JUDGMENT OF THE COURT (Sixth Chamber)

11 December 1997 (1)

(Freedom to provide services — Placement of employees — Exclusion of privateundertakings — Exercise of official authority)

In Case C-55/96,

REFERENCE to the Court under Article 177 of the EC Treaty by the Corted'Appello, Milan, Italy, for a preliminary ruling in the non-contentious proceedings(giurisdizione volontaria) brought before that court by

Job Centre Coop. arl

on the interpretation of Articles 48, 49, 55, 56, 59, 60, 62, 66, 86 and 90 of the ECTreaty,

THE COURT (Sixth Chamber),

composed of: R. Schintgen, President of the Second Chamber, acting as Presidentof the Sixth Chamber, G.F. Mancini and P.J.G. Kapteyn (Rapporteur), Judges,

Advocate General: M.B. Elmer,

Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

—    Job Centre Coop. arl, by Pietro Ichino, of the Milan Bar, Christian Jacobs,Rechtsanwalt, Bremen, Renzo Morresi, of the Bologna Bar, and CaterinaRucci, of the Milan Bar,

—    the Italian Government, by Umberto Leanza, Head of the Legal Service inthe Ministry of Foreign Affairs, acting as Agent, and Danilo del Gaizo,Avvocato dello Stato,

—    the German Government, by Ernst Röder, Ministerialrat in the FederalMinistry of the Economy, and Bernd Kloke, Regierungsrat in the sameMinistry, acting as Agents,

—    the Norwegian Government, by Irvin Høyland, Deputy Director General inthe Ministry of Foreign Affairs, acting as Agent,

—    the Commission of the European Communities, by Enrico Traversa, of itsLegal Service, acting as Agent,

having regard to the Report for the Hearing,

after hearing the oral observations of Job Centre Coop. arl, the Italian Governmentand the Commission at the hearing on 13 March 1997,

after hearing the Opinion of the Advocate General at the sitting on 15 May 1997,

gives the following

Judgment

1.

    By order of 30 January 1996, which was received at the Court on 23 February 1996,the Corte d'Appello (Court of Appeal), Milan, referred to the Court for apreliminary ruling under Article 177 of the EC Treaty three questions on theinterpretation of Articles 48, 49, 55, 56, 59, 60, 62, 66, 86 and 90 of the EC Treaty.

2.

    Those questions were raised in the context of an appeal under Article 2330(4) ofthe Italian Civil Code against a refusal by the Tribunale Civile e Penale (Civil andCriminal District Court), Milan, to confirm the instrument establishing Job CentreCoop. arl ('JCC‘).

3.

    JCC is a cooperative society with limited liability which is in the course of being setup, with its head office in Milan. Under its statutes, its business is to include, inparticular, serving as an intermediary between supply and demand on theemployment market and providing temporary staff for third parties. Its object is toenable workers and undertakings, whether they are members or not, to draw onsuch services on the employment market in Italy and the Community.

4.

    In Italy, the employment market is subject to a mandatory placement systemadministered by public placement offices and regulated by Law No 264 of 29 April1949. Article 11(1) of that Law prohibits the pursuit of any activity, evenunremunerated, as an intermediary between supply of and demand for paidemployment. Any placement contrary to those rules or engagement of employeesthrough an intermediary other than a placement office gives rise, according to LawNo 264, to penal or administrative sanctions. Furthermore, employment contractsconcluded in breach of those rules may be annulled by the courts following acomplaint by the placement office, which must be lodged within one year from theengagement of an employee, and at the request of the Public Prosecutor.

5.

    The first paragraph of Article 1 of Law No 1369 of 23 October 1960 lays down aprohibition on acting as an intermediary in employment relationships, whether asan employment agency or as an employment business, failure to comply with whichgives rise to the penal sanctions provided for in Article 2 thereof. Under the finalparagraph of Article 1, any persons employed in breach of the first paragraph ofArticle 1 are legally regarded in all respects as engaged by the undertaking whichhas in fact used their services.

6.

    On 28 January 1994, the chairman of JCC, which was in the course of being set up,applied to the Tribunale Civile e Penale, Milan, for confirmation of the instrumentestablishing it in accordance with Article 2330(3) of the Italian Civil Code. By orderof 31 March 1994, that court stayed the confirmation procedure and submitted tothe Court of Justice for a preliminary ruling two questions concerning variousarticles of the EC Treaty that it considered relevant to its decision on theapplication for confirmation of the instrument establishing JCC.

7.

    In its judgment of 19 October 1995 in Case C-111/94 Job Centre [1995] ECR I-3361,the Court held that it had no jurisdiction to rule on the questions raised by theTribunale Civile e Penale, Milan, on the ground that when the national court rulesunder the 'giurisdizione volontaria‘ procedure on an application for confirmationof the instrument establishing a company with a view to its registration, it isperforming a non-judicial function which, in other Member States, is entrusted toadministrative authorities. It is exercising administrative authority without being atthe same time called upon to settle any dispute.

8.

    Following that judgment, by decision of 18 December 1995 the Tribunale Civile ePenale, Milan, dismissed the application for confirmation of the instrument

establishing JCC submitted by its representative, on the ground that its businessobjects were incompatible with certain mandatory rules of Italian employmentlegislation.

9.

    JCC appealed against that refusal, under Article 2330(4) of the Italian Civil Code,to the Corte d'Appello, Milan, seeking to have the Tribunale's decision set asideand the instrument establishing it confirmed.

10.

    The Corte d'Appello considered that JCC's appeal raised questions ofinterpretation of Community law and decided to stay the proceedings and refer tothe Court of Justice for a preliminary ruling the following questions:

'1.    May the provisions of Italian national law contained in Article 11(1) of LawNo 264 of 29 April 1949 and the first paragraph of Article 1 of Law No1369 of 23 October 1960, whereby the business of acting as an intermediaryand negotiator between supply and demand on the employment market,whether as an employment agency or as an employment business, isprohibited unless carried on by the public offices specified in thoseprovisions, be regarded as relating to the exercise of official authority withinthe meaning of the combined provisions of Articles 66 and 55 of the ECTreaty in view of the fact that they are treated by Italian law as relating tomatters of public policy because their purpose is to protect the interests ofworkers and the national economy?

2.    Must those provisions, in view of their general scope, be regarded asconflicting with the principles of Community law laid down by Articles 48,49, 59, 60, 62, 66, 86 and 90 of the said Treaty concerning the right to work,freedom of economic initiative, freedom of movement for workers andothers, freedom of supply and demand for work and services, free and faircompetition between economic agents and the prohibition of abuse ofdominant positions?

3.    In the event that the abovementioned legislation of the Italian Stateconcerning operation of an employment agency or an employment businessis in breach of the principles of Community law mentioned in the foregoingquestion, must the judicial and administrative authorities of that MemberState consider themselves bound to apply those principles directly, allowingpublic and private bodies and undertakings to act as intermediaries betweenthose offering and those seeking employment and temporary work, providedthat the provisions governing employment contracts and mandatory socialsecurity are complied with and subject to the controls provided for by law?‘

11.

    It appears from the file in the main proceedings that by those questions thenational court is asking, essentially, whether the provisions of the Treaty concerningfreedom of movement for workers, freedom to provide services and competitionpreclude national legislation under which any activity as an intermediary between

supply and demand in employment relationships is prohibited unless carried on bypublic placement agencies.

12.

    JCC is a cooperative society with limited liability in the course of being set upwhich, in the main proceedings, has claimed the right to act as an intermediarybetween supply and demand on the employment market and to provide temporarystaff.

13.

    In so far as the questions refer to provisions concerning freedom of movement forworkers, it need merely be pointed out that it does not follow from the fact thatworkers are among the founding members of JCC that Article 48 is applicable,since once JCC has been set up and is in operation it will be an independent legalperson.

14.

    Accordingly, the provisions concerning freedom of movement for workers have norelevance for the dispute in the main proceedings.

15.

    In so far as the questions refer to Articles 86 and 90 of the Treaty, they raise theproblem of the extent of the exclusive right granted to public placement offices,and hence of the prohibition, giving rise to penal and administrative sanctions, ofany activity as an intermediary between supply and demand on the employmentmarket by private companies.

16.

    Consideration must therefore be given first of all to the interpretation of thoseprovisions of the Treaty.

Interpretation of Articles 86 and 90 of the Treaty

17.

    JCC claims, essentially, that the prohibition of the business of acting as anintermediary between supply and demand on the employment market, unlesscarried on by public bodies, is contrary to Articles 86 and 90 of the Treaty, sincepublic placement offices are not able to satisfy market demand for such activities.In that connection JCC refers, in particular, to Case C-41/90 Höfner and Elser vMacrotron [1991] ECR I-1979.

18.

    The German and Norwegian Governments, and the Commission, maintain that anexclusive right to place employees should be assessed in the light of the principlesthat can be extracted from the judgment in Höfner and Elser, cited above.

19.

    The Italian Government states, first, that the legislation at issue in the mainproceedings does not grant any undertaking special or exclusive rights as regardsthe sub-contracting of employment, but is confined to prohibiting any type ofactivity as an intermediary in employment relationships. It then considers that, inthe light of the particular characteristics and social objectives of the public

placement of employees in Italy, it cannot be regarded as an economic activity, andtherefore as a business activity. Lastly, it maintains that the public monopoly onplacement is not capable of causing the effects referred to in Article 86(b) of theTreaty.

20.

    Having regard to the foregoing considerations, it is necessary to establish whetherpublic placement offices such as those referred to in Article 11(1) of Law No 264may be regarded as undertakings within the meaning of Articles 85 and 86 of theTreaty (see Höfner and Elser, cited above, paragraph 20).

21.

    It must be observed, in the context of competition law, first, that the concept of anundertaking encompasses every entity engaged in an economic activity, regardlessof its status and the way in which it is financed and, second, that the placement ofemployees is an economic activity.

22.

    The fact that the placement of employees is normally entrusted to public officescannot affect the economic nature of such activities. Placement of employees hasnot always been, and is not necessarily, carried out by public entities.

23.

    The Italian Government further contends that according to Joined Cases C-159/91and C-160/91 Poucet and Pistre v Assurances Générales de France and Others [1993]ECR I-637, a social security body acting under a monopoly system is not anundertaking within the meaning of Article 86 of the Treaty; in paragraphs 18 and19 of that judgment the Court held that such activity was not an economic activity,since it was based on the principle of national solidarity and was entirely non-profit-making.

24.

    However, although it is clear from that judgment that administering mandatorysocial security schemes such as those described in the references for a preliminaryruling in Poucet and Pistre, cited above, does not constitute an economic activity,that conclusion, in paragraph 17, was based on the same criteria as had beenapplied in Höfner and Elser when it was concluded that employment procurementmust be described as a business activity within the meaning of the Communitycompetition rules.

25.

    A body such as a public placement office may therefore be classed as anundertaking for the purposes of the Community competition rules.

    

26.

    Public placement offices entrusted under the legislation of a Member State with theoperation of services of general economic interest, such as those envisaged inArticle 11(1) of Law No 264, remain subject to the competition rules pursuant toArticle 90(2) of the Treaty unless and to the extent to which it is shown that theirapplication is incompatible with discharge of their duties (see Case 155/73 Sacchi[1974] ECR 409, paragraph 15, and Höfner and Elser, cited above, paragraph 24).

27.

    As regards the operation of public placement offices enjoying an exclusive right,compliance with which is ensured by a prohibition of any activity as an intermediaryin employment relationships on pain of penal and administrative sanctions such asthose provided for in Laws Nos 264 and 1369, it must be stated that the applicationof Article 86 of the Treaty cannot obstruct the performance of the particular taskassigned to those offices if they are manifestly not in a position to satisfy demandin that area of the market.

28.

    Whilst it is true that Article 86 concerns undertakings and may be applied withinthe limits laid down by Article 90(2) to public undertakings or undertakings vestedwith exclusive rights or specific rights, the Treaty nevertheless requires the MemberStates not to take or maintain in force measures which could destroy theeffectiveness of that provision (see Case 13/77 Inno v ATAB [1977] ECR 2115,paragraphs 31 and 32, and Höfner and Elser, cited above, paragraph 26). Article90(1) provides that the Member States are not to enact or maintain in force, in thecase of public undertakings and the undertakings to which they grant special orexclusive rights, any measure contrary to the rules contained in the Treaty, inparticular those provided for in Articles 85 to 94.

29.

    Consequently, any measure adopted by a Member State which maintains in forcestatutory provisions that create a situation in which public placement offices cannotavoid infringing Article 86 is incompatible with the rules of the Treaty.

30.

    In the first place, an undertaking vested with a legal monopoly may be regarded asoccupying a dominant position within the meaning of Article 86 of the Treaty (seeCase 311/84 CBEM v CLT and IPB [1985] ECR 3261, paragraph 16), and theterritory of a Member State to which that monopoly extends may constitute asubstantial part of the common market (see Case 322/81 Michelin v Commission[1983] ECR 3461, paragraph 28).

31.

    Secondly, the mere creation of such a dominant position by granting an exclusiveright within the meaning of Article 90(1) is not as such incompatible with Article86 of the Treaty (see CBEM, cited above, paragraph 17; Höfner and Elser, citedabove, paragraph 29; Case C-320/91 Corbeau [1993] ECR I-2533, paragraph 11;and Case C-323/93 Centre d'Insémination de la Crespelle v Coopérative de laMayenne [1994] ECR I-5077, paragraph 18). A Member State will contravene theprohibition contained in those two provisions only if the undertaking in question,merely by exercising the exclusive right granted to it, cannot avoid abusing itsdominant position (see Case C-387/93 Banchero [1995] ECR I-4663, paragraph 51).

32.

    Pursuant to Article 86(b) of the Treaty, such abuse may in particular consist inlimiting the provision of a service, to the prejudice of those seeking to availthemselves of it.

33.

    As the Commission has rightly pointed out, the market in the provision of servicesrelating to the placement of employees is both very extensive and extremelydiverse. Supply and demand on that market cover all sectors of production andrelate to a range of jobs requiring anything from unskilled labour to the scarcestand most specialized professional qualifications.

34.

    On such an extensive and differentiated market, which is, moreover, subject toenormous changes as a result of economic and social developments, publicplacement offices may well be unable to satisfy a significant portion of all requestsfor services.

35.

    By prohibiting, on pain of penal and administrative sanctions, any activity as anintermediary between supply and demand on the employment market unlesscarried on by public placement offices, a Member State creates a situation in whichthe provision of a service is limited, contrary to Article 86(b) of the Treaty, if thoseoffices are manifestly unable to satisfy demand on the employment market for alltypes of activity.

36.

    Thirdly, the question of the responsibility imposed on a Member State by virtue ofArticles 86 and 90(1) of the Treaty arises only if the abusive conduct on the partof the placement agency concerned is liable to affect trade between MemberStates. That does not mean that the abusive conduct in question must actually haveaffected such trade. It is sufficient to establish that it is capable of having such aneffect (see Michelin v Commission, cited above, paragraph 104).

37.

    A potential effect of that kind on trade between Member States arises in particularwhere the placement of employees by private companies may extend to thenationals or to the territory of other Member States.

38.

    In view of all the foregoing considerations, the reply to the national court must bethat public placement offices are subject to the prohibition contained in Article 86of the Treaty, so long as application of that provision does not obstruct theperformance of the particular task assigned to them. A Member State whichprohibits any activity as an intermediary between supply and demand on theemployment market, whether as an employment agency or as an employmentbusiness, unless carried on by those offices, is in breach of Article 90(1) of theTreaty where it creates a situation in which those offices cannot avoid infringingArticle 86 of the Treaty. That is the case, in particular, in the followingcircumstances:

—    the public placement offices are manifestly unable to satisfy demand on themarket for all types of activity; and

—    the actual placement of employees by private companies is renderedimpossible by the maintenance in force of statutory provisions under which

such activities are prohibited and non-observance of that prohibition givesrise to penal and administrative sanctions; and

—    the placement activities in question could extend to the nationals or to theterritory of other Member States.

Interpretation of Article 59 et seq. of the Treaty

39.

    Since the prohibition of any activity as an intermediary between supply and demandon the employment market unless carried on by public placement offices, asreferred to in the questions referred to the Court, is contrary to Articles 86 and90(1) of the Treaty in the circumstances indicated in paragraph 38 of this judgment,there is no need for the Court to give a ruling on the interpretation of Article 59et seq. of the Treaty.

Costs

40.

    The costs incurred by the Italian, German and Norwegian Governments and by theCommission of the European Communities, which have submitted observations tothe Court, are not recoverable. Since these proceedings are, for the parties to themain proceedings, a step in the proceedings pending before the national court, thedecision 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 Corte d'Appello, Milan, by orderof 30 January 1996, hereby rules:

Public placement offices are subject to the prohibition contained in Article 86 ofthe EC Treaty, so long as application of that provision does not obstruct theperformance of the particular task assigned to them. A Member State whichprohibits any activity as an intermediary between supply and demand on theemployment market, whether as an employment agency or as an employmentbusiness, unless carried on by those offices, is in breach of Article 90(1) of theTreaty where it creates a situation in which those offices cannot avoid infringingArticle 86 of the Treaty. That is the case, in particular, in the followingcircumstances:

—    the public placement offices are manifestly unable to satisfy demand on themarket for all types of activity; and

—    the actual placement of employees by private companies is renderedimpossible by the maintenance in force of statutory provisions under whichsuch activities are prohibited and non-observance of that prohibition givesrise to penal and administrative sanctions; and

—    the placement activities in question could extend to the nationals or to theterritory of other Member States.

SchintgenMancini Kapteyn

Delivered in open court in Luxembourg on 11 December 1997.

R. Grass

H. Ragnemalm

Registrar

President of the Sixth Chamber

1: Language of the case: Italian.