61991CC0029_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
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Mr President,
Members of the Court,
1. The Kantongerecht (Cantonal Court), Groningen, has referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a number of questions on 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 (1) ("the directive").
Those questions were raised in proceedings brought by the plaintiff in the main proceedings, the Dr Sophie Redmond Stichting ("the Redmond Foundation"), in order to have set aside certain contracts of employment between it and members of its staff, including the defendants in the main proceedings, H. Bartol and others.
Background to the case
2. The Redmond Foundation is a foundation governed by Dutch law which is engaged inter alia in providing assistance to drug addicts, alcoholics and persons addicted to medicinal products from certain minority groups in Dutch society (in particular persons of Surinamese or Antilles, including Aruban, origin). In addition, it also acts as a social and recreational centre for such persons in need of assistance. Its income has always been entirely dependent on subsidies from the Municipality of Groningen, where it is based. The defendants work for the Redmond Foundation. They concluded with it employment contracts governed by private law to which the rules of the Burgerlijk Wetboek ("the Civil Code") apply.
With effect from 1 January 1991, the Municipality of Groningen ceased to subsidize the Redmond Foundation. At the same time, it decided to switch the subsidy for Surinamese and Antilles drug addicts to another foundation providing assistance to drug addicts, the Sigma Foundation ("Sigma"), on condition that as a general foundation for the provision of assistance to drug addicts it should also be accessible to them. With effect from 1 January 1991, the premises rented by the Municipality to the Redmond Foundation, which it used both for the provision of assistance and for its social and recreational purposes, were leased to Sigma.
The Redmond Foundation and Sigma stated that they were prepared actively to cooperate on the transfer to Sigma of the Redmond Foundation' s clients/patients. A working group on the "incorporation of the Redmond Foundation' s activities in the Sigma Foundation" was set up. The Municipality of Groningen expressed the wish that when the provision of assistance was taken over by Sigma "use should be made of the knowledge and resources (e.g. staff) of the Redmond Foundation". Sigma offered new employment contracts to a number of the Redmond Foundation' s employees.
3. In late 1990 the Redmond Foundation asked the national court for leave to set aside the employment contracts between it and those members of its staff who had not been taken on by Sigma. It asked for such leave under a provision of Article 1639w of the Civil Code, according to which a change in circumstances may justify setting aside a contract of employment immediately or within a brief period. (2)
One of the objections raised in the national court by the defendants against the application made by the Redmond Foundation to set aside their employment contracts relates to Article 1639aa et seq. of the Civil Code by which the Netherlands implemented the directive. To ensure a sound understanding of the case, I shall set forth its most important provisions:
Article 1639aa
"For the purposes of this section
(a) undertaking means any business or service;
(b) transfer of an undertaking means any transfer of an undertaking or part of an undertaking pursuant to an agreement, in particular an agreement of sale, hire, lease or grant in usufruct ...".
Article 1639bb
"On the transfer of an undertaking the employer' s rights and obligations existing on the date of such transfer pursuant to a contract of employment between him and the employees of the undertaking shall automatically be transferred to the transferee ...".
Article 1639dd
"If the transfer of the undertaking results in a change of circumstances which is unfavourable to the worker and the contract of employment is set aside on that ground under Article 1639w, that contract shall be deemed to have been set aside under paragraph 8 of that article on a ground attributable to the employer."
4. The national court considers that whether the Redmond Foundation' s application to set aside the employment contracts may be granted depends on whether the directive, or Article 1639aa et seq. of the Civil Code based on that directive, apply to the dispute before it. Faced with a question relating to the interpretation of the directive, the national court therefore referred the following questions to the Court for a preliminary ruling:
"(a) Does 'transfer of an undertaking ... to another employer as a result of a legal transfer or merger' within the meaning 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 also cover the situation in which the subsidizing body decides to terminate the subsidy paid to one legal person, as a result of which the activities of that legal person are fully and definitively terminated, and simultaneously to switch it to another legal person with identical or comparable aims and objects, it being intended by and agreed between the two legal persons and the subsidizing body not only that, so far as possible, the clients/patients of the first legal person should be 'switched' to the second legal person but also that, thereupon, a lease should be granted to the second legal person of the immovable property leased by the first legal person from the subsidizing body and that, so far as is possible (and desirable), use should be made of the 'knowledge and the resources (e.g. staff)' of the first legal person?
(b) For the purpose of answering the foregoing question, does it make any difference that the inventory of the first legal person is not also transferred to the second legal person?
(c) Is it of any significance, for the purpose of answering Question (b), whether the untransferred inventory consists exclusively or well-nigh exclusively of aids for the purposes of the abovementioned social and recreational function?
(d) Can (the transferred part of) the undertaking still be said to retain its identity if the abovementioned social and recreational function of the first legal person is not transferred but the function of providing assistance is?
(e) For the purpose of answering Question (d), does it make any difference whether the social and recreational activities must be regarded as constituting a separate object or solely as an aid for the purposes of an optimum provision of assistance?
(f) For the purposes of answering the above questions, does it, lastly, still make any difference that the (intended) transfer of the activities of the first legal person to the second was not brought about in the first instance by (an) agreement(s) to that end between the subsidizing body and the two legal persons but by a decision, based on a change of policy on the part of the subsidizing public body, to terminate the subsidy paid to the first legal person and to switch it to the second legal person?"
5. The key question seems to me to be whether the transfer from the Redmond Foundation to Sigma of (part of) the activity of the undertaking and the dismissals of staff related thereto fall within the scope of the directive. That question is in two parts. First, it is necessary to consider whether this case involves a "transfer of an undertaking" within the meaning of the directive (see sections 11 to 16 below). However, that part of the question is subject to a preliminary question, namely whether the Redmond Foundation is an "undertaking" within the meaning of the directive (see sections 6 to 10 below). The second part of the question is whether or not there was a legal transfer or a merger within the meaning of the directive (sections 17 to 24 below).
The term "undertaking" within the meaning of the directive
6. As the Commission rightly observes, the question arises as to whether the Redmond Foundation is in fact an "undertaking". Under Dutch law, the answer is obvious: in implementing the directive, the Netherlands legislature expressly included in the definition of "undertaking" "instellingen" [institutions] (which include foundations; see Article 1639aa(a) of the Civil Code, cited in section 2 above). I shall nevertheless consider this question since, regardless of the situation arising under the Dutch implementing provisions, the answer to it is important in order correctly to define the scope of the directive.
Under Dutch law, a foundation is in principle a non-profit-making legal person. By design, the Dutch legislature sought to distinguish foundations from companies, inter alia by prohibiting a foundation from including amongst its objects making distributions to its founders, members of its constituent bodies or other persons, unless in the latter case the distributions have a charitable or social purpose. (3) Although Dutch foundations are often used in practice for commercial purposes and more specifically in connection with groups of companies, (4) the question arises as to whether, where that is not the case, the directive nevertheless applies to a non-profit-making institution, such as the Redmond Foundation, whose income consists exclusively of subsidies.
The Court has not yet gone into this. To date it has considered only cases in which profit-making undertakings were transferred.
7. Article 1(1) determines the scope of the directive in very general terms:
"This directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger."
The actual text of the directive makes no distinction depending on whether an undertaking is commercial or non-commercial. There is one exception only to its scope ratione materiae, that for sea-going vessels (Article 1(3)).
The directive, it appears from the preamble thereto, was prompted by changes in the structure of commercial undertakings, caused by economic trends at both national and Community level. This is in fact the situation which arises most frequently: it is precisely those restructuring operations, takeovers and mergers of undertakings which often have substantial repercussions as far as employees are concerned. (5) The fact that the prime objective of the directive is to prevent this restructuring process within the Common Market from taking place to the detriment of employees of the undertakings concerned was confirmed by the Court in the judgments in Abels (6) and d' Urso. (7)
However, there is nothing in the wording of the directive to rule out a broad interpretation of the term "undertaking" used therein. Quite the contrary, it appears from various factors that that term is to be given a clearly social meaning: the directive is part of the Community' s social action programme; (8) its title stresses the "safeguarding of employees' rights" in the event of transfers of undertakings; according to the preamble, it aims to provide for "the protection of employees in the event of a change of employer", (9) and, still according to the preamble, the directive seeks through the approximation of national laws to maintain the improvement described in Article 117 of the Treaty, which includes the improvement of working conditions. (10)
8. The Court has repeatedly stressed the clearly social objective pursued by the directive. The Court has held that:
"the purpose of the directive is to ensure, so far as possible, that the rights of employees are safeguarded in the event of a change of employer by enabling them to remain in employment with the new employer on the terms and conditions agreed with the transferor." (11)
It is recognized that
"the rules applicable in the event of a transfer of an undertaking or a business to another employer are intended to safeguard, in the interests of the employees, the existing employment relationships which are part of the economic entity transferred". (12)
It is precisely to that end that the directive provides inter alia
"for the transfer of the transferor' s rights and obligations arising from a contract of employment or from an employment relationship (Article 3(1)), the continued observance by the transferee of the terms and conditions agreed in any collective agreement (Article 3(2)) and protection for the employees concerned against dismissal by the transferor or the transferee solely by reason of the transfer (Article 4(1))". (13)
9. The emphasis laid on the directive' s social aim is important, since in various fields the Court has consistently held that, as a general rule, the term "undertaking" should be given the most appropriate meaning having regard to the objective of the Community rules concerned and to their effectiveness. A striking example is afforded by two recent judgments, to which I shall confine myself, namely the judgments in Vandevenne and Hoefner and Elser.
The first was concerned inter alia with the interpretation of the term "undertaking" in Article 15 of Council Regulation (EEC) No 3820/85 of 20 December 1985 on the harmonization of certain social legislation relating to road transport. (14) The Court expressly stated that
"the definition of 'undertaking' within the meaning of Article 15 of Regulation No 3820/85 must be considered in the light of the system established by the regulation and its aims". (15)
In Hoefner and Elser the Court considered that a public employment agency, engaged inter alia in employment procurement activities, was an undertaking within the meaning of economic law relating to competition laid down in Articles 85 and 86 of the Treaty:
"It must be observed, in the context of competition law, first that the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in which it is financed and, secondly, that employment procurement is an economic activity". (16)
It is significant for the purposes of the present case that in Hoefner and Elser the Court did not consider the way in which the undertaking was financed to be decisive. The service in question, namely employment procurement, was provided free of charge and largely financed by employers' and employees' contributions.
10. In the light of the foregoing, it may be stated that, in order to establish whether a given natural or legal person is an undertaking within the meaning of a directive which, like that at issue in these proceedings, pursues a clearly social aim, decisive importance attaches to whether one or more persons have the status of an employee vis-à-vis that natural or legal person under a contract of employment or an employment relationship within the meaning of Article 3(1) of the directive. Unlike the interpretation of the term "worker" contained in Article 48 of the Treaty, (17) the term "employee" in this case covers, according to the Court, any person who, in the Member State concerned, is protected as an employee under national employment law. (18)
"Transfer of an undertaking" within the meaning of the directive
11. The question now is whether a "transfer of an undertaking, business or part of a business" within the meaning of the directive took place in this case. It appears from the facts described in section 2 above that at least a partial transfer took place. The point at issue between the parties to the main proceedings relates above all to the question whether the undertaking retained its identity in that transfer.
The Redmond Foundation claims that it did not. It considers that the nature of the assistance provided by the two foundations is very different, in view of the omission of the target group (drug addicts from Surinam and the Antilles) and of the social and recreational function of the Redmond Foundation' s day centre. In response, one of the defendants contends that the undertaking retained its identity, since the core of the Redmond Foundation' s activities, namely the provision of assistance to drug addicts and other victims of substance abuse, was taken over. The fact that certain forms of assistance or certain activities were not continued does not prevent there having been a transfer of an undertaking or at least of part of an undertaking.
12. In the past, the Court has repeatedly ruled on the need for identity to be maintained in the event of the transfer of an undertaking, business or part of a business within the meaning of the directive.
In the judgments in Spijkers v Benedik and Ny Moelle Kro, the Court held that the decisive criterion for ascertaining whether a transfer within the meaning of the directive had taken place was whether the undertaking concerned had retained its identity. (19) To that end it should be considered
"whether the business was disposed of as a going concern, as would be indicated, inter alia, by the fact that its operation was actually continued or resumed by the new employer, with the same or similar activities". (20)
In making that determination, the Court went on to hold,
"it is necessary to consider all the facts characterizing the transaction in question, including the type of undertaking or business, whether or not the business' s tangible assets, such as buildings and movable property, are transferred, 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 customers are transferred and the degree of similarity between the activities carried on before and after the transfer and the period, if any, for which those activities were suspended. It should be noted, however, that all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation". (21)
According to Article 1(1), the directive is also applicable where, not all the undertaking, but only one or more of its businesses or parts of its businesses are transferred to another employer. Where such a partial transfer takes place, it is self-evident that those factors, establishing that the undertaking has retained its identity, should be applied only in respect of the business of the undertaking or, as the case may be, the part of such business which has been transferred.
13. It appears from the facts of the case, in so far as I am aware of them, that a number of factors mentioned by the Court were present in this instance.
The activities of the two foundations, that is to say, receiving and assisting drug addicts, are substantially the same. In my view, it is not of fundamental importance that, as the Redmond Foundation maintains, the target groups did not correspond entirely (Surinamese and Antilles drug addicts, alcoholics and persons addicted to medicinal products in the case of the Redmond Foundation, as against drug addicts in general in the case of Sigma) or that the social and recreational function of the Redmond Foundation' s day centre was not resumed (see section 15).
There was also a de facto transfer of tangible assets, in so far as the premises leased to the Redmond Foundation by the Municipality of Groningen were leased to Sigma with effect from 1 January 1991.
As regards taking over the staff, counsel for the Redmond Foundation stated at the hearing that two or three employees had not been taken over and that four and a half (a part-time worker) had. That number is not inconsistent per se with the undertaking' s or the business' s retaining its identity in the transfer: in the judgment in Bork International the Court held that the directive was applicable in a situation in which, first, all the staff were dismissed and, subsequently, "more than half" were taken on again. (22)
Continuity has also been established with regard to the clients: both the Redmond Foundation and Sigma declared that they were willing to transfer the former' s clients/patients to the latter.
Lastly, although this aspect does not appear amongst the factors listed by the Court ° in any case solely by way of example and not exhaustively ° it seems to me in this case that the transferral of the funding of the entity is of decisive importance. The subsidy granted by the Municipality of Groningen was the sole source of the Redmond Foundation' s operating funds. The Municipality' s decision to grant that subsidy to Sigma with effect from 1 January 1991 was in the circumstances undoubtedly the most important factor in the transfer to Sigma of the undertaking operated by the Redmond Foundation.
14. The ultimate appraisal as to whether, having regard to the facts described above, there has been a continuation, under a new employer, of the same undertaking or at least of a substantial part of the undertaking falls to the national court. As the Court held in the judgment in Spijkers,
"It is for the national court to make the necessary factual appraisal, in the light of the criteria set out above, in order to establish whether or not there is a transfer in the sense indicated above". (23)
Accordingly, it is the national court which is best placed to assess, having regard to the aforementioned evaluation criterion and to the connecting factors mentioned, the importance of the facts mentioned in its second and third questions, namely the fact that the Redmond Foundation' s inventory was not transferred to Sigma and the fact that the Redmond Foundation' s inventory consisted exclusively or almost exclusively of aids intended for the social and recreational function which it performed and which was not resumed by Sigma. However, as the Court emphasized in the judgment in Spijkers (see section 12, above), an overall assessment should be made of the transfer and, in assessing whether the undertaking or business concerned retained its identity in the transfer, disproportionate attention should not be paid to factual or legal matters which are of lesser significance.
15. Accordingly, it is also for the national court to determine the importance to be attached to the circumstance adverted to in the fourth question, according to which Sigma no longer provides the social and recreational services offered by the Redmond Foundation. I would also observe, however, that it is by no means essential for the application of the directive that the undertaking' s activity before and after the transfer should be the same. To require this would run counter to the broad scope of the directive and to its wording, according to which, I repeat, both the transfer of a business and of part of a business of an undertaking are covered. It seems to me that, apart from the social and recreational services which are no longer provided, that which remains of the activity of the undertaking can undeniably be described as part of the activity of the Redmond Foundation, which "retains its identity".
In addition, the directive expressly contemplates the possible reorientation of the undertaking' s activity following the transfer. In that regard, Article 4(1) makes clear that the protection afforded to employees in connection with a transfer of an undertaking does not stand in the way of "dismissals that may take place for economic, technical or organizational reasons entailing changes in the workforce". (24) As a result, the fact that the undertaking' s activity has been reoriented does not stand in the way of the applicability of the directive.
16. At the hearing, counsel for the Redmond Foundation expanded an argument which does not appear from the national court' s questions.
According to that argument, the decision of the Municipality of Groningen to cease paying the subsidy meant that the Redmond Foundation' s Board had to wind it up. That task was entrusted to its lawyer in September 1990. A plan was subsequently drawn up with the Redmond Foundation' s accountant with a view, in the context of the winding up, to terminate the contract to lease its premises concluded with the Municipality of Groningen and to set aside the employment contacts concluded with its employees, in each case with effect from 1 January 1991. It follows that since September 1990 the Redmond Foundation has in fact been in liquidation, a situation which should be equated with insolvency. Consequently, in the light of the judgment in Abels, the directive is not applicable.
I can deal with this point briefly. That argument is based on an appraisal of a factual situation which does not appear in the assessment of the facts made by the national court. In the context of the cooperation introduced by the preliminary ruling procedure between the national court and the Court of Justice, it is for the national court to determine and assess the facts of the case and for the Court of Justice to examine the question submitted for a preliminary ruling solely in the light of the national court' s assessment. (25)
In case the Court should nevertheless wish to consider this argument, suffice it to say that none of the evidence in the documents before the Court suggests that, at the time when its activities were transferred to Sigma, the Redmond Foundation had suspended payment of its debts, let alone that any proceedings for insolvency or suspension of payments had been brought against it. I need only refer to the Court' s judgment in Danmols Inventar, which was concerned with a transfer of an undertaking after the transferor had suspended payment of its debts but before it was declared insolvent. The Court considered that the fact that the transfer had occurred after the transferor had suspended payment of its debts was in itself not enough to exclude the transfer from the scope of the directive. (26) I conclude therefore that a fortiori nothing in this case prevents the directive from applying.
The absence of a "legal transfer" or a "merger"
17. It is clear that the prime cause of the transfer to Sigma of the Redmond Foundation' s activities was not a "takeover" agreement. As the national court observes, the transfer was the result of a decision of the Municipality of Groningen to the effect that the Redmond Foundation' s subsidy would henceforth be paid to Sigma.
The Redmond Foundation considers that it should be inferred from the lack of any agreement (even an indirect agreement) between itself, Sigma and the Municipality of Groningen that the directive is not applicable. It denies the existence of any agreements as to the way in which the assistance would be provided by Sigma after 1 January 1991, as the relevant negotiations came to naught.
For their part, the defendants consider that the relationship between the Municipality of Groningen and the institutions which it subsidizes must be regarded as a contractual relationship. Given that immediately after the Municipality terminated its relationship with the Redmond Foundation it entered into relations with Sigma, there was a transfer of an undertaking or at least of part of an undertaking within the meaning of the directive.
18. In the first place, I would observe that in assessing whether, in a given situation, there has been a transfer resulting from a "legal transfer or merger" within the meaning of the directive, the Court has invariably started out from the premiss that that question has to be considered in the light of the final outcome of the transaction in question. According to the Court, the directive is applicable
"where, following a legal transfer or merger, there is a change in the legal or natural person who is responsible for carrying on the business and who by virtue of that fact incurs the obligations of an employer vis-à-vis the employees of the undertaking". (27)
Next, it clearly appears from the case-law that, as regards the scope of the directive and, in particular, the question as to when a legal transfer is involved, the Court has always used a teleological approach. The beginnings of this approach are to be found in the judgment in Abels, where, for the first time, the Court came up against major terminological differences between the various language versions of the relevant provision. Whereas most of the versions, including the Dutch, refer only to contractual transfers, (28) the English ("legal transfer") and Danish ("overdragelse") in particular indicate a wider scope. In view of those divergences, the Court held that
"the scope of the provision at issue cannot be appraised solely on the basis of a textual interpretation. Its meaning must therefore be clarified in the light of the scheme of the directive ... and its purpose". (29)
19. In keeping with this approach, the Court has systematically given a very broad interpretation to the expression "legal transfer". Striking illustrations are to be found in the judgments in Berg, Daddy' s Dance Hall and Bork International.
The first of those cases was concerned with the transfer of an establishment under a lease-purchase agreement, followed by the restoration of the establishment to the vendor pursuant to a court ruling terminating the agreement on the ground of the purchasers' non-performance. The Court answered the argument that the directive was not applicable to a transfer effected by a judicial decision terminating an agreement by stating that it is irrelevant
"whether the termination results from an agreement between the contracting parties or a unilateral declaration by one of them or indeed a judicial decision. In all these cases, the transfer of the undertaking occurs on the basis of a contract". (30)
The judgment in Daddy' s Dance Hall related to a situation in which a non-transferable lease had been concluded between the operator of a number of restaurants and bars and their owner. The lease was terminated and the staff dismissed. However, the businesses continued to be run with the same staff until a new lease entered into force between the owner and a new lessee, who immediately re-engaged the employees of the former lessee. The Court considered that this transaction fell within the scope of the directive. In my view, the following passage, which is repeated mutatis mutandis in the judgment in Bork International, is very revealing:
"The fact that in such a case the transfer is effected in two stages, in that the undertaking is first retransferred from the original lessee to the owner and the latter then transfers it to the new lessee, does not prevent the directive from applying, provided that the economic unit in question retains its identity; that is so in particular when, as in this case, the business is carried on without interruption by the new lessee with the same staff as were employed in the business before the transfer". (31)
20. Those examples show that the Court does in fact give a very broad meaning to the expression "legal transfer". It is sufficient for the transfer to occur "on the basis of a contract", even if, as the Court held in the passage from Berg quoted in section 19, the transfer ° in that case a retransfer ° originates in a termination "which results from an agreement between the contracting parties or a unilateral declaration by one of them or indeed a judicial decision". According to the judgments in Daddy' s Dance Hall and Bork International, it is not even necessary for there to have been an agreement between the transferor and the ultimate transferee.
21. Did the transfer from the Redmond Foundation to Sigma occur on such a (broad) contractual basis?
Here, I would draw a parallel with the Court' s case-law in competition cases. The Court interprets the term "agreement" within the meaning of Article 85(1) of the Treaty widely in order to make the prohibition laid down in that provision of agreements in restraint of competition as effective as possible. Accordingly, "gentlemen' s agreements", for instance, have also been regarded as agreements within the meaning of Article 85(1) in so far as they are a faithful expression of the joint intention of the parties to the cartel with regard to their conduct in the Common Market. (32) It follows that, in order for Article 85(1) to apply, it is sufficient for there to be agreement (written or oral, express or implied) between the parties mutually to restrict their freedom of movement on the market with a view to restricting competition. (33)
It seems to me that agreement between the parties also plays a decisive role in assessing the requirement of a "contractual basis" for the purposes of the directive at issue, in so far as the rules laid down in the directive have to be made as effective as possible. If it appears that agreements have been concluded between the parties concerning the transfer of the undertaking in question or of a business or a part of a business, I consider that the directive is applicable even where, as in the case of Berg (see sections 19 and 20 above), the transfer results in part from unilateral declarations by one of the parties or from acts (in that case, a judicial decision) of third parties. As is clear from Bork International, the crucial factor is that the undertaking ultimately comes into the hands of a transferee who continues to run it, even if there is no agreement between the transferee and the original owner of the undertaking.
22. In the light of this, it seems highly significant to me that, according to the first of the questions submitted for a preliminary ruling, the national court finds that it was
"intended by and agreed between the two legal persons and the subsidizing body not only that, so far as possible, the clients/patients of the first legal person should be 'switched' to the second legal person but also that, thereupon, a lease should be granted to the second legal person of the immovable property leased by the first legal person from the subsidizing body and that, so far as is possible (and desirable), use should be made of the 'knowledge and the resources (e.g. staff)' of the first legal person".
In addition, the national court finds (in section 11(g)) that, as mentioned above (in section 2), the Redmond Foundation and Sigma
"declared themselves ready to cooperate actively in the 'transfer' of the plaintiff' s clients/patients to the Sigma Foundation and a working party for the 'Incorporation of the Activities of the Redmond Foundation into the Sigma Foundation' has come into being".
Do those findings not contain sufficient evidence that the transfer of the undertaking occurred "on the basis of a contract" in view more specifically of the agreement in principle between the transferor and the transferee to cooperate on the most essential aspect of the transfer, namely continuity of the provision of services to the Redmond Foundation' s patients?
23. To my mind, the existence of such a contractual basis is not undermined by the objections made to it by the Redmond Foundation. This applies in the first place to the Redmond Foundation' s objection to the effect that the negotiations which took place between itself and Sigma with regard to the organization of assistance after 1 January 1991 came to naught. First, that argument does not detract from the existence of the aforementioned agreement in principle to cooperate with a view to transferring the provision of services. Secondly, it merely confirms that consultations on the transfer actually did take place between the parties (presumably within the aforementioned working party). The fact that those consultations did not result in an agreement on each specific point does not call in question the overall context in which they took place, namely an intention, based on mutual agreement, to cooperate on the transfer of the undertaking. (34)
Nor do I attach any importance to the argument developed by counsel for the Redmond Foundation at the hearing to the effect that there could be no question of a consensus having been reached, as the relationship between the Municipality of Groningen and the Redmond Foundation was characterized by the latter' s complete dependence: the Redmond Foundation' s income came solely from the grant of subsidies by the Municipality. It was argued that a contractual relationship can be involved only where "the parties are in principle on an equal footing". That view is not convincing. There is nothing in the directive to suggest that it is limited to contractual relations between parties who are in principle on an equal footing. What is more, such a criterion would give rise to innumerable disputes: it would be enough for a transferor or a transferee to invoke an "imbalance" in contractual relations to call in question the applicability of the directive.
Lastly, the argument of the Redmond Foundation that the relationship between a subsidized institution and the subsidizing body is not of a contractual nature under national law does not detract from the applicability of the directive. The expression "legal transfer" [in Dutch: overdracht krachtens overeenkomst ° transfer pursuant to an agreement] in Article 1(1) of the directive ° like the word "agreement" in Article 85(1) of the EEC Treaty ° has a Community meaning, the scope of which cannot be restricted by an interpretation based on national law. (35)
24. Even if the Court were to consider that there was no transfer of an undertaking resulting from a legal transfer in this case, that would not necessarily mean that the directive did not apply in this case.
Article 1(1) of the directive mentions a second method of transferring the undertaking, namely "transfer ... as a result of a ... merger". The express incorporation of that legal basis in addition to legal transfer indicates that the term "merger" should be given an independent meaning, the scope of which goes beyond a "merger agreement" in the strict sense.
In the absence of a more precise definition of the term "merger" in the directive itself (36) or in the Court' s case-law, its usual meaning in the context of undertakings should be taken as the starting point: there it refers to two or more previously independent undertakings which join or merge together resulting in a concentration in the broad sense of the word. That meaning is borne out by the preamble to the directive, which mentions transfers of undertakings as a result of legal transfers or mergers as reflections of "changes in the structure of undertakings" brought about by economic trends. (37) In that sense, the word refers, in my view, to the concept of "concentration" in the broad sense, as it is employed for example in the definition of "concentration" set out in Article 3(1) of Council Regulation (EEC) No 4064/89 of 21 December 1989 on the control of concentrations between undertakings. (38) According to that provision, a concentration arises where "two or more previously independent undertakings merge", but also where one or more undertakings "acquire, whether by purchase of securities or assets, by contract or by any other means, direct or indirect control of the whole or parts of one or more other undertakings".
In order to determine whether the transfer of an undertaking is the result of a merger within the meaning of the directive, therefore, the fact that it is part of a restructuring operation which gives rise to a concentration of previously independent undertakings, irrespective of the legal technique (contractual or otherwise) used to that end, is of decisive importance. According to the Court' s case-law, if this results in a change of employer ° in the sense of the natural or legal person who has obligations as an employer vis-à-vis the workers employed ° the directive must apply (see section 8 above).
Conclusion
25. I propose that the Court should answer the national court' s questions as follows:
(1) The application of Council Directive 77/187/EEC of 14 February 1977 is not precluded by the fact that the transfer of an undertaking, business or part of a business is caused by the decision of a subsidizing body to switch the subsidy from one legal person to another, resulting in the termination of the activities of the first legal person and in their transfer to the second, provided that it is a transfer from a going concern and hence the undertaking, business or part of a business which was transferred retains its identity and provided that the transfer is the result of a legal transfer or a merger.
(2) It is for the national court to determine whether or not the undertaking retains its identity, in particular in the light of the abandonment of certain functions; in so doing, the national court should take account of all the factual circumstances characterizing the transaction concerned from which it can be inferred whether or not there is continuity in the essential aspects of the provision of services concerned.
(3) It is for the national court to determine whether the transfer is the result of a legal transfer or a merger. In order for there to be a legal transfer, it is sufficient for the transfer to have taken place on the basis of a contract, which refers to the existence of an agreement in principle between the transferor and the transferee and their readiness to cooperate, even if the transfer is, in part, effected by unilateral declarations by the parties and/or by acts of third parties and even if no takeover agreement is concluded between the transferor and the ultimate transferee. In order for there to have been a transfer resulting from a merger, it is sufficient for the transfer to have taken place in the context of a restructuring operation resulting in a concentration of previously independent undertakings, even if that transaction does not arise from an actual merger agreement.
(*) Original language: Dutch.
(1) ° OJ 1977 L 61, p. 26.
(2) ° For the relevant part of the provision, see the Report for the Hearing.
(3) ° Civil Code, Article 285(3). See, in particular, Asser/Van der Grinten: De rechtspersoon, Volume II of Asser' s handleiding tot de beoefening van het Nederlands burgerlijk recht, Zwolle, Tjeenk Willink, 1986, section 471, pp. 347-349.
(4) ° See in this connection inter alia V.A.M. Van der Burg, De onderneming in het stichtingsgewaad, in Van vennootschappelijk belang (Maeijerbundel), Zwolle, Tjeenk Willink, 1988, p. 21 et seq.; Dijk/Van der Ploeg, Van vereniging, cooeperatie en stichting, Arnhem, Gouda Quint, 1991, p. 13. The use of foundations in connection with groups in this connection appears inter alia from the numerous purchasing and sales centres set up as foundations, research foundations, foundations involved in implementing the rules on competition, foundations operating as administrative offices in connection with the certification of shares in public limited companies (whereby the foundation holds the shares and issues certificates to the former shareholders) and the placing of shares in a foundation by large shareholders without successors with a view to ensuring the continuity of the undertaking: W.J. Slagter, Compendium van het ondernemingsrecht, Deventer, Kluwer, 1990, p. 335.
(5) ° See the first and second recitals in the preamble to the directive.
(6) ° Judgment in Case 135/83 Abels v Bedrijfsvereniging voor de Metaalindustrie en de Electrotechnische Industrie [1985] ECR 469, paragraph 18 in fine.
(7) ° Judgment in Case C-362/89 D' Urso [1991] ECR I-4105, paragraph 23.
(8) ° It was announced in the Council Resolution of 21 January 1974 concerning a social action programme (OJ 1974 C 13, p. 1, more specifically at p. 4).
(9) ° Second recital in the preamble to the directive.
(10) ° Fifth recital in the preamble (OJ 1977 L 61, p. 26); see also in this connection the judgment in Abels, cited above, paragraph 18.
(11) ° Judgments in Case 287/86 Ny Moelle Kro [1987] ECR 5465, paragraph 12, in Case 324/86 Tellerup v Daddy' s Dance Hall [1988] ECR 739, paragraph 9, in Joined Cases 144 and 145/87 Berg v Besselsen [1988] ECR 2559, paragraph 12, in Case 101/87 Bork International v Foreningen af Arbejdsledere i Danmark [1988] ECR 3057, paragraph 13, and in D' Urso, cited above, paragraph 9.
(12) ° Judgments in Berg, paragraph 13, and D' Urso, paragraph 9.
(13) ° Judgment in Ny Moelle Kro, paragraph 11; and see the earlier judgment in Case 19/83 Wendelboe [1985] ECR 457, paragraph 15, and Berg, cited above, paragraph 13.
(14) ° OJ 1985 L 370, p. 1.
(15) ° Judgment in Case C-7/90 Vandevenne [1991] ECR I-4371, paragraph 6.
(16) ° Judgment in Case C-41/90 Hoefner and Elser [1991] ECR I-1979, paragraph 21.
(17) ° See, inter alia, the judgments in Case 66/85 Lawrie-Blum [1986] ECR 2121, paragraph 17, in Case 197/86 Brown [1988] ECR 3205, paragraph 21, in Case 344/87 Bettray [1989] ECR 1621, paragraph 12, and in Case C-3/90 Bernini [1992] ECR I-1071, paragraph 14.
(18) ° Judgments in Case 105/84 Danmols Inventar [1985] ECR 2639, paragraph 28, and in Case 237/84 Commission v Belgium [1986] ECR 1247, paragraph 13.
(19) ° Judgments in Case 24/85 Spijkers v Benedik [1986] ECR 119, paragraphs 11 and 15, and in Ny Moelle Kro, cited above, paragraph 18.
(20) ° Judgments in Spijkers, paragraph 12, and in Ny Moelle Kro, paragraph 18.
(21) ° Judgment in Spijkers, paragraph 13. The Court reiterated a number of those factors in the judgment in Bork International, paragraph 15.
(22) ° This appears from paragraph 4 of the judgment.
(23) ° Judgment in Spijkers, paragraph 14.
(24) ° According to the Court, in order to determine whether the employees were dismissed for those reasons or solely as a result of the transfer, it is necessary to take into consideration the objective circumstances in which the dismissal took place: judgment in Bork International, paragraph 18.
(25) ° See, expressly, the judgment in Case 139/85 Kempf [1986] ECR 1741, paragraph 12.
(26) ° Judgment in Danmols Inventar, cited in footnote 18, paragraph 10.
(27) ° Judgments in Ny Moelle Kro, paragraph 12, Daddy' s Dance Hall, paragraph 9, and Berg, paragraph 17.
(28) ° In particular the German ( vertragliche UEbertragung ), French ( cession conventionnelle ), Greek ( ********* ******** ), Italian ( cessione contrattuale ) and Dutch ( overdracht krachtens overeenkomst ): see the judgment in Abels, paragraph 11.
(29) ° Paragraph 13. More specifically with regard to the question referred for a preliminary ruling, the Court added that the meaning of the provision had to be clarified in the light of its place in the system of Community law in relation to the rules on insolvency, ibid.
(30) ° Judgment in Berg, paragraph 19.
(31) ° Judgment in Daddy' s Dance Hall, paragraph 10; cf. paragraph 14 of the judgment in Bork International.
(32) ° See the three judgments in Case 41/69 ACF Chemiefarma v Commission [1970] ECR 661, paragraph 112, in Case 44/69 Buchler v Commission [1970] ECR 733, paragraph 25, and in Case 45/69 Boehringer v Commission [1970] ECR 769, paragraph 28.
(33) ° See also section 11 of my Opinion in Case 279/87 Tipp-Ex v Commission [1990] ECR I-261 (summary publication, opinion not published in the ECR).
(34) ° See also as regards the need for an overall view of the contractual relationship between the parties, section 8 of my Opinion in Case 277/87 Sandoz v Commission, not published in the ECR.
(35) ° Thus, in order for there to be an agreement within the meaning of Article 85(1) of the Treaty, it is not necessary for it to constitute a valid and binding contract under national law: judgment in Case C-277/87 Sandoz v Commission [1990] ECR I-45 (summary publication), at the end of paragraph 2 of the summary of the judgment; see also the judgment in Joined Cases 209/78 to 215/78 and 218/78 Van Landewyck v Commission [1980] ECR 3125, paragraphs 85 and 86.
(36) ° For definitions coming under company law and revenue law, respectively, see Articles 3(1) and 4(1) of the Third Council Directive 78/855/EEC of 9 October 1978 based on Article 54(3)(g) of the Treaty concerning mergers of public limited companies (OJ 1978 L 295, p. 36) and Article 2(1)(a) of Council Directive 90/434/EEC of 23 July 1990 on the common system of taxation applicable to mergers, divisions, transfers of assets and exchanges of shares concerning companies of different Member States (OJ 1990 L 225, p. 1).
(37) ° First recital in the preamble to the directive.
(38) ° OJ 1989 L 395, p. 1.