CELEX: 61996CJ0117
Social policy
Protection of employees in the event of the employer's insolvency
Directive 80/987/EEC
Employee residing and employed in a State other than that in which the employer is established
Guarantee institution

Grounds
1 By order of 27 March 1996, received at the Court on 12 April 1996, the Østre Landsret (Eastern Regional Court, Denmark) referred to the Court for a preliminary ruling under Article 177 of the EC Treaty a question on the interpretation of 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 (OJ 1980 L 283, p. 23; `the directive').
2 The question arose in a dispute between Mrs Mosbæk and the Lønmodtagernes Garantifond, the guarantee institution responsible pursuant to the directive for settling outstanding claims in Denmark (`the Fund'), following the insolvency of Mrs Mosbæk's employer.
3 Mrs Mosbæk, who lives in Denmark, was employed from 1 June 1993 by the English company Colorgen Ltd (`Colorgen') as commercial manager for Denmark, Norway, Sweden, Finland and, subsequently, Germany.
4 Colorgen, whose registered office was at Warrington, England, was neither established nor registered in Denmark either as an undertaking or in any other capacity, and in particular was not registered with the tax or customs authorities.  It was represented there only by Mrs Mosbæk. For the performance of her activities, Colorgen had rented an office.
5 During the whole of the employment relationship, Mrs Mosbæk's remuneration was paid directly to her by Colorgen, with no deductions for tax, pension or other social security contributions under Danish law.
6 In July 1994, Colorgen was declared insolvent, and its employees, including Mrs Mosbæk, were dismissed.  Pursuant to Article 3 of the directive, Mrs Mosbæk declared, both to the Fund and to the company's English receiver, an outstanding claim of DKR 471 996, representing her salary, commissions and expenses.
7 The Fund refused to settle the claim on the ground that responsibility lay with the guarantee institution of the State where the employer was established, in this case the National Insurance Fund.
8 On 19 December 1994, Mrs Mosbæk brought court proceedings against the Fund in Hillerød, Denmark.
9 The case was then referred, at the Fund's request, to the Østre Landsret, which considered it necessary to refer the following question to the Court of Justice:
`In a situation where the employer is not established in the Member State in which the employee is resident and is solely represented in the State of the employee's residence by way of the said employee's work, which inter alia is carried out in office premises rented by the employer for the employee's use, is it the guarantee institution in the country where the employer is established or the guarantee institution in the country where the employee is resident which, on the employer's insolvency, according to Article 3 of Directive 80/987/EEC is to guarantee payment of the employee's outstanding claims resulting from the employment relationship in question?'
10 As a preliminary point, it must be borne in mind that the directive is intended to guarantee to employees a minimum level of protection under Community law in the event of the insolvency of their employer, without prejudice to more favourable provisions existing in the Member States.  To that end it provides in particular for specific guarantees of payment of outstanding claims.
11 Article 1(1) of the directive provides:
`This directive shall apply to employees' claims arising from contracts of employment or employment relationships and existing against employers who are in a state of insolvency within the meaning of Article 2(1).'
12 Article 2(1) provides:
`For the purposes of this directive, an employer shall be deemed to be in a state of insolvency:
(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 administrative provisions of the Member State concerned, to satisfy collectively the claims of creditors and which make it possible to take into consideration the claims referred to in Article 1(1), and
(b) where the authority which is competent pursuant to the said laws, regulations and administrative provisions has:
- either decided to open the proceedings,
- or established that the employer's undertaking or business has been definitively closed down and that the available assets are insufficient to warrant the opening of the proceedings.'
13 Article 3 of the directive requires the Member States to take the measures necessary to ensure that guarantee institutions guarantee payment of employees' outstanding claims resulting from contracts of employment or employment relationships and relating to pay for the period prior to a given date.
14 Finally, Article 5 provides:
`Member States shall lay down detailed rules for the organization, financing and operation of the guarantee institutions, complying with the following principles in particular:
(a) the assets of the institutions shall be independent of the employers' operating capital and be inaccessible to proceedings for insolvency;
(b) employers shall contribute to financing, unless it is fully covered by the public authorities;
(c) the institutions' liabilities shall not depend on whether or not obligations to contribute to financing have been fulfilled.'
15 What the national court wishes to know is, essentially, which guarantee institution is responsible under Article 3 of the directive for guaranteeing payment of an employee's claims on the employer's insolvency, where that employer is established in a Member State other than that in which the employee resides and was employed.
16 Whilst it is true that the directive contains no provisions expressly envisaging the circumstances described in the order for reference, it cannot be inferred that it does not apply to the claims of employees residing and employed, or having been employed, in a Member State other than that in which their employer is established.
17 The purpose of the directive is to guarantee a minimum level of protection for employees who have suffered as a result of their employer's insolvency, there being no restriction imposed, in particular in Article 1(1) of the directive which defines its scope, as regards cases where the employee's place of residence or employment does not coincide with the employer's place of establishment.
18 In order to be effective, Community law - which guarantees freedom of movement for persons within the Community and thus encourages situations involving, as in the present case, foreign elements - requires such an interpretation of the directive, the second recital in the preamble to which states that it is intended to reduce existing differences between Member States `which can have a direct effect on the functioning of the common market'.
19 It is therefore necessary to determine the guarantee institution responsible for paying claims where the employer is established in a Member State other than that of the employee's place of residence or employment.
20 That institution, it is clear from the scheme of the directive, must be the guarantee institution of the State in which, in accordance with Article 2(1) of the directive, either it is decided to open the proceedings for the collective satisfaction of creditors' claims, or it has been established that the employer's undertaking or business has been definitively closed down.
21 In the first place, for the directive to apply, Article 2(1) requires two events to have occurred: first, a request for proceedings to be opened to satisfy collectively the claims of creditors must have been lodged with the competent national authority; secondly, there must have been either a decision to open those proceedings, or a finding that the business has been closed down where the available assets are insufficient (Joined Cases C-94/95 and C-95/95 Bonifaci and Others and Berto and Others v INPS [1997] ECR I-0000, paragraph 35, and Case C-373/95 Maso and Others v INPS [1997] ECR I-0000, paragraph 45).
22 As the Fund, the French and United Kingdom Governments and the Commission have pointed out, it thus appears that the operation of the guarantee system established by the directive, and hence the intervention of the guarantee institution, are conditional, first and foremost, upon a request being made for the opening of proceedings to satisfy creditors' claims collectively, thus making it possible for the salary claims in question to be taken into consideration.
23 In practice, the opening of such proceedings is most often requested in the State in which the employer is established.  That general tendency should be reinforced by the entry into force of the Convention on Insolvency Proceedings signed at Brussels on 23 November 1995 (not yet published in the Official Journal of the European Communities), Article 3(1) of which uses as the main criterion for jurisdiction `the centre of a debtor's main interests'.
24 In the second place, Article 5(b) of the directive provides that the guarantee system which it is designed to establish is to be financed by employers, unless it is fully covered by the public authorities.  It accords with the scheme of the directive, in the absence of any contrary indication therein, for the guarantee institution responsible for employees' outstanding claims to be the one which levied, or at all events should have levied, the insolvent employer's contributions.  That cannot be the case of the institution of the Member State in which the employee resides and was employed without the employer having some establishment or commercial presence there.
25 Thus, Article 5(b) of the directive confirms the link between the obligation of the guarantee institution to pay and the place of establishment of the employer who, as a general rule, contributes to the financing of the institution.  As has already been emphasized in paragraph 23 of this judgment, the State of the employer's establishment is most often that in which the request for the opening of the proceedings is made.
26 Finally, the fact that the directive has not provided for a system of set-off or reimbursement of payments between the guarantee institutions of the various Member States tends to confirm that the Community legislature intended, in the event of an employer's insolvency, that the guarantee institution of only one Member State should become involved, in order to prevent unnecessary entanglements between national systems and, in particular, situations in which a worker might claim the benefit of the directive in several Member States.
27 The answer to the question must therefore be that, where the employer is established in a Member State other than that in which the employee resides and was employed, the guarantee institution responsible, under Article 3 of the directive, for the payment of that employee's claims in the event of the employer's insolvency is the institution of the State in which, in accordance with Article 2(1) of the directive, either it is decided to open the proceedings for the collective satisfaction of creditors' claims or it has been established that the employer's undertaking or business has been closed down.
Decision on costs
Costs
28 The costs incurred by the German, French and United Kingdom Governments and by the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court.
Operative part
On those grounds,
THE COURT
(Fifth Chamber),
in answer to the question referred to it by the Østre Landsret by order of 27 March 1996, hereby rules:
Where the employer is established in a Member State other than that in which the employee resides and was employed, the guarantee institution responsible, 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, for the payment of that employee's claims in the event of the employer's insolvency is the institution of the State in which, in accordance with Article 2(1) of the directive, either it is decided to open the proceedings for the collective satisfaction of creditors' claims or it has been established that the employer's undertaking or business has been closed down.