CELEX: 62001CJ0145
Language: en
Date: 2003-06-05
Title: Judgment of the Court (Sixth Chamber) of 5 June 2003. # Commission of the European Communities v Italian Republic. # Failure of a Member State to fulfil obligations - No proper letter of formal notice - Application inadmissible. # Case C-145/01.

Case C-145/01 Commission of the European CommunitiesvItalian Republic
            «(Failure of a Member State to fulfil obligations – No proper letter of formal notice – Application inadmissible)»
            
               
                  Opinion of Advocate General Léger delivered on 10 April 2003 
                     
               I - 0000 
               
            
                   
               
               
            
               
                  Judgment of the Court (Sixth Chamber), 5 June 2003  
                     
               I - 0000 
               
            
                   
               
               
            
            Summary of the Judgment
         
         
                  1..
                  Actions for failure to fulfil obligations – Examination of the merits by the Court – Situation to be taken into consideration – Situation on expiry of the period laid down by the reasoned opinion   (Art. 226 EC) 
         
                  2..
                  Actions for failure to fulfil obligations – Pre-litigation procedure – Letter of formal notice – Delimitation of the subject-matter of proceedings – Reasoned opinion referring to rules other than those cited in the letter of formal notice – Inadmissibility of the action   (Art. 226 EC) 
         
         1.
          In an action under Article 226 EC, the question whether a Member State has failed to fulfil its obligations must be determined
         by reference to the situation prevailing in the Member State at the end of the period laid down in the reasoned opinion and,
         in accordance with the second paragraph of Article 226 EC, if a Member State has put a stop to the infringement before the
         end of that period, the Commission may no longer bring an action before the Court of Justice.  see para. 15
         
         2.
          In the system established by Article 226 EC, the purpose of the pre-litigation procedure is to give the Member State concerned
         an opportunity to comply with its obligations under Community law or to avail itself of its right to defend itself against
         the complaints made by the Commission. The proper conduct of that procedure thus constitutes an essential guarantee required
         by the Treaty in order to protect the rights of the Member State concerned. It is only when that guarantee is observed that
         the contentious procedure before the Court can enable it to judge whether the Member State has in fact failed to fulfil the
         obligations which the Commission alleges it has breached. More specifically, the purpose of the letter of formal notice in
         the pre-litigation procedure is to delimit the subject-matter of the dispute and to indicate to the Member State, which is
         invited to submit its observations, the factors enabling it to prepare its defence. It follows that the reasoned opinion and
         the application made to the Court pursuant to the second paragraph of Article 226 EC are flawed, with regard to the rights
         of the defence, since they refer to rules of Community law other than those cited in the letter of formal notice and since
         the change in the legal situation is likely to have affected the assessment of the compatibility of the national legislation
         in question with Community law.  see paras 17-18
      

      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
            
            JUDGMENT OF THE COURT (Sixth Chamber)5 June 2003  (1)
         
         
            
         
               ((Failure of a Member State to fulfil obligations – No proper letter of formal notice – Application inadmissible))
               
            In Case C-145/01, 
            
            
             Commission of the European Communities,  represented by A. Aresu, acting as Agent, with an address for service in Luxembourg,
            
            
            applicant, 
            
            v
             Italian Republic,  represented by U. Leanza, acting as Agent, and by D. Del Gaizo, avvocato dello Stato, with an address for service in Luxembourg,
            
            defendant, 
            
            APPLICATION for a declaration that, by maintaining in force Article 47(5) and (6) of Law No 428 of 29 December 1990 laying
            down provisions for compliance with the obligations arising from Italy's membership of the European Communities (Community
            Law for 1990) (ordinary supplement to GURI No 10 of 12 January 1991, p. 5), which:
            
            
            ─
            allow for the non-application of the automatic transfer of all contracts of employment or employment relationships, from the
            transferor to the transferee, in respect of undertakings subject to an approved composition procedure involving the transfer
            of assets or a special administration procedure, where those undertakings pursue their activity after the transfer, and 
            
            
            ─
            in respect of undertakings declared to be  
            in a situation of economic crisis, do not provide for the transfer, from the transferor to the transferee, of employees and debts arising from a contract of
            employment or employment relationship, 
            
            the Italian Republic has failed to fulfil its obligations under 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 (OJ 1977 L 61, p. 26), in particular Articles 3 and 4 thereof,
            
            
            THE COURT (Sixth Chamber),,
            
            composed of: J.-P. Puissochet (Rapporteur), President of the Chamber, R. Schintgen, C. Gulmann, F. Macken and J.N. Cunha Rodrigues, Judges, 
            
            Advocate General: P. Léger, Registrar: R. Grass, 
            
            
            having regard to the report of the Judge-Rapporteur,
            
            after hearing the Opinion of the Advocate General at the sitting on 10 April 2003, 
         gives the following
         
         
         Judgment
         1
            
         By application lodged at the Registry of the Court on 29 March 2001, the Commission of the European Communities brought an
         action under Article 226 EC for a declaration that, by maintaining in force Article 47(5) and (6) of Law No 428 of 29 December
         1990 laying down provisions for compliance with the obligations arising from Italy's membership of the European Communities
         (Community Law for 1990) (ordinary supplement to GURI No 10 of 12 January 1991, p. 5,  
         Law No 428/1990), which: 
         
         
         ─
         allow for the non-application of the automatic transfer of all contracts of employment or employment relationships, from the
         transferor to the transferee, in respect of undertakings subject to an approved composition procedure involving the transfer
         of assets or a special administration procedure, where those undertakings pursue their activity after the transfer, and 
         
         
         
         ─
         in respect of undertakings declared to be  
         in a situation of economic crisis, do not provide for the transfer, from the transferor to the transferee, of employees and debts arising from a contract of
         employment or employment relationship, 
         
         the Italian Republic has failed to fulfil its obligations under 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 (OJ 1977 L 61, p. 26), in particular Articles 3 and 4 thereof.
         
            
               Legal background
            
         
         2
            
         In the version in force at the date on which the Commission gave the Italian Republic formal notice to submit its observations
         on the alleged failure to fulfil its obligations, that is, on 16 July 1997, Section II of Directive 77/187, entitled  
         Safeguarding of employees' rights, provided as follows:  Article 3 
         
         1.
          The transferor's rights and obligations arising from a contract of employment or from an employment relationship existing
         on the date of a transfer ... shall, by reason of such transfer, be transferred to the transferee.
         Member States may provide that, after the date of transfer ... and in addition to the transferee, the transferor shall continue
         to be liable in respect of obligations which arose from a contract of employment or an employment relationship.
         
         2.
          Following the transfer ... the transferee shall continue to observe the terms and conditions agreed in any collective agreement
         on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective
         agreement or the entry into force or application of another collective agreement.
         Member States may limit the period for observing such terms and conditions, with the provision that it shall not be less than
         one year.... Article 4 
         
         1.
          The transfer of an undertaking, business or part of a business shall not in itself constitute grounds for dismissal by the
         transferor or the transferee. This provision shall not stand in the way of dismissals that may take place for economic, technical
         or organisational reasons entailing changes in the work-force.
         ...
         
         
         3
            
         Directive 77/187 was amended by Council Directive 98/50/EC of 29 June 1998 (OJ 1998 L 201, p. 88). In accordance with Article
         3 of that directive, it entered into force on 17 July 1998 and was thus applicable at the date on which the Commission issued
         its reasoned opinion concerning the alleged failure to fulfil obligations, namely on 4 August 1999. 
         
         
         4
            
         Directive 98/50 amended  
          inter alia  the second subparagraph of Article 3(1) of Directive 77/187, which now reads as follows: Member States may provide that, after the date of transfer, the transferor and the transferee shall be jointly and severally
         liable in respect of obligations which arose before the date of transfer from a contract of employment or an employment relationship
         existing on the date of the transfer.
         
         
         5
            
         Directive 98/50 also introduced Article 4a into Directive 77/187, which is worded as follows: 
         
         1.
          Unless Member States provide otherwise, Articles 3 and 4 shall not apply to any transfer of an undertaking, business or part
         of an undertaking or business where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings
         which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of
         a competent public authority (which may be an insolvency practitioner authorised by a competent public authority).
         
         
         2.
          Where Articles 3 and 4 apply to a transfer during insolvency proceedings which have been opened in relation to a transferor
         (whether or not those proceedings have been instituted with a view to the liquidation of the assets of the transferor) and
         provided that such proceedings are under the supervision of a competent public authority (which may be an insolvency practitioner
         determined by national law) a Member State may provide that:
         
         
         (a)
         notwithstanding Article 3(1), the transferor's debts arising from any contracts of employment or employment relationships
         and payable before the transfer or before the opening of the insolvency proceedings shall not be transferred to the transferee,
         provided that such proceedings give rise, under the law of that Member State, to protection at least equivalent to that provided
         for in situations covered by 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,  
         and, or alternatively, that,
         
         (b)
         the transferee, transferor or person or persons exercising the transferor's functions, on the one hand, and the representatives
         of the employees on the other hand may agree alterations, in so far as current law or practice permits, to the employees'
         terms and conditions of employment designed to safeguard employment opportunities by ensuring the survival of the undertaking,
         business or part of the undertaking or business. 
         
         
         3.
          A Member State may apply paragraph 2(b) to any transfers where the transferor is in a situation of serious economic crisis,
         as defined by national law, provided that the situation is declared by a competent public authority and open to judicial supervision,
         on condition that such provisions already exist in national law by 17 July 1998.
         ...
         
         4.
          Member States shall take appropriate measures with a view to preventing misuse of insolvency proceedings in such a way as
         to deprive employees of the rights provided for in this Directive.
         
         
         
         6
            
         Article 2112 of the Codice Civile (Civil Code), in the version in force during the pre-litigation procedure, provided as follows:
          Transfer of an undertaking
         
         (1)
         On the transfer of an undertaking, the employment relationship shall continue with the transferee and the employee shall retain
         all rights under that relationship.  
         
         
         (2)
         The transferor and the transferee shall be jointly and severally liable in respect of all rights which the employee had on
         the date of the transfer. The employee may agree to release the transferee from the obligations flowing from the employment
         relationship, in accordance with the procedures provided for in Articles 410 and 411 of the Codice di Procedura Civile (Code
         of Civil Procedure). 
         
         
         (3)
         The transferee shall be bound to apply the economic and regulatory measures provided for in collective agreements, including
         company agreements, in force at the date of the transfer, until their expiry, unless they are replaced by other collective
         agreements applicable to the transferee's undertaking. 
         
         
         (4)
         The provisions of this article shall also apply in the case of usufruct or lease in respect of the undertaking.
         
         
         
         7
            
         Article 47(5) and (6) of Law No 428/1990, the subject-matter of this action for failure to fulfil obligations, provide as
         follows: Where the transfer concerns an undertaking or production unit declared by the CIPI [Inter-Ministerial Committee for the Coordination
         of Industrial Policy] to be in a  
         crisis situation pursuant to the fifth paragraph under (c) of Article 2 of Law No 675 of 12 August 1977 or an undertaking which has been declared
         insolvent or has been the subject of an approved composition involving the transfer of assets, a compulsory liquidation or
         a special administration procedure ─ whether or not provision has been made for the continuation of the business or the consultation
         referred to in the foregoing paragraphs has resulted in any agreement providing for the continued employment of personnel,
         even in part ─, Article 2112 of the Civil Code shall not, unless that agreement lays down more favourable conditions, apply
         to employees whose employment relationship continues with the transferee.  Such an agreement may additionally provide that
         surplus personnel are to be excluded from the transfer and that the latter are to continue, wholly or in part, in the service
         of the transferor. Those employees who are not recruited by the transferee, the lessee or the new operator have a right of priority in respect
         of vacancies filled by the latter during a period of one year from the transfer or during a longer period fixed by collective
         agreement. Article 2112 of the Civil Code does not apply to those abovementioned employees, who are recruited by the transferee,
         the lessee or the new operator after the transfer of the undertaking.
         Pre-litigation procedure
         
         8
            
         The letter of formal notice of 16 July 1997 from the Commission to the Italian Republic alleges incorrect implementation of
         Articles 3(1) and 4(1) of Directive 77/187 by reason of the content of Article 47(5) and (6) of Law No 428/1990. In support
         of its analysis, the Commission refers in particular to the Court's interpretation of that directive, especially in Case C-472/93
          
          Spano and Others  [1995] ECR I-4321. The Commission adds: On 24 February 1997, an amended proposal for a directive amending Directive 77/187/EEC (Document COM(97) 60 final) was presented
         to the Commission. That proposal envisages allowing for greater flexibility for transfers effected under insolvency procedures,
         which in some ways is similar to the Italian legislation. I would, however, in any event point out that the Italian legislation
         will have to be adapted, even if the amendment to the directive is adopted as proposed by the Commission. The mere fact that
         a situation of  
         economic crisis has been declared by an administrative authority is not affected by the proposal for a directive, since the revised provisions
         require there to be an insolvency procedure.
         
         
         9
            
         Having examined the response of the Italian authorities given in a letter of 16 September 1997, the Commission issued its
         reasoned opinion on 4 August 1999. It concluded as follows: ... by maintaining in force Article 47(5) and (6) of Law No 428 of 29 December 1990, which: 
         
         
         ─
            allow for the non-application of the automatic transfer of all contracts of employment or employment relationships, from the
            transferor to the transferee, in respect of undertakings subject to an approved composition procedure involving the transfer
            of assets or a special administration procedure, where those undertakings pursue their activity after the transfer, and 
         
         
         
         ─
            in respect of undertakings declared to be  
            in a situation of economic crisis, do not provide for the transfer, from the transferor to the transferee, of employees and debts arising from a contract of
            employment or employment relationship, 
         the Italian Republic has failed to fulfil its obligations under Directive 77/187 ... and in particular Articles 3 and 4 thereof.
         In accordance with the second paragraph of Article 226 EC, the Commission requests the Italian Republic to take the measures
         necessary to comply with this reasoned opinion within two months of its notification.
         
         
         10
            
         In paragraph 4 of the considerations set out in its reasoned opinion, the Commission recalls the Court's case-law referred
         to in the letter of formal notice. It adds in paragraph 5: The Commission next wishes to point out that the new Directive 98/50/EC, whilst allowing for a certain amount of flexibility
         in respect of transfers of undertakings in difficulty, is not so close to the Italian legislation as to render the latter
         fully compatible with Community law ... .
         
         
         11
            
         Paragraphs 5 and 6 of the reasoned opinion contain an analysis aimed at substantiating that finding as regards the effects
         of the introduction by Directive 98/50 of Article 4a into Directive 77/187. 
         Admissibility of the action
         
         12
            
         Without formally raising a preliminary issue under Article 91 of the Rules of Procedure, the Italian Government submits principally
         that the action is inadmissible. It claims that, after the letter of formal notice but prior to notification of the reasoned
         opinion, Directive 77/187 was substantially amended by Directive 98/50, particularly as regards the application of Articles
         3 and 4 in the context of transfers taking place during liquidation or insolvency proceedings or rescues of undertakings in
         difficulty. In the reasoned opinion the Commission took account of those amendments and did not limit in time the complaints
         addressed to the Italian Republic. Thus the content of those complaints was, if not expanded, at least different from that
         set out in the letter of formal notice. 
         
         
         13
            
         The Commission counters that the infringements of Community law of which it complains are the same in the reasoned opinion
         and in the letter of formal notice, namely infringement of Articles 3 and 4 of Directive 77/187. The reference to the provisions
         of Directive 98/50 in the reasoned opinion and the application is intended solely to strengthen the Commission's position
         by showing that the infringements of Directive 77/187 have not been eradicated by the entry into force of Directive 98/50
         but, on the contrary, continue exactly as before. It would, incidentally, be ironic if the entry into force of a directive
         which amended a previous directive were to authorise a Member State to continue to infringe the first directive when the amending
         directive did not make any substantive changes to the first directive. 
         
         
         14
            
         The Commission's line of argument on this point cannot be accepted. 
         
         
         15
            
         It is settled case-law that the question whether a Member State has failed to fulfil its obligations must be determined by
         reference to the situation prevailing in that Member State at the end of the period laid down in the reasoned opinion (see,
          
          inter alia ,  Case C-200/88  
          Commission  v  
          Greece  [1990] ECR I-4299, paragraph 13; and Case C-299/01  
          Commission  v  
          Luxembourg  [2002] ECR I-5899, paragraph 11). In accordance with the second paragraph of Article 226 EC, if a Member State has put a
         stop to the infringement before the end of that period, the Commission may no longer bring an action before the Court of Justice.
         
         
         
         16
            
         In this case, it is the situation prevailing in October 1999, that is, two months after notification of the reasoned opinion
         to the Italian Republic, which falls to be examined by the Court. At that time, however, Directive 98/50 had been in force
         for more than a year. As was pointed out in paragraph 5 of this judgment, that directive introduced Article 4a into Directive
         77/187 which, to a certain extent and in certain circumstances, allows a Member State not to apply Articles 3 and 4 of that
         directive. Article 47(5) and (6) of Law No 428/1990, the subject-matter of this action by the Commission, may well, at least
         partially, correspond to the situations contemplated in Article 4a. The reasoned opinion does in fact devote two entire paragraphs
         to showing that, notwithstanding the introduction of that article, the Italian legislation remains contrary to Articles 3
         and 4 of Directive 77/187 (see paragraphs 10 and 11 of this judgment). However, the Commission's letter of formal notice,
         issued in July 1997, does not contain ─ and, moreover, could not contain ─ any analysis of that legislation in the light of
         Article 4a of Directive 77/187, a provision which did not yet exist. As indicated in paragraph 8 of this judgment, in that
         letter the Commission confined itself to referring to the amended proposal for a directive amending Directive 77/187, the
         text of which, moreover, was not retained as such by the Council when it adopted Directive 98/50. The Italian authorities,
         who responded diligently in September 1997 to the Commission's letter of formal notice, were thus unable, at that stage of
         the pre-litigation procedure, to defend the Italian Republic by taking Article 4a of Directive 77/187 into account, yet that
         provision, which had the effect of lessening the obligations imposed on the Member States, was in force in October 1999 at
         the end of the time-limit fixed in the reasoned opinion and was likely to have affected the assessment of whether the Italian
         legislation was compatible with Directive 77/187. 
         
         
         17
            
         It should be borne in mind that the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity
         to comply with its obligations under Community law or to avail itself of its right to defend itself against the complaints
         made by the Commission (see Case 293/85  
          Commission  v  
          Belgium  [1988] ECR 305, paragraph 13; and order in Case C-266/94  
          Commission  v  
          Spain  [1995] ECR I-1975, paragraph 16). The proper conduct of that procedure thus constitutes an essential guarantee required by
         the EC Treaty in order to protect the rights of the Member State concerned. It is only when that guarantee is observed that
         the contentious procedure before the Court can enable it to judge whether the Member State has in fact failed to fulfil the
         obligations which the Commission alleges it has breached (order in  
          Commission  v  
          Spain , paragraphs 17 and 18). More specifically, the purpose of the letter of formal notice in the pre-litigation procedure is
         to delimit the subject-matter of the dispute and to indicate to the Member State, which is invited to submit its observations,
         the factors enabling it to prepare its defence. 
         
         
         18
            
         It follows that the reasoned opinion and the application made to the Court pursuant to the second paragraph of Article 226
         EC are flawed, with regard to the rights of the defence, since they refer to rules of Community law other than those cited
         in the letter of formal notice and since the change in the legal situation is likely to have affected the assessment of the
         compatibility of the national legislation in question with Community law. 
         
         
         19
            
         It follows from all the foregoing that the Commission's application must be dismissed as inadmissible.   
         
         Costs
         20
            
         Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
         applied for in the successful party's pleadings.  Since the Italian Republic has asked that the Commission be ordered to pay
         the costs and the latter has been unsuccessful in its pleadings, it must be ordered to pay the costs.  
         
         On those grounds, 
         
         
         
            
            THE COURT (Sixth Chamber)
         
         
         hereby:  
         
            
            1.
             Dismisses the application as inadmissible; 
            
            
            2.
             Orders the Commission of the European Communities to pay the costs. 
            
            
                  Puissochet
               
               
                  Schintgen 
               
               
                  Gulmann 
               
            
                  Macken
               
               
                  Cunha Rodrigues 
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
                  
               
               
                  
               
               
                  
               
            
            
            
            
            
            
            
            
         
         
         Delivered in open court in Luxembourg on 5 June 2003. 
         
         
         
         
                  R. Grass 
               
               
                  J.-P. Puissochet  
               
            
         
         
         
                  Registrar
               
               
                  President of the Sixth Chamber
               
            
      
      
          1 –
            
             Language of the case: Italian.