Language of document : ECLI:EU:C:1998:205

JUDGMENT OF THE COURT (Sixth Chamber)

7 May 1998 (1)

(Freedom of movement for workers — National legislation requiring legalpersons to appoint as manager a person residing in the country — Indirectdiscrimination)

In Case C-350/96,

REFERENCE to the Court under Article 177 of the EC Treaty by theVerwaltungsgerichtshof, Austria, for a preliminary ruling in the proceedings pendingbefore that court between

Clean Car Autoservice GmbH

and

Landeshauptmann von Wien

on the interpretation of Article 48 of the EC Treaty and Articles 1 to 3 ofRegulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom ofmovement for workers within the Community (OJ, English Special Edition 1968(II), p. 475),

THE COURT (Sixth Chamber),

composed of: H. Ragnemalm, President of the Chamber, R. Schintgen(Rapporteur), G.F. Mancini, J.L. Murray and G. Hirsch, Judges,

Advocate General: N. Fennelly,


Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

—    Clean Car Autoservice GmbH, by Christoph Kerres, Rechtsanwalt, Vienna,

—    the Landeshauptmann von Wien, by Erich Hechtner, Senatsrat am Amt derWiener Landesregierung,

—    the Austrian Government, by Franz Cede, Ambassador, Federal Ministry ofForeign Affairs, acting as Agent, and

—    the Commission of the European Communities, by Peter Hillenkamp andPieter Jan Kuijper, Legal Advisers, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of the Commission at the hearing on 23 October1997,

after hearing the Opinion of the Advocate General at the sitting on 4 December1997,

gives the following

Judgment

1.
    By order of 8 October 1996, received at the Court on 24 October 1996, theVerwaltungsgerichtshof (Administrative Court) referred to the Court for apreliminary ruling under Article 177 of the EC Treaty two questions on theinterpretation of Article 48 of that Treaty and Articles 1 to 3 of Regulation (EEC)No 1612/68 of the Council of 15 October 1968 on freedom of movement forworkers within the Community (OJ, English Special Edition 1968 (II), p. 475).

2.
    Those questions were raised in proceedings brought by Fortress ImmobilienEntwicklungs GmbH, now Clean Car Autoservice GmbH ('Clean Car‘), anAustrian company established in Vienna, against the Landeshauptmann von Wien(Prime Minister of Vienna Land), concerning the rejection of an application byClean Car to register for a trade on the ground that it had appointed as managera person who did not reside in Austria.

The Austrian legislation

3.
    Under Paragraph 9(1) of the Gewerbeordnung 1994 (the Austrian Trade Code,hereinafter 'the GewO 1994‘), legal persons, commercial-law partnerships(whether general or limited) and registered civil partnerships (whether general orlimited) may exercise a trade, provided that they have appointed a manager ortenant in accordance with Paragraphs 39 and 40 of the GewO 1994.

4.
    Paragraph 39 of the GewO 1994 provides as follows:

'1.    The owner may for the exercise of his trade appoint a manager who isresponsible to the owner for the proper exercise of the trade and to theauthorities (Paragraph 333) for compliance with the provisions of the lawon trades; he must appoint a manager if he is not resident in Austria.

2.    The manager must satisfy the personal requirements prescribed for theexercise of the trade, be resident in Austria, and be in a position to actaccordingly in the business. In the case of a trade for which the productionof proof of qualification is prescribed, the manager of a legal person, to beappointed in accordance with Paragraph 9(1), must also:

    (1)    belong to the statutory representative organ of the legal person or

    (2)    be a worker employed in the business for at least half the normalweekly working hours and subject to full compulsory insurance inaccordance with the provisions of social security law.

    The manager of an owner who is not resident in Austria, to be appointedunder subparagraph 1 for the exercise of a trade for which the productionof proof of qualifications is prescribed, must be a worker employed in thebusiness for at least half the normal weekly working hours and subject tofull compulsory insurance in accordance with the provisions of social securitylaw. The provisions of Paragraph 39(2), in force until the coming into forceof Federal law BGBl. No 29/1993, shall continue until 31 December 1998to apply to persons who have been appointed as manager by 1 July 1993.

3.    In cases where a manager must be appointed, the owner must make use ofa manager who acts in the business accordingly.‘

5.
    Pursuant to Paragraph 370(2) of the GewO 1994, where the appointment of amanager has been notified or approved, any fines regarding the conduct of a tradeare to be imposed on that manager.

6.
    Paragraph 5(1) of the GewO 1994 provides that trades may be exercised on thebasis of the application to register the trade in question, pursuant to Paragraph 339,when the general conditions and any specific conditions are fulfilled, subject tocertain exceptions which are not relevant in the present case.

7.
    Under Paragraph 339(1) of the GewO 1994, any person wishing to exercise a trade,other than a trade for which authorisation is required and proof of competenceother than a proficiency certificate must be produced, must apply for registrationto the administrative authority of the district in which the establishment is situated.

8.
    Pursuant to Paragraph 340(1) of the GewO 1994, the district administrativeauthority examines the application for registration for a trade under Paragraph339(1) to ensure that the statutory conditions for the exercise of the trade appliedfor are satisfied by the applicant at the location concerned. If they are not, thedistrict administrative authority must, under Paragraph 340(7), make a finding tothat effect by administrative decision and prohibit the exercise of the trade inquestion.

The main proceedings

9.
    On 13 June 1995, Clean Car applied to the Magistrat der Stadt Wien (Vienna CityCouncil) to register for the trade of 'maintenance and care of motor vehicles(service station) excluding all artisanal activity‘. When making that application, itstated that it had appointed Mr Rudolf Henssen, a German national residing inBerlin, as manager in accordance with the GewO 1994; it further indicated that MrHenssen was actively seeking to rent accommodation in Austria and that thedeclaration relating to his residence there would be forwarded in due course.

10.
    By decision of 20 July 1995, the Magistrat der Stadt Wien found that the statutoryprerequisites for the exercise of that trade were not satisfied and thereforeprohibited it, on the ground that the manager must satisfy the personal conditionslaid down for the exercise of the trade in question, must have a residence inAustria and must be in a position to act effectively as manager in the business, inaccordance with Paragraph 39(2) of the GewO 1994.

11.
    On 10 August 1995, Clean Car lodged an administrative appeal against thatdecision with the Landeshauptmann von Wien, submitting that the personappointed as manager now had a residence in Austria and that, in any event, sincethe accession of the Republic of Austria to the European Union, residenceanywhere in the European Union was sufficient to satisfy the statutoryrequirements.

12.
    By decision of 2 November 1995, the Landeshauptmann von Wien dismissed theappeal, principally on the ground that, because of the constitutive nature of theapplication to register a trade, the material factual and legal situation was that

pertaining at the time the application was lodged, when the person appointed asmanager did not yet have a residence in Austria.

13.
    On 21 December 1995, Clean Car brought proceedings before theVerwaltungsgerichtshof, submitting that the arguments based on Community lawhad been ignored in the decisions of both the Magistrat der Stadt Wien and theLandeshauptmann von Wien. Clean Car referred in particular to Articles 6 and 48of the EC Treaty and submitted that the person whom it had appointed asmanager was entitled, as an employee in its service and thus as a worker, to enjoythe right to freedom of movement established by Article 48.

14.
    Taking the view that, in order to reach a decision in the case, it must determinewhether the Austrian legislation prohibiting the owner of a trade undertaking fromappointing as manager an employee not resident in Austria is contrary toCommunity law as laid down in Article 48 of the Treaty and Articles 1 to 3 ofRegulation No 1612/68, the Verwaltungsgerichtshof stayed proceedings andrequested a preliminary ruling from the Court on the following questions:

'1.    Are Article 48 of the EC Treaty and Articles 1 to 3 of RegulationNo 1612/68 to be interpreted as meaning that employers in the host Statealso derive therefrom the right to employ workers who are nationals ofanother Member State without being bound by conditions which — even ifthey do not depend on nationality — are typically linked with nationality?

2.    If employers of the host State have the right stated in Question 1: AreArticle 48 of the EC Treaty and Articles 1 to 3 of Regulation No 1612/68to be interpreted as meaning that a provision such as Paragraph 39(2) ofthe Gewerbeordnung 1994, under which the owner of a trade may appointas a manager for trade law purposes only a person whose residence is in thehost State (Austria), is consistent therewith?‘

15.
    In its order for reference, the national court indicates that the first matter to beconsidered is whether the provisions of Community law concerning freedom ofmovement for workers, which are addressed primarily to workers as such, may alsobe relied upon by employers. If so, the question then arises whether thoseprovisions preclude a rule such as that in Paragraph 39(2) of the GewO 1994,having regard in particular to the limitations envisaged in Article 48(3) of theTreaty and to the fact that, under Paragraph 370(2) of the GewO 1994, themanager is responsible, in the exercise of the trade, for compliance with theapplicable statutory provisions.

The first question

16.
    By its first question, the national court seeks in substance to determine whether therule of equal treatment in the context of freedom of movement for workers,enshrined in Article 48 of the Treaty and Articles 1 to 3 of Regulation No 1612/68,may also be relied upon by an employer in order to employ, in the Member Statein which he is established, workers who are nationals of another Member State.

17.
    It should be borne in mind, first of all, that Articles 1 to 3 of RegulationNo 1612/68 merely clarify and give effect to the rights already conferred by Article48 of the Treaty (see, to that effect, Case C-419/92 Scholz v Opera Universitaria diCagliari [1994] ECR I-505, paragraph 6).

18.
    Next, it must be noted that Article 48(1) states, in general terms, that freedom ofmovement for workers is to be secured within the Community. Under Article 48(2)and (3), such freedom of movement is to entail the abolition of any discriminationbased on nationality between workers of the Member States as regardsemployment, remuneration and other conditions of work and employment, and toentail the right, subject to limitations justified on grounds of public policy, publicsecurity or public health, to accept offers of employment actually made, to movefreely within the territory of Member States for that purpose, to stay in a MemberState in order to be employed there under the same conditions as nationals of thatState and to remain there after such employment.

19.
    Whilst those rights are undoubtedly enjoyed by those directly referred to — namely,workers — there is nothing in the wording of Article 48 to indicate that they maynot be relied upon by others, in particular employers.

20.
    It must further be noted that, in order to be truly effective, the right of workers tobe engaged and employed without discrimination necessarily entails as a corollarythe employer's entitlement to engage them in accordance with the rules governingfreedom of movement for workers.

21.
    Those rules could easily be rendered nugatory if Member States could circumventthe prohibitions which they contain merely by imposing on employers requirementsto be met by any worker whom they wish to employ which, if imposed directly onthe worker, would constitute restrictions on the exercise of the right to freedom ofmovement to which that worker is entitled under Article 48 of the Treaty.

22.
    Finally, the above interpretation is corroborated both by Article 2 of RegulationNo 1612/68 and by the Court's case-law.

23.
    It is made explicitly clear in Article 2 of Regulation No 1612/68 that any employerpursuing an activity in the territory of a Member State and any national of aMember State must be able to conclude and perform contracts of employment inaccordance with the provisions in force laid down by law, regulation oradministrative action, without any discrimination resulting therefrom.

24.
    It is, furthermore, clear from, in particular, the judgment in Case C-415/93 UnionRoyale Belge des Sociétés de Football Association and Others v Bosman and Others[1995] ECR I-4921, paragraphs 84 to 86, that justifications on grounds of publicpolicy, public security or public health, as envisaged in Article 48(3) of the Treaty,may be relied upon not only by Member States in order to justify limitations onfreedom of movement for workers under their laws, regulations or administrativeprovisions but also by individuals in order to justify such limitations underagreements or other measures adopted by persons governed by private law. Thus,if an employer may rely on a derogation under Article 48(3), he must also be ableto rely on the same principles under, in particular, Article 48(1) and (2).

25.
    In the light of those considerations, the answer to the first question must be thatthe rule of equal treatment in the context of freedom of movement for workers,enshrined in Article 48 of the Treaty, may also be relied upon by an employer inorder to employ, in the Member State in which he is established, workers who arenationals of another Member State.

The second question

26.
    By its second question, the national court wishes to ascertain, in substance, whetherArticle 48 of the Treaty precludes a Member State from providing that the ownerof an undertaking exercising a trade on the territory of that State may not appointas manager a person not resident there.

27.
    The Court has consistently held that the rules of equal treatment prohibit not onlyovert discrimination based on nationality but also all covert forms of discriminationwhich, by applying other distinguishing criteria, achieve in practice the same result(see, inter alia, Case C-266/95 Merino García v Bundesanstalt für Arbeit [1997] ECRI-3279, paragraph 33).

28.
    It is true that a provision such as Paragraph 39(2) of the GewO 1994 applieswithout regard to the nationality of the person to be appointed as manager.

29.
    However, as the Court has already held (see, inter alia, Case C-279/93 FinanzamtKöln-Altstadt v Schumacker [1995] ECR I-225, paragraph 28), national rules underwhich a distinction is drawn on the basis of residence are liable to operate mainlyto the detriment of nationals of other Member States, as non-residents are in themajority of cases foreigners.

30.
    A requirement that nationals of the other Member States must reside in the Stateconcerned in order to be appointed managers of undertakings exercising a tradeis therefore such as to constitute indirect discrimination based on nationality,contrary to Article 48(2) of the Treaty.

31.
    It would be otherwise only if the imposition of such a residence requirement werebased on objective considerations independent of the nationality of the employeesconcerned and proportionate to a legitimate aim pursued by the national law (see,to that effect, Case C-15/96 Schöning-Kougebetopoulou v Freie und HansestadtHamburg [1998] ECR I-0000, paragraph 21).

32.
    In that context, as stated at paragraph 15 above, the national court has expresslyreferred in its order for reference to the fact that, under Paragraph 370(2) of theGewO 1994, the person appointed as manager is responsible for compliance withthe applicable statutory provisions in the exercise of the trade concerned and finesmay be imposed upon him.

33.
    In their written observations, the Landeshauptmann von Wien and the AustrianGovernment have explained that the residence requirement is intended to ensurethat the manager can be served with notice of the fines which may be imposedupon him and that they can be enforced against him. The intention is also toensure that the manager satisfies the other requirement imposed on him byParagraph 39(2) of the GewO 1994, namely that he must be in a position to acteffectively as such in the business.

34.
    In that regard, the residence requirement must be held either to be inappropriatefor ensuring that the aim pursued is achieved or to go beyond what is necessary forthat purpose.

35.
    In the first place, the fact that the manager resides in the Member State in whichthe undertaking is established and exercises its trade does not itself necessarilyensure that he will be in a position to act effectively as manager in the business. A manager residing in the State but at a considerable distance from the place atwhich the undertaking exercises its trade should normally find it more difficult toact effectively in the business than a person whose place of residence, even if inanother Member State, is at no great distance from that at which the undertakingexercises its trade.

36.
    Secondly, other less restrictive measures, such as serving notice of fines at theregistered office of the undertaking employing the manager and ensuring that theywill be paid by requiring a guarantee to be provided beforehand, would make itpossible to ensure that the manager can be served with notice of any such finesimposed upon him and that they can be enforced against him.

37.
    Finally, it must be added, even such measures as those just indicated are notjustified by the aims in question if the service of notice of fines imposed on amanager resident in another Member State and their enforcement against him areguaranteed by an international convention concluded between the Member Statein which the undertaking exercises its trade and that in which the manager resides.

38.
    It must be concluded, therefore, that the residence requirement in questionconstitutes indirect discrimination.

39.
    As regards the justifications based on Article 48(3) of the Treaty, to which thenational court has also referred, it must be observed that a general rule of the kindin issue in the main proceedings cannot be justified on any grounds of publicsecurity or public health.

40.
    As regards the justification on grounds of public policy, also envisaged in Article48(3) of the Treaty, the Court has already held (Case 30/77 R v Bouchereau [1977]ECR 1999) that in so far as it may justify certain restrictions on the free movementof persons subject to Community law, recourse to the concept of public policy asused in that provision presupposes, in any event, the existence, in addition to theperturbation of the social order which any infringement of the law involves, of agenuine and sufficiently serious threat affecting one of the fundamental interestsof society.

41.
    Here, however, it does not appear from the documents in the case that any suchinterest is liable to be affected if the owner of an undertaking is free to appoint,for the purpose of exercising that undertaking's trade, a manager who does notreside in the Member State concerned.

42.
    It is thus also impossible for a national provision such as that in issue in the mainproceedings, which requires any worker appointed as manager for the exercise ofa trade to reside in the State concerned, to be justified on grounds of public policywithin the meaning of Article 48(3) of the Treaty.

43.
    In view of the foregoing considerations, the answer to the second question must bethat Article 48 of the Treaty precludes a Member State from providing that theowner of an undertaking exercising a trade on the territory of that State may notappoint as manager a person not resident there.

Costs

44.
    The costs incurred by the Austrian Government and by the Commission, whichhave submitted observations to the Court, are not recoverable. Since theseproceedings are, for the parties to the main proceedings, a step in the actionpending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions referred to it by the Verwaltungsgerichtshof by order of8 October 1996, hereby rules:

1.    The rule of equal treatment in the context of freedom of movement forworkers, enshrined in Article 48 of the EC Treaty, may also be relied uponby an employer in order to employ, in the Member State in which he isestablished, workers who are nationals of another Member State.

2.    Article 48 of the Treaty precludes a Member State from providing that theowner of an undertaking exercising a trade on the territory of that Statemay not appoint as manager a person not resident there.

Ragnemalm
Schintgen
Mancini

Murray

Hirsch

Delivered in open court in Luxembourg on 7 May 1998.

R. Grass

H. Ragnemalm

Registrar

President of the Sixth Chamber


1: Language of the case: German.