Opinion of Mr Advocate General
Mr President,
Members of the Court,
1. The Pretore di Milano (hereinafter referred to as the referring court), has submitted to the Court two questions relating to the interpretation of Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses (hereinafter referred to as the directive).
2. By a decree of 26 May 1981 the Minister for Industry placed EMG and other companies in the Marelli group under the special administration procedure for large undertakings in critical difficulties (amministrazione straordinaria delle grandi imprese in crisi) provided for by the Italian legislation. At the same time, he authorized EMG to continue trading whilst remaining subject to that procedure.
3. The Pretore considers that the main proceedings raise two questions concerning the interpretation of Directive 77/187. Why this should be so — for example, because, according to the referring court, the provisions of the directive may be relied upon directly by the parties in the main proceedings or because the Italian legislation must be interpreted in conformity with the directive — is not explained in the order for reference. I shall not therefore focus my analysis on the effect of the directive but shall confine myself to answering the two following preliminary questions. Those questions read as follows:
The second question: the scope of the directive
4. By the second question the referring court wishes to know whether Directive 77/187 is applicable to the transfer of an undertaking where the transferor has been made subject to a special administration procedure provided for by Italian legislation. In answering this question it is necessary to avoid defining the scope of the directive by reference only to a specific procedure existing in the legal system of an individual Member State. In my proposed reply I shall therefore indicate the general criteria which a procedure such as that in question in this case must satisfy in order for a transfer taking place under such a procedure to be caught by, or fall outside the scope of, the directive. It will then be for the referring court to consider whether the special administration procedure in Italy satisfies those criteria. In order for my reply to be sufficiently related to the specific question, I shall, however, begin by briefly describing the Italian procedure for placing under special administration large undertakings in critical difficulties, placing emphasis on the criteria which, in view of the case-law of the Court, I shall subsequently consider to be decisive in ascertaining whether the directive is applicable.
The Italian special administration procedure
5. The special administration procedure for large undertakings in critical difficulty is one of the procedures laid down by Italian legislation for the event that an undertaking is not in a position to meet its obligations. Besides that procedure, there are also bankruptcy proceedings properly so called (fallimento), compulsory administrative winding-up (liquidazione coatta amministrativa), preventive arrangements and composition (concordato preventivo) and supervised administration (amministrazione controllata), which, as the Agent of the Italian Government confirmed at the hearing, is comparable to a procedure like surséance van betaling.
6. Article 2 of Law No 95/79 provides that the ministerial decree commencing the procedure after the court has found that the undertaking is in a state of insolvency or has failed to make payments may authorize the undertaking to continue in trading under the supervision of the auditor for a period not exceeding two years; that authorization may be extended two times for a total period not exceeding two years.
7. Opinions differ on the purpose of the special administration procedure. In the order for reference the referring court states that the procedure is mainly intended to restructure the undertaking, having regard above all to the safeguarding of jobs. According to the referring court, the conservatory purpose of the procedure is clear from the following circumstances:
8. At the hearing the Italian Government produced figures showing that on 30 April 1990 the procedure had been declared applicable to 40 groups of undertakings representing in total 300 undertakings. At that date seven undertakings had been authorized to continue trading, 273 were in the course of being wound up and the procedure had been closed in respect of 20 of them. Those undertakings employed 60000 workers before the procedure was commenced. Application of the procedure had enabled 29000 workers to be transferred. 24400 workers had opted for voluntary redundancy or been made redundant. As at 30 April 1990, 7600 workers were still employed in the undertakings under special administration and 6600 of them were receiving benefits from CIGS.
Case-law of the Court of Justice
9. Article 1(1) of Directive 77/187 defines the scope of the directive as follows:
10. This case concerns other terms of the aforementioned directive, more particularly those according to which the directive is applicable only to transfers carried out as a result of a legal transfer or merger (which is not in issue in this case). Those terms, too, have also been interpreted by the Court. In particular in the Abels case, it considered whether it followed from those terms that the directive is applicable where the transferor of the undertaking (in that case, pursuant to Netherlands law) has been declared insolvent or obtained a surséance van betaling (judicial leave to suspend payment of debts). In that judgment, the Court ruled that:
11. The Court noted first of all that there were discrepancies between the various language versions of Article 1(1) of the directive. Some versions indicated that transfers arising as a result of an administrative or judicial decision were excluded whilst others seemed to indicate a wider scope of application. Moreover, the term legal transfer had different meanings in the insolvency law of the Member States. Whilst in certain Member States it was considered that a sale effected in insolvency proceedings was a normal contractual sale, even if judicial intervention was a preliminary requirement for the conclusion of such a contract, under other legal systems the sale is regarded as taking place by virtue of a measure adopted by a public authority. In view of those differences, the Court considered that the scope of the provision at issue could not be appraised solely on the basis of a textual interpretation; its meaning had to be clarified in the light of the scheme of the directive, its place in the system of Community law in relation to the rules of insolvency, and its purpose.
12. The Court went on to state that insolvency law was characterized by special procedures intended to weigh up the various interests involved, in particular those of the various classes of creditors; consequently, in all the Member States there were specific rules which might derogate, at least partially, from other provisions, of a general nature, including provisions of social law.
13. The Court derived its second argument in support of its judgment from the aim of the directive. Referring to its preamble, it stated that the directive aimed to afford protection to workers in the event of transfers of undertakings in view of the need, referred to in Article 117 of the EEC Treaty, to promote improved working conditions and an improved standard of living for workers.
14. According to the Court, that difference of opinion showed that there was considerable uncertainty about the impact on the labour market of transfers of undertakings in the event of an employer's insolvency and about the appropriate measures to be taken in order to ensure the best protection of workers' interests. The Court's conclusion from this was that:
15. The Abels case also raised the question whether a transfer taking place in the Netherlands surséance van betaling procedure fell outside the ambit of Directive 77/187. According to Advocate General Sir Gordon Slynn, in such a context it was simpler to consider the sale of the undertaking by the owner as a contractual transfer.
16. On this point, the Court did not follow the Advocate General. Proceedings such as those relating to a surséance van betaling have, according to the Court, certain features in common with liquidation proceedings in so far as both are of a judicial nature. They are, however, different from liquidation proceedings
17. The Court confirmed its judgment in the Abels case in three other judgments delivered on the same day. In its judgment in the Mikkelsen case, delivered a few months later, the Court also referred to the judgment in Abels. However, that judgment related to the transfer of an undertaking which had taken place after the transferor company had ceased its payments but before it had been declared insolvent. According to the Court, it followed from the judgment in Abels that:
Similarities and differences between liquidation and suspension of payments
18. I infer from the Court's judgment in the Abels case that it did not wish strictly to limit its assessment to a situation in which the transferor has been adjudged insolvent. In both paragraph 17 and paragraph 19, the Court refers to liquidation or similar proceedings, thus suggesting that a transfer taking place in a procedure other than a liquidation procedure may also be excluded from the scope of the directive. It is only in regard to a transfer effected in the course of a procedure of the surséance van betaling type, in contrast to a transfer in liquidation proceedings, that the Court has hitherto held that it is not excluded from the scope of Directive 77/187, on account of the clear differences between the two procedures and thus a lack of any similarity.
19. The expression anajogous procedures (that is to say procedures similar to bankruptcy, winding-up and like procedures) also appears in other Community law texts. For example, the second subparagraph of Article 1(2) of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters excludes from the scope of that convention bankruptcy, proceedings relating to the winding-up of solvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings. In the Gourdain case in which the Court was asked to rule on the question whether a judgment delivered by a French court in a action en comblement du passif social fell within the scope of that convention, the Court (in paragraph 4) defined the terms used in Article 1 as follows:
20. The analogous procedures referred to in the provisions cited above, as defined by the Court in the Gourdain judgment, also include procedures of the surséance van betaling type. In the protocol annexed to the draft Convention on Bankruptcy, the surséance van betaling procedure provided for in Netherlands law is, moreover, expressly referred to in the list of procedures other than bankruptcy to which the convention is to apply.
21. In order to determine whether a procedure of the special administration kind in Italian law is akin to liquidation proceedings, which, in its judgment in Abels, the Court excluded from the scope of Directive 77/187, or to a procedure of the surséance van betaling type, which the Court considers to fall within the scope of that directive, it is necessary to look more closely at the similarities and differences between bankruptcies and suspensions of payments.
22. In the Abels judgment, the Court also indicated the differences between bankruptcy (faillite) and surséance (suspension of payment). In my view, there are three.
23. According to what the Court stated in Abels (see above, at paragraph 16), a second difference consists in the fact that, in the case of a suspension of payments, the supervision exercised by the court over the commencement and the course of such proceedings is more limited.
24. A third difference is closely connected with the two previous ones and resides in the fact that, as mentioned above, the more extensive supervision of the court in the case of bankruptcy is accompanied by the imposition of a thoroughgoing form of administration or receivership in order to ascertain the assets, realise the assets and discharge the liabilities, the reverse side of which is that the debtor is placed under compulsory receivership and loses all powers of disposition and control. Here again, the situation is totally different than in the case of a suspension of payments: at the most, one or more auditors or administrators are appointed who supervise the debtor who is assisted by them and authorized to carry out certain acts but who does not, however, lose his powers of disposal and control over his property.
Non-applicability of the directive to transfers carried out in a special administration procedure
25. Where, then, having regard to the similarities and differences described above, does a procedure of the special administration kind appear on the scale of analogous procedures: is it more akin to bankruptcy or more akin to a suspension of payments?
26. As regards the first difference, regarding the purpose of the proceedings, the national court and the parties differ in their view as to whether the special administration procedure is designed to restructure or liquidate the undertaking. In my view, this difference of opinion is based on a misunderstanding and, more precisely, on a confusion between (compulsory) liquidation of the assets and the continuity of the undertaking transferred.
27. As regards the second difference, regarding the supervision exercised by the court over the commencement and course of the procedure, one particular feature must be noted. Whereas in bankruptcy proceedings it is the court which supervises the commencement and the course of the proceedings, in a procedure of the special administration kind, this supervision may be exercised by an administrative authority, with the qualification, however, that, as in the case of the Italian legislation in question (see above, at paragraph 5), the prior intervention of the court is necessary in order for the state of insolvency to be determined and, as in the case of bankruptcy, that declaration may be made not only upon application by the debtor but also upon application by creditors, and possibly upon application by the Public Prosecutor's Office or by the court acting of its own motion.
28. Finally, as regards the third difference, concerning the effects of the administration on the debtor's powers of disposal and management, it is clear that, in this regard too, a procedure of the special administration type is akin to bankruptcy proceedings. This is all the more evident since under the Italian special administration procedure reference is made, as far as the course of the procedure is concerned, and unless the law otherwise provides, to the bankruptcy legislation on compulsory administrative liquidation. This means, inter alia, that the debtor (in the case of a company, the company organs) loses all powers of disposition and management; these are transferred to the auditor or auditors appointed by the Minister for Industry (see above, at paragraph 5). The effect of this is, inter alia, that, both in the case of bankruptcy proceedings and in the case of special administration, and unlike in the case of a suspension of payments, agreements on the transfer of an undertaking, business or part of a business within the meaning of Article 1(1) of the directive are concluded by the receivers or auditors (acting under judicial and administrative supervision respectively) without the involvement of the debtor and are not therefore agreements freely entered into by him. In my view, that last factor has decisive importance since it means in effect that the non-applicability of the directive in the event of the transfer of an undertaking under a special administration procedure, as in the case of bankruptcy proceedings, is not independent on a decision of the undertaking's owners.
29. It follows from the foregoing that a procedure of the special administration kind provided for in Italian law must be treated, for the purposes of the directive, as a bankruptcy procedure, bearing in mind, too, that the court stated in its judgment in the Mikkelsen case (see above, at paragraph 17) that the directive ceases to be applicable only from the time when the court adjudges the debtor to be insolvent.
30. In view of the foregoing considerations, I propose to reply to the second question in the way indicated at the end of this Opinion, at paragraph 37.
The first question: are rights automatically transferred?
31. The reply which I propose to give to the second question does not affect the competence of the referring court to determine whether the special administration procedure has the aforementioned characteristics so as to be treated as being like a bankruptcy procedure, in which case transfers of undertakings which take place under that procedure do not fall within the scope of the directive. In the event that, contrary to my expectations, the referring court should decide that the procedure does not have the aforementioned characteristics, I must still answer the first question.
32. By its first question the referring court asks the Court to interpret the first subparagraph of Article 3(1) of the directive: is the effect of that provision that the transferor's rights and obligations arising from contracts of employment or employment relationships existing at the time of the transfer are automatically transferred to the transferee?
33. The first subparagraph of Article 3(1) of Directive 77/187 provides that:
34. The Italian Government and the defendants in the main proceedings maintain that, although it is true that the parties may not waive the rights which the directive confers on the employees who are transferred, nevertheless the directive does not provide that all the employees working in the undertaking transferred must be taken on by the transferee.
35. In support of its view the Italian Government also derives an argument from the first subparagraph of Article 4(1) of the directive, which reads as follows:
36. I therefore propose to answer the first question in the way indicated below.
Proposed answers
37. My proposed answer to the second of the questions referred for a preliminary ruling is as follows:
1 Original language: Duich.
2 OJ L 61, p. 26.
3 For further information about CIGS, I refer to the documents in Case 22/87 Commission v Italy [1989] ECR 143. That case raised the question whether the Italian legislation which guarantees payment by CIGS is a system of guarantee as required by Council Directive 80/987/EEC of 20 October 1980 on the approximation of the laws of the Member States relating to tne protection of employees in the event of the insolvency of their employer (OJ L 283, p. 23).
4 The Court has already considered this provision in its judgment in Case 23/84 Commission v Italy [1986] ECR 2291. That case raised the question whether that provision provided sufficient protection for the interests (more precisely, rights to old-age benefits of workers and former workers under supplementary social security schemes) provided for in the second subparagraph of Anide 3(3) of Directive 77/187. The Court rejected the Commission's argument that this was not the case.
5 Article 2112 of the Italian Civel Code was last amended by Law No 428 of 29 December 1990 (Suppl. ordinario GURI No 10 of 12 January 1991). I will return to this point in footnote 31.
6 GURI No 286 of 10 December 1986.
7 GURI No 32 of 9 February 1987.
8 This is in fact a special bankruptcy procedure which is declared applicable (or commenced) by a court but which is conducted under the supervision of an administrative authority owing to the particular character of the undertakings concerned (which, according to the Commission in its written observations, are, in particular, banks, insurance companies and certain public undertakings; see also paragraph 17 and footnote 30 below). The procedure for compulsory administrative winding-up is governed by Article 194 et seq. of the Royal Decree quoted in the following footnote.
9 For all these procedures, see Royal Decree No 267 of 16 March 1942 (GURI No 81 of 6 April 1942), as repeatedly amended.
10 GURI No 36 of 6 February 1979.
11 GURI No 94 of 4 April 1979.
12 See above, footnote 7.
13 Jozef Spijkers v Gebroeden Benedik Abattoir CV and Another [l9Sb] ECR 1119.
14 Judgment in Case 135/83 H. B. M. Abels v Bedrijfsvereniging voor de Metaalindustrie en de Electrotechnische Industrie [1985) ECR 469.
15 Translator's note: the term used in the Dutch version of the directive is overdracht krachtens overeenkomst and in the French text cession conventionnelle
16 OJ L 48, p. 29.
17 [1985] ECR at p. 475.
18 See in this regard N. J. Polak, Faillissementirechl, third revised edition, 1986, at p. 149 et seq.
19 Case 19/83 Knud Wendelboe and Othrn v L J. Music ApS, in liquidation [1985] ECR 457, paragraph 10; Case 179/83 Induuritbond FNV and Another v Netherlands State [1985] ECR 511; Case 186/83 Arie Bonen and Others v Rotterdamsche Droogdok Maatschappij BKĮ1985] ECR 519.
20 Judgment of 11 July 1985 in Case 105/84 Foreningen af Arbejdsledere i Danmark v AIS Danmols Inventar, in liquidation.
21 In the casc of Italy, see paragraph 5.
22 It is sufficient to note here that, broadly, a distinction may be drawn between procedures which, like the surséance van beuling procedure and/or the preventief concordaat, are designed to prevent liquidation and procedures which, like liquidation or forceo administrative liquidation, are designed to distribute the remaining assets (and, of course, any deficit) amongst the creditors. In the case of the firstmentioned procedures, the situation is one in which there are only liquidity problems or reversible problems of solvency which may be remedied by a collective suspension of payments and/or the partial (and conditional) remission of debts. In the case of the secondmentioned procedures, there are serious and irreversible problems of solvency, which suggest that the remaining assets are likely to be lost.
23 Sec also the Convention on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters signed at Lugano on 16 September 1988 (OJ L 319, p. 9), which likewise is not applicable to bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings.
24 Judgment of 22 February 1979 in Case 133/78 Henri Gourdain v Franz /VW/er[1979] ECR 733.
25 This definition corresponds word for word with ihat given by Mr Jenard in his report on the Brussels Convention (OJ 1979, C 59, p. 1, at page 12); Article 1(2) excludes bankruptcy, proceedings relating to the winding-up of insolvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings, i.e. those proceedings which, depending on the syslem of law involved, are based on the suspension of payments, the insolvency of the debtor or his inability to raise credit, and which involve the judicial authorities for the purpose either of compulsory and collective liquidation of the assets or simply of supervision.
26 Bulletin of the European Communities supplement 2/82.
27 As I have already stated, in the Abels case the Court had to consider the surséance procedure as it is regulated in Netherlands law, that is to say a procedure which is designed to prevent liquidation and is comparable to the Italian amministrazione contrai/ata procedure (paragraph 5).
28 In some countries, suspension of payments is accompanied by a preventative agreement whereby it is also intended to resolve reversible problems of solvency, for example by a partial remission of debts. In the latter case, otner countries have a special preventative composition procedure. See also footnote 20.
29 The situation is the same under the Italian amministrazione controllata procedure (Article 187 of Royal Decree No 267) or under the concordato preventivo procedure (Anieles 160 and 161 of Decree No 267).
30 If it were not so treated, there would be the additional risk that debtors would seek application of bankruptcy proceedings, instead of a special administration procedure, in order to escape the application of the directive, although the special administration procedure offers a more appropriate framework for preserving jobs as far as possible.
31 For example, in Italy, in ihe case of compulsory administrative liquidation, already referred to above: see paragraph 5 and footnote 7.
32 See also the list of procedures for credit institutions in difficulties, set out in the proposal for a Council Directive concerning the reorganization and the winding-up of credit institutions and deposit-guarantee schemes (OJ 1988 C 36, p. I).
33 At the hearing the Commission pointed out the scope of Article 2112 of the Italian Civil Code was altered by Law No 428 of 29 December 1990 in so far as the provision is no longer applicable to transfers of undertakings under special administration if such transfers take place after the undertaking ceases trading. However, the Italian Government denied that in making that change the Italian legislature was taking the Commission's position: Article 2112 would not be applicable once the public authorities found that the undertaking was in a state of crisis, which in practice was always the case with undertakings placed under special administration.
34 Judgment of 5 May 1988 in Joined Cases 144/87 and 145/87 Harry Berg and Another v Ivo Marten Bessehen [1988) ECR 2559.
35 Judgment of 10 February 1988 in Case 324/86 Foreningen af Arbejdsledere i Danmarkv Daddy's Dance Hall AIS [1988] ECR 739.
36 On this point, see V. Bertrand: Transfert det contrau de travail et ceition d'entreprise, 1988, p. 108 et seq.