Judgment of the Court of 6 June 1996. - Commission of the European Communities v Italian Republic. - Dealing in transferable securities. - Case C-101/94.



European Court reports 1996 Page I-02691



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

++++

Freedom of movement for persons ° Freedom of establishment ° Freedom to provide services ° Dealing in transferable securities ° Activity restricted by a Member State to companies or firms whose registered office is on its territory ° Not permitted

(EC Treaty, Arts 52 and 59)

Summary

Articles 52 and 59 of the Treaty preclude a Member State from restricting the activity of dealing in transferable securities (apart from by banks) to companies or firms whose registered office is on its territory, thus preventing dealers from other Member States who wish to exercise an activity on its territory from using certain forms of establishment, such as a branch or agency, so that they are obliged to incur additional costs compared with its own nationals, and making it altogether impossible for them to make use of their freedom to provide services.

By so doing the State applies a difference in treatment which is not objectively justified, since although the above requirement facilitates the supervision and control of operators in the market, it is neither the only means of nor an indispensable condition for, firstly, making sure that operators comply with its rules for pursuing the activity of dealer in transferable securities and, secondly, imposing effective sanctions on dealers who breach those rules. Nothing prevents the State from requiring dealers from other Member States to supply information and documents relating specifically to the activities of their secondary establishments on its territory, from making their activity subject to the provision of financial guarantees or from concluding cooperation agreements with the supervisory authorities of other Member States regarding supervision of markets and agents; furthermore, it cannot argue that it is not possible to compare the rules on access to the profession of securities dealer in the various Member States, in particular the rules on guarantees regarding companies' own funds, where its legislation expressly provides for the possibility of concluding such agreements and the different methods used by Member States to determine own funds requirements ensure equivalent protection overall.

Parties

In Case C-101/94,

Commission of the European Communities, represented by Antonino Abate, Principal Legal Adviser, and Ben Smulders, of its Legal Service, acting as Agents, assisted by Luca G. Radicati di Brozolo, of the Milan Bar, with an address for service at the office of Carlos Gómez de la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

applicant,

v

Italian Republic, represented by Umberto Leanza, Head of the Department for Legal Affairs of the Ministry of Foreign Affairs, acting as Agent, assisted by Ivo Maria Braguglia, Avvocato dello Stato, with an address for service in Luxembourg at the Italian Embassy, 5 Rue Marie-Adelaïde,

defendant,

APPLICATION for a declaration that, by restricting the activity of dealing in transferable securities (apart from by banks) to companies or firms whose registered office is in Italy, the Italian Republic has failed to fulfil its obligations under Articles 52 and 59 of the EC Treaty,

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, D.A.O. Edward, J.-P. Puissochet (Rapporteur) and G. Hirsch (Presidents of Chambers), G.F. Mancini, J.C. Moitinho de Almeida, P.J.G. Kapteyn, C. Gulmann, J.L. Murray, P. Jann and M. Wathelet, Judges,

Advocate General: C.O. Lenz,

Registrar: H. von Holstein, Deputy Registrar,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 16 January 1996,

after hearing the Opinion of the Advocate General at the sitting on 19 March 1996,

gives the following

Judgment

Grounds

1 By application lodged at the Court Registry on 22 March 1994, the Commission of the European Communities brought an action under Article 169 of the EC Treaty for a declaration that, by restricting the activity of dealing in transferable securities (apart from by banks) to companies or firms whose registered office (sede legale) is in Italy, the Italian Republic had failed to fulfil its obligations under Articles 52 and 59 of the EC Treaty.

2 Law No 1 of 2 January 1991, regulating the activity of dealing in securities and the organization of the securities market (Gazzetta Ufficiale della Repubblica Italiana No 3, 4 January 1991, p. 3, hereinafter "the Law"), applies in accordance with Article 1(1) thereof to the following activities, which it designates as "activities of dealing in transferable securities":

"(a) dealing, for one' s own account or the account of others, or both for one' s own account and that of others, in transferable securities;

(b) investment and distribution of transferable securities with or without prior subscription or purchase at a fixed date, or acceptance of guarantees with respect to the issuer;

(c) management of assets by means of operations relating to transferable securities;

(d) collection of orders for the purchase or sale of transferable securities;

(e) giving advice in relation to transferable securities;

(f) soliciting savings from the public by actions of a promotional nature carried out elsewhere than at the registered office or principal administrative office of the issuer, investor or person implementing the investment ...".

3 Under Article 2(1) of the Law, the profession of dealing in transferable securities may be carried on in Italy with respect to the public (apart from by banks) only by securities firms (società di intermediazione mobiliare, hereinafter "SIM") which have been authorized to do so by the Commissione Nazionale per le Società e la Borsa (National Commission for Companies and the Stock Exchange, hereinafter "Consob").

4 To obtain such authorization, the SIM must satisfy certain conditions relating inter alia to their legal form, the amount of their initial capital, and the probity of their managers and shareholders.

5 Article 3(2)(a) of the Law prescribes:

"The [dealer in securities] must be constituted in the form of a limited company (società per azioni) or partnership limited by shares (società in accomandita per azioni), must include in its company name the words 'società di intermediazione mobiliare' and have its registered office on Italian territory ...".

6 The Commission notified the Italian authorities, by a formal letter of 20 December 1991, that certain provisions of the Law, in particular Article 3(2)(a), were contrary to the provisions of Articles 52 and 59 of the Treaty. In their reply of 6 February 1992 the Italian authorities rejected that view. The Commission issued a reasoned opinion on 19 October 1992, in which it claimed that, by restricting dealing in transferable securities to companies and firms which had their registered office in Italy and satisfied conditions which could not be fulfilled by dealers from other Member States, the Italian Republic had failed to fulfil its obligations under Articles 52 and 59 of the Treaty. The Italian authorities responded by letter of 8 January 1993, in which they maintained that the legislation was consistent with the Treaty.

7 In those circumstances the Commission brought the present action. As can be seen from the pre-litigation procedure and from the pleadings submitted to the Court, the application concerns essentially if not exclusively the provisions in Article 3(2)(a) of the Law.

The complaint of breach of Article 52 of the Treaty

8 The Commission submits that the obligation to carry on the activity of a dealer in transferable securities in the form of a company or firm whose registered office is in Italy is contrary to Article 52 of the Treaty. It argues that such a rule prevents dealers from other Member States from making use of certain forms of establishment, such as a branch or agency, and discriminates against them by obliging them to bear the expense of setting up a new company. It submits that such an obligation is not necessary for attaining the legitimate aims pursued by the Italian legislation. Thus it would be possible to provide for a procedure, such as an authorization or recognition procedure, for the purpose of ascertaining whether dealers from other Member States are subject in their Member State of origin to rules equivalent to those laid down by the Italian legislation.

9 Under the second paragraph of Article 52 of the Treaty, freedom of establishment is to be exercised under the conditions laid down by the law of the country of establishment for its own nationals.

10 Access to and the exercise of certain self-employed activities may thus be conditional on compliance with provisions laid down by law, regulation or administrative action justified by the general interest, such as rules relating to organization, qualifications, professional ethics, supervision and liability (judgments in Case 71/76 Thieffry v Conseil de l' Ordre des Avocats à la Cour de Paris [1977] ECR 765, paragraph 12, and Case C-55/94 Gebhard v Consiglio dell' Ordine degli Avvocati e Procuratori di Milano [1995] ECR I-4165, paragraph 35). Those provisions may stipulate in particular that the exercise of a specific activity is restricted to persons presenting certain guarantees and subject to particular rules or supervision.

11 Where access to or the exercise of a specific activity is subject to such conditions in the host Member State, a national of another Member State who wishes to exercise that activity must in principle comply with them (Gebhard, paragraph 36).

12 However, as the Court has already held, Article 52 of the Treaty, which embodies one of the fundamental principles of the Community, is intended inter alia to ensure, with respect to establishment, that all nationals of Member States who wish to establish themselves in another Member State, even if that establishment is only secondary, for the purpose of pursuing activities there as self-employed persons receive the same treatment as nationals of that State.

13 That article prohibits any discrimination against nationals of other Member States resulting from national legislation, regulations or practices (see to that effect the judgments in Case 270/83 Commission v France [1986] ECR 273, paragraphs 13 and 14, and Case C-168/91 Konstantinidis [1993] ECR I-1191, paragraph 12). It prohibits in particular all national rules which are liable to place nationals of other Member States in a legal or factual situation which is less favourable than the situation, in the same circumstances, of a national of the Member State of establishment (Konstantinidis, paragraph 13).

14 The Italian Government does not deny that its legislation prevents dealers from other Member States from using certain forms of secondary establishment or that it causes them to incur additional costs which Italian dealers do not have to bear. It simply argues that that difference in treatment is objectively justified.

15 The Italian Government considers that it is not possible to compare the conditions laid down by the Italian legislation with those laid down by the other Member States, as the Commission suggests. It submits that that is the case in particular with guarantees regarding companies' own funds, which are determined by a method different from that used in the other Member States.

16 However, as the Commission observes, the Italian legislation itself admits the possibility of comparing the national and foreign rules. In particular, under Article 20(8) of the Law, Consob is empowered to conclude with the supervisory authorities of other countries agreements for the mutual recognition of regulated securities markets, and it is for Consob to satisfy itself that certain standards, including the rules for supervision of markets and dealers, have an effect "equivalent to that of the Italian rules in force".

17 Moreover, according to the Commission, which was not contradicted on this point, the different methods used by Member States to determine own funds requirements ensure equivalent protection overall, even if one method may prove more protective, case by case, than another.

18 The argument that it is not possible to compare the rules on access to the profession of securities dealer in the various Member States, in particular with regard to companies' own funds, must therefore be rejected.

19 The Italian Government also considers that dealers cannot be supervised and effectively sanctioned unless they have their principal establishment in Italy. It considers that only if the principal establishment, and in particular the registered office, is located on the national territory is it possible to have all the information available which is necessary for supervision and all the factors which ensure that sanctions are effective.

20 Such an argument cannot be accepted either. The Italian Government has not shown that the location of the dealer' s principal establishment on Italian territory is the only means of supervising and effectively sanctioning the dealer in question if he wishes to operate in Italy.

21 While the obligation to have the registered office in Italy facilitates the supervision and control of the operators in the market, such an obligation is not the only means of making sure that they comply with the rules for pursuing the activity of dealer in transferable securities laid down by the Italian legislature and of imposing effective sanctions on dealers who breach those rules.

22 As the Commission observes, it is possible to require dealers who wish to operate in Italy to agree to be subject to checks or to supply the Italian authorities with the necessary documents and information to ensure that they satisfy the conditions imposed by Italian law. In particular, they could be required to supply information and documents relating specifically to the activities of their secondary establishments in Italy.

23 With respect to the solvency of operators, activity in Italy can be made subject to the provision of financial guarantees on Italian territory to cover the operations carried out on that territory.

24 Furthermore, the Italian authorities might conclude cooperation agreements regarding supervision of markets and agents, as is the case with non-member countries. Such a possibility is, moreover, as stated above, expressly provided for in Article 20(8) of the Law.

25 The Italian Government cannot rely on Article 56 of the EC Treaty, either, to argue that its legislation is consistent with Community law.

26 Even if the aims pursued by the Italian legislation may be regarded as aims of "public policy" within the meaning of those provisions, it follows a fortiori from what has been said above that the obligations at issue are not indispensable for achieving those aims and thus cannot be regarded as justified from the point of view of those provisions (see the judgment in Case C-3/88 Commission v Italy [1989] ECR 4035, paragraph 15).

27 Finally, the Italian Government cannot plead failure to respect the principle of reciprocity or rely on a possible infringement of the Treaty by another Member State to justify its own default (see the judgments in Case 232/78 Commission v France [1979] ECR 2729, paragraph 9, and Case 325/82 Commission v Germany [1984] ECR 777, paragraph 11).

28 Accordingly, the complaint of breach of Article 52 of the Treaty must be upheld.

The complaint of breach of Article 59 of the Treaty

29 The Commission submits that the obligation to pursue the activity of dealing in transferable securities in the form of a company or firm whose seat is in Italy is contrary to Article 59 of the Treaty, since it absolutely precludes the provision of services in Italy by dealers from other Member States. It considers that such an obligation is not indispensable or even necessary in any case for achieving the legitimate aims of investor protection and market stability pursued by the Italian legislation.

30 The Italian Government submits that, for the reasons stated in paragraphs 15 and 19 above, such an obligation is not merely necessary but also indispensable for achieving those aims.

31 The obligation for operators from other Member States to set up their principal establishment in Italy is the very negation of the freedom to provide services and, as can be seen from paragraphs 20 to 24 above, does not constitute a condition which is indispensable for attaining the aim pursued. It therefore infringes Article 59 of the Treaty (see the judgment in Case 205/84 Commission v Germany [1986] ECR 3755, paragraph 52).

32 Nor can the Italian Government rely on the provisions of Article 66 of the EC Treaty, for the same reasons as those stated at paragraph 26 above. It also cannot rely on failures by other Member States to fulfil their obligations to justify its own failure.

33 Accordingly, the complaint of breach of Article 59 of the Treaty must also be upheld.

34 In those circumstances, it must be held that, by restricting the activity of dealing in transferable securities (apart from by banks) to companies or firms whose registered office is in Italy, the Italian Republic has failed to fulfil its obligations under Articles 52 and 59 of the Treaty.

Decision on costs

Costs

35 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Italian Republic has been unsuccessful, it must be ordered to pay the costs.

Operative part

On those grounds,

THE COURT

hereby:

1. Declares that, by restricting the activity of dealing in transferable securities (apart from by banks) to companies or firms whose registered office is in Italy, the Italian Republic has failed to fulfil its obligations under Articles 52 and 59 of the EC Treaty;

2. Orders the Italian Republic to pay the costs.