JUDGMENT OF THE COURT (Fifth Chamber)

16 December 1999 (1)

(Social policy — Protection of employees in the event of the insolvency of theiremployer — Directive 80/987/EEC — Employees residing and employed in a Stateother than that in which the employer has its principal establishment —Guarantee institution)

In Case C-198/98,

REFERENCE to the Court under Article 177 of the EC Treaty (now Article234 EC) by the Industrial Tribunal, Bristol, United Kingdom, for a preliminaryruling in the proceedings pending before that tribunal between

G. Everson,

T.J. Barrass

and

Secretary of State for Trade and Industry,

Bell Lines Ltd (in liquidation),

on the interpretation of Article 3 of Council Directive 80/987/EEC of 20 October1980 on the approximation of the laws of the Member States relating to theprotection of employees in the event of the insolvency of their employer (OJ 1980L 283, p. 23),

THE COURT (Fifth Chamber),

composed of: L. Sevón, President of the First Chamber, acting as President of theFifth Chamber, C. Gulmann, J.-P. Puissochet, P. Jann and M. Wathelet(Rapporteur), Judges,

Advocate General: D. Ruiz-Jarabo Colomer,

Registrar: H.A. Rühl, Principal Administrator,

after considering the written observations submitted on behalf of:

—    Messrs Everson and Barrass, by M. Tether, Barrister, instructed byPattinson & Brewer, Solicitors,

—    the United Kingdom Government, by M. Ewing, of the Treasury Solicitor'sDepartment, acting as Agent, and M. Hoskins, Barrister,

—    the Irish Government, by M.A. Buckley, Chief State Solicitor, acting asAgent, E. FitzSimons, C. O hOisin and C. O'Rourke, BL,

—    the Italian Government, by Professor U. Leanza, Head of the Legal Servicein the Ministry of Foreign Affairs, acting as Agent, and G. Aiello, Avvocatodello Stato,

—    the Netherlands Government, by M.A. Fierstra, Legal Adviser at theMinistry of Foreign Affairs, acting as Agent,

—    the Commission of the European Communities, by D. Gouloussis, LegalAdviser, and N. Yerrell, a national civil servant on secondment to the LegalService, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Messrs Everson and Barrass, represented byM. Tether; the United Kingdom Government, represented by M. Ewing andM. Hoskins; the Irish Government, represented by M. Cush, SC, and C. O hOisin;the Italian Government, represented by G. Aiello; the Netherlands Government,represented by M.A. Fierstra; and the Commission, represented by D. Gouloussisand N. Yerrell, at the hearing on 6 July 1999,

after hearing the Opinion of the Advocate General at the sitting on 9 September1999,

gives the following

Judgment

1.

    By order of 6 May 1998, received at the Court on 25 May 1998, the IndustrialTribunal, Bristol, referred to the Court for a preliminary ruling under Article 177of the EC Treaty (now Article 234 EC) a question on the interpretation ofArticle 3 of Council Directive 80/987/EEC of 20 October 1980 on theapproximation of the laws of the Member States relating to the protection ofemployees in the event of the insolvency of their employer (OJ 1980 L 283, p. 23,hereinafter 'the Directive‘).

2.

    That question has arisen in a dispute between Messrs Everson and Barrass, on theone hand, and the Secretary of State for Trade and Industry ('the Secretary ofState‘), on the other, concerning payment of outstanding claims following theinsolvency of their employer, Bell Lines Ltd ('Bell‘).

The legal framework

Community law

3.

    The Directive is intended to guarantee employees a minimum level of protectionunder Community law in the event of the insolvency of their employer, withoutprejudice to more favourable provisions existing in the Member States. To thatend, it requires Member States to establish an institution which will guaranteepayment of outstanding claims to workers whose employer has become insolvent.

4.

    According to Article 1(1), the Directive applies:

'to employees' claims arising from contracts of employment or employmentrelationships and existing against employers who are in a state of insolvency withinthe meaning of Article 2(1).‘

5.

    Article 2(1) of the Directive provides:

'For the purposes of this Directive, an employer shall be deemed to be in a stateof insolvency:

(a)    where a request has been made for the opening of proceedings involving theemployer's assets, as provided for under the laws, regulations andadministrative provisions of the Member State concerned, to satisfycollectively the claims of creditors and which make it possible to take intoconsideration the claims referred to in Article 1(1), and

(b)    where the authority which is competent pursuant to the said laws,regulations and administrative provisions has:

    —    either decided to open the proceedings,

    —    or established that the employer's undertaking or business has beendefinitively closed down and that the available assets are insufficientto warrant the opening of the proceedings.‘

6.

    Article 3 of the Directive requires Member States to take the measures necessaryto ensure that guarantee institutions guarantee payment of employees' outstandingclaims resulting from contracts of employment or employment relationships andrelating to pay for the period prior to a given date.

7.

    Article 5 of the Directive provides as follows:

'Member States shall lay down detailed rules for the organisation, financing andoperation of the guarantee institutions, complying with the following principles inparticular:

(a)    the assets of the institutions shall be independent of the employers'operating capital and be inaccessible to proceedings for insolvency;

(b)    employers shall contribute to financing, unless it is fully covered by thepublic authorities;

(c)    the institutions' liabilities shall not depend on whether or not obligations tocontribute to financing have been fulfilled.‘

National legislation

8.

    Part XII of the Employment Rights Act 1996 ('the 1996 Act‘) is intended totranspose the Directive into domestic law in the United Kingdom.

9.

    According to the referring tribunal, the 1996 Act does not contain any expressprovision governing the situation in which a company which has a commercialpresence in the United Kingdom and employs workers there but which isincorporated in another Member State becomes insolvent under the law of thatother State.

The dispute in the main proceedings

10.

    Bell, at present in liquidation, is a company incorporated under Irish law with itsregistered office in Dublin. It carried on business as a shipping agent, in particular

from various business addresses in the United Kingdom, and employed 209 personsin the United Kingdom for whom employer's and employees' social securitycontributions were paid into the National Insurance Fund.

11.

    In July 1997 the High Court of Ireland made an order that Bell be wound up ongrounds of insolvency and appointed a liquidator. The High Court of Justice(England and Wales), Queen's Bench Division, recognised the appointment of theliquidator within the context of judicial cooperation in matters of insolvency andappointed joint special managers to assist in the winding up of Bell's affairs in theUnited Kingdom.

12.

    Bell's employees in the United Kingdom were dismissed. Most of them applied tothe Secretary of State under Part XII of the 1996 Act for payment in respect ofarrears of pay, outstanding holiday pay and compensatory payments in lieu ofnotice. Those applications were rejected on the ground that the 1996 Act,interpreted in the light of the judgment in Case C-117/96 Mosbæk vLønmodtagernes Garantifond [1997] ECR I-5017, did not impose any obligation tomake such payments.

13.

    The applicants in the main proceedings worked for Bell's branch at Avonmouth,near Bristol. That branch was registered with the Registrar of Companies forEngland and Wales under section 690A of and Schedule 21A to the Companies Act1985. Those rules implement, within the domestic law of the United Kingdom, thebranch registration requirements laid down in Eleventh Council Directive89/666/EEC of 21 December 1989 concerning disclosure requirements in respectof branches opened in a Member State by certain types of company governed bythe law of another State (OJ 1989 L 395, p. 36). That registration, however, didnot have the result of conferring legal personality on the Avonmouth branch.

14.

    Before the referring tribunal, the applicants in the main proceedings maintainedthat their situation was distinguishable from that in Mosbæk inasmuch as Bell hadestablished a permanent commercial presence in the United Kingdom, wasregistered in that Member State for tax, customs and social security purposes, andhad paid social security contributions in the United Kingdom in respect of itsemployees working there.

15.

    The Secretary of State contended, on the other hand, that, in so far as theproceedings for collective satisfaction of creditors' claims had been commenced inIreland, the Irish guarantee institution was responsible for settlement of the claims. Moreover, that approach had the advantage that it involved the guaranteeinstitution of only one Member State, in accordance with the objective of theDirective.

16.

    The national tribunal held, in the light of the judgment in Case C-106/89 Marleasingv La Comercial Internacional de Alimentación [1990] ECR I-4135, paragraph 8, that,

applying the principles of interpretation of national law, the 1996 Act did notimpose an obligation on the Secretary of State to indemnify the applicants in themain proceedings. It decided to stay proceedings and to ask the Court to answerthe following question:

'Where

—    (i)    an employee works in one Member State for an employerincorporated in another Member State; and

    (ii)    the employer has a branch in the Member State in which theemployee works, and that branch is registered under the nationalprovisions implementing Council Directive 89/666/EEC (the EleventhCompany Law Directive), although it is not incorporated and does nothave legal personality separate from that of the employer, in thatMember State; and

    (iii)    both the employer and the employee are required to make socialsecurity contributions in the Member State in which the employeeworks,

under Article 3 of Council Directive 80/987/EEC of 20 October 1980 on theapproximation of the laws of the Member States relating to the protection ofemployees in the event of the insolvency of their employer, which guaranteeinstitution is responsible for the payments thereby due; is it

—    (a)    the guarantee institution in the Member State in which insolvencyproceedings have been commenced, or

—    (b)    the guarantee institution in the Member State in which the employeeworks and in which the employer has a permanent commercialpresence?‘

The question submitted for a preliminary ruling

17.

    By its question, the referring tribunal is in substance asking which is the competentguarantee institution, under Article 3 of the Directive, for ensuring payment ofoutstanding wage claims in the case where the employees in question wereemployed in a Member State by the branch of a company incorporated under thelaws of another Member State, in which that company has its registered office andin which it was placed in liquidation.

18.

    According to the United Kingdom Government, the competent guaranteeinstitution is that of the Member State in which the decision was taken to openproceedings for the collective satisfaction of creditors' claims or in which it was

established that the undertaking had been definitively closed down. Thatinterpretation, which accords with the judgment in Mosbæk and has the merit ofbeing clear and simple, should be of general application in all cases where theinsolvent employer is incorporated in a Member State other than that in which theemployees reside and were employed.

19.

    In contrast, the applicants in the main proceedings and the Irish, Italian andNetherlands Governments, together with the Commission, submit that, inaccordance with the purpose of the Directive, the obligation to pay employees theamounts owing to them rests with the guarantee institution of the Member Statein which they were employed and in which the employer had a permanentcommercial presence. In this regard, the facts of the present case are clearlydistinguishable from those of Mosbæk, since Bell not only had a branch in theUnited Kingdom and was registered there in accordance with Directive 89/666, butalso had offices or other assets in that Member State and paid its workers throughits branch, collecting the taxes and social security contributions payable underUnited Kingdom legislation.

20.

    It is important at the outset to note that the purpose of the Directive is toguarantee a minimum of protection for employees adversely affected by theinsolvency of their employer. So far as the content of that guarantee is concerned,Article 3 of the Directive imposes an obligation to ensure payment of employees'outstanding claims resulting from contracts of employment or employmentrelationships and relating to pay for the period prior to a given date.

21.

    Where the employer is established in a single Member State, the Directive requiresthat the competent guarantee institution for the purposes of paying employees'outstanding claims be that of the Member State of the place of establishment.

22.

    Where, as in the main proceedings in this case, the employer has several places ofestablishment in different Member States, it is necessary, for the purpose ofdetermining the competent guarantee institution, to refer, as an additional criterionand in the light of the social objectives of the Directive, to the place in which theemployees are employed. That will in most cases correspond to the social andlanguage environment with which they are familiar.

23.

    In the main proceedings here, in contrast to the position in Mosbæk, where theinsolvent employer did not have any establishment in the territory of the MemberState in which the employee was working, the employer concerned was establishedwithin the territory of the United Kingdom, since it had a branch in Avonmouthemploying more than 200 persons, including the applicants in the main proceedings. In such a case, the institution which must settle any outstanding claims is that of theMember State within whose territory the branch is established.

24.

    The answer to the question referred must therefore be that where the employeesadversely affected by the insolvency of their employer were employed in a MemberState by the branch established in that State of a company incorporated under thelaws of another Member State, where that company has its registered office andin which it was placed in liquidation, the competent institution, under Article 3 ofthe Directive, for payment to those employees of outstanding claims is that of theState within whose territory they were employed.

Costs

25.

    The costs incurred by the United Kingdom, Irish, Italian and NetherlandsGovernments and by the Commission, which have submitted observations to theCourt, are not recoverable. Since these proceedings are, for the parties to the mainproceedings, a step in the action pending before the national tribunal, the decisionon costs is a matter for that tribunal.

On those grounds,

THE COURT (Fifth Chamber),

in answer to the question referred to it by the Industrial Tribunal, Bristol, by orderof 6 May 1998, hereby rules:

Where the employees adversely affected by the insolvency of their employer wereemployed in a Member State by the branch established in that State of a companyincorporated under the laws of another Member State, where that company has itsregistered office and in which it was placed in liquidation, the competentinstitution, under Article 3 of Council Directive 80/987/EEC of 20 October 1980 onthe approximation of the laws of the Member States relating to the protection ofemployees in the event of the insolvency of their employer, for payment to thoseemployees of outstanding claims is that of the State within whose territory theywere employed.

SevónGulmann Puissochet Jann Wathelet

Delivered in open court in Luxembourg on 16 December 1999.

R. Grass

D.A.O. Edward

Registrar

President of the Fifth Chamber

1: Language of the case: English.