Article 47(5) and (6) of Law No 428 of 29 December 1990, which... provide for the non-application of the automatic transfer of all contracts of employment or employment relationships... 37. The Commission thus based the rea- in respect of undertakings subject to an soned opinion and the application on approved composition procedure consisting complaints identical to those which it had set out in the letter of formal notice. in [the] disposal of asset[s], or a special administration procedure [and which,] in respect of undertakings declared to be a situation of "economic crisis", do not provide for the transfer of... the debts

40. However, this does not mean that the Italian authorities were misled by the dis- puted reference. It must be noted that, in its 43. I therefore propose that the Court response to the letter of formal notice, 24 should declare the application admissible 25 the Italian Government had already put and thereafter determine whether the Ita- forward a similar defence. It had pointed lian Republic has failed to fulfil its obli- out that, in April 1997, the Commission gations under Directive 77/187. had submitted a proposal for a directive amending Directive 77/187 and intended to allow greater flexibility in respect of transfers of undertakings taking place in the context of collective procedures. The Italian Government had thus maintained IV — Substance that Article 47(5) and (6) of Law No 428/90 was in accordance with the provisions of the abovementioned proposal. 44. As to the substance, the Commission complains that the Italian Republic

49. Thus, in Abels, 2 7 the Court ruled that 26 45. In its reply the Commission none the Directive 77/187 did not apply to transfers of an undertaking, business or part of a less withdrew its first complaint regarding business in the context of insolvency pro- transfers of undertakings taking place in ceedings instituted with a view to the the context of special administration pro- liquidation of the assets of the transferor cedures under Italian law. under the supervision of a judicial auth- ority.

51. Similarly, in d'Urso and Others 29the business with a view to its subsequent Court held that Directive 77/187 did not recovery, and that by contrast with insol- apply to transfers of undertakings made as vency proceedings, the procedure whereby part of a creditors' arrangement procedure an undertaking is declared to be in critical of the kind provided for in the Italian difficulties does not involve any judicial legislation on compulsory administrative supervision or any measure whereby the liquidation, the effects of which are com- assets of the undertaking are put under parable to those of insolvency proceedings. administration, and does not provide for On the other hand, the Court held that any suspension of payments. 32 Directive 77/187 applies where, in accord- ance with the Italian legislation on special administration for large undertakings in a situation of crisis, the competent authority has authorised the continuance of the undertaking's business for as long as that decree remains in force. In such a case, the primary purpose of the special adminis- tration procedure is to give the undertaking 53. It follows from that case-law that, for a stability that will enable its future activity the purposes of determining whether Direc- to be safeguarded. The social and economic tive 77/187 applies to the transfer of an objectives thus pursued cannot explain nor undertaking subject to an administrative or justify the circumstance that, when the judicial procedure, the decisive test is the undertaking concerned is transferred, its purpose of the procedure in question. 33 employees lose the rights which Directive However, in Dethier Équipement 34 and 77/187 confers on them. 30 Europièces 35the Court held that, if the criterion relating to the purpose of the procedure is not conclusive, it is necessary to consider that procedure in detail, such as the existence and scope of judicial super- vision.

59. Inasmuch as the failure to fulfil obli- gations must be assessed solely in the light of Directive 77/187, the first complaint formulated by the Commission must there- fore be upheld. 56. This first complaint must be upheld.

57. We have seen 36 that in Spano and Others the Court expressly held that Direc- tive 77/187 had to be applied to the C — The approved composition pro- transfer of an undertaking which the CIPI cedure consisting in the disposal of assets has declared to be in a situation of crisis (second complaint) under Article 2(5) of Law No 675/77.

60. In its second complaint the Commis- sion claims that the Italian authorities do 58. In the present case, the Italian Republic not apply Directive 77/187 to transfers of has not put forward any evidence to show undertakings taking place in the context of that it had complied with the judgment in an approved composition procedure con- Spano and Others. In its defence 37 and sisting in the disposal of assets. rejoinder 38 the Italian Republic merely submitted that the Italian procedure whereby a 'situation of crisis' is declared was consistent with the derogation intro-

36 — See point 52 of this Opinion. 61. The parties to the dispute have pro- 37 — Paragraph 18. vided the Court with little information as 38 — Paragraph 7. regards the content of this procedure. I - 5594

COMMISSION v ITALY

62. It is apparent from the documents 65. That said, the purpose of the approved before the Court that, under Italian law, composition procedure for the disposal of the composition procedure is regulated by assets is not clear from the national legis- Articles 160 to 186 of Royal Decree No 267 lation. of 16 March 1942, laying down rules for insolvency, composition, supervised admin- istration and compulsory liquidation. 39

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debtor from being put into bankruptcy and 72. The Commission maintains that the that it is therefore designed to ensure the main purpose of the procedure in question continuance of the undertaking's business. is to enable 'the resumption of business and the continuation of trade or industry'. 40 According to the Commission, that aim is underlined both by Italian academic legal writing and by the Corte suprema di cassazione (Italy). 41 Thus, although 69. Thus, Article 160 of Decree No 267/42 Article 182 of Decree No 267/42 mentions provides that the owner of the business may the 'disposal of assets', the term 'disposal' propose a composition 'as long as he has should be understood as meaning the not been declared insolvent'. Articles 162, 'preservation' of the debtor's assets and 163, 179 and 181 of the same decree state not their liquidation. 42 Conversely, the that, if the employer does not fulfil the Italian Government claims that the com- criteria for eligibility for the procedure, if position consisting in the disposal of assets he does not lodge the sums required for the is intended essentially to liquidate the composition to be implemented, if the debtor's assets with a view to paying off creditors do not approve the proposal or the creditors collectively. It points out, if the conditions for approval by the court however, that, according to the case-law are not satisfied, the court must, of its own of the Corte suprema di cassazione, the motion, declare the debtor to be insolvent. procedures at issue result in the definitive Finally, according to Article 181 of Decree loss of the debtor's rights over the entirety No 267/42, before approving the composi- of the assets which are the subject of these tion, the court must assess 'the economic procedures. 43 expediency [of the composition] for the creditors, having regard to the existing assets and the efficiency of the undertaking' as well as the question 'whether the debtor, in the light of the causes of his difficulties, and of his conduct, deserves the composi- tion'.

'According to the reference by the national court, in the case of a liquidation the liquidator, although appointed by the 77. It appears that those three criteria are court, is an organ of the company who not satisfied in the present case. sells the assets under the supervision of the general meeting; there is no special pro- cedure for establishing liabilities under the supervision of the court; and a creditor may as a rule enforce his debt against the company and obtain judgment against it. 78. As regards the first criterion, it is true By contrast, in the case of an insolvency, that Decree No 267/42 does not state the administrator, inasmuch as he repre- whether the liquidator, appointed by the sents the creditors, is a third party vis-à-vis court at the time of the approval, can be an the company and realises the assets under organ of the company or must be a third the supervision of the court; the liabilities party vis-à-vis the company. As we have of the company are established in accord- seen, that provision merely requires that the ance with a special procedure and individ- court appoint 'one or more liquidators' ual enforcement actions are prohibited. without specifying their status. On the other hand, it is certain that the judicial auditor, who is responsible in particular for 44 — Cited at point 53 of this Opinion. supervising the carrying out of the com- 45 — Paragraphs 29 and 30. position, cannot be part of the company

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which is the subject of the procedure. — the judicial auditor is to draw up an Article 165 of Decree No 267/42 expressly inventory of the debtor's estate and, on states that the 'judicial auditor is, so far as the debtor's request, the judge may concerns the performance of his duties, a appoint an auctioneer to assist him in public official'. evaluating the assets; 50

81. Finally, as regards the third criterion, it V — Costs will be noted that the Italian legislation expressly prohibits individual steps to enforce debts during the course of the composition procedure. Article 168 of Decree No 267/42 provides that 'from the date on which the application is lodged and until the judgment approving the composi- 84. Article 69(2) of the Rules of Procedure tion has become final, the creditors... may provide that the unsuccessful party is to be not initiate or pursue actions of enforce- ordered to pay the costs if they have been ment against the assets of the debtor, which applied for in the successful party's plead- shall be void'. ings. Article 69(3) provides, however, that the Court may order the parties to bear their own costs where they fail on one or more heads. Furthermore, Article 69(5) provides that a party who withdraws is to be ordered to pay the costs unless the attitude of the other party justifies the contrary.

82. It follows from these various factors that the Italian procedure for approved composition consisting in the disposal of assets has features which, according to the case-law of the Court, are more akin to 85. In the present case, I have observed that insolvency procedures. As the case stands, I the Commission withdrew its first com- am therefore inclined to consider that plaint, but that that withdrawal was due to Directive 77/187 does not apply to observations lodged by the Italian Republic transfers of undertakings which take place after the commencement of the action. In in the context of that procedure. addition, it has become clear that the Commission's second complaint is well founded, whereas the third complaint must be rejected. Finally, each party has claimed that the other should be ordered to pay the costs of the action.

(2) for the rest, the application is dismissed.

(3) the Italian Republic shall pay two thirds of the costs.

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