JUDGMENT OF THE COURT (Fifth Chamber)

10 July 1997 (1)

(Social policy — Protection of employees in the event of the insolvency of theiremployer — Council Directive 80/987/EEC — Liability of a Member State arisingfrom belated transposition of a directive — Adequate reparation — Limitationperiod)

In Case C-261/95,

REFERENCE to the Court under Article 177 of the EC Treaty by the PreturaCircondariale, Frosinone (Italy), for a preliminary ruling in the proceedings pendingbefore that court between

Rosalba Palmisani

and

Istituto Nazionale della Previdenza Sociale (INPS)

on the interpretation of Article 5 of the EC Treaty and of the principle of Stateliability for loss or damage caused to individuals by a breach of Community lawattributable to the State,

THE COURT (Fifth Chamber),

composed of: J.C. Moitinho de Almeida, President of the Chamber, L. Sevón,D.A.O. Edward, P. Jann and M. Wathelet (Rapporteur), Judges,

Advocate General: G. Cosmas,

Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

—    Rosalba Palmisani, by M. D'Antona, of the Rome Bar, and A. Schiavi, ofthe Frosinone Bar,

—    the Istituto Nazionale della Previdenza Sociale (INPS), by G. Violante, ofthe Frosinone Bar, V. Morielli, of the Naples Bar, L. Cantarini and R.Sarto, of the Rome Bar,

—    the Italian Government, by Professor U. Leanza, Head of the Legal AffairsDepartment of the Ministry of Foreign Affairs, acting as Agent, and by D.Del Gaizo, Avvocato dello Stato,

—    the United Kingdom Government, by L. Nicoll, of the Treasury Solicitor'sDepartment, acting as Agent, and by S. Richards and C. Vajda, Barristers,

—    the Commission of the European Communities, by L. Gussetti, of its LegalService, assisted by H. Kreppel, a national civil servant on secondment tothat Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of Rosalba Palmisani, represented byM. D'Antona, the Istituto Nazionale della Previdenza Sociale (INPS), representedby V. Morielli, R. Sarto, and A. Todaro, of the Rome Bar, the Italian Government,represented by D. Del Gaizo, the United Kingdom Government, represented byL. Nicoll, and by S. Richards and N. Green, Barristers, and the Commission,represented by L. Gussetti, M. Patakia, of its Legal Service, and E. Altieri, anational civil servant on secondment to that Service, acting as Agents, at thehearing on 3 October 1996,

after hearing the Opinion of the Advocate General at the sitting on 23 January1997,

gives the following

Judgment

1.

    By order of 27 June 1995, received at the Court on 3 August 1995, the PreturaCircondariale (District Magistrate's Court), Frosinone, referred to the Court for apreliminary ruling under Article 177 of the EC Treaty a question concerning theinterpretation of Article 5 of that Treaty and of the principle of State liability forloss or damage caused to individuals by a breach of Community law attributable tothe State.

2.

    That question was raised in proceedings between Rosalba Palmisani and theIstituto Nazionale della Previdenza Sociale (hereinafter 'the INPS‘) concerning theconditions governing reparation for the loss or damage sustained by her as a resultof the belated transposition of Council Directive 80/987/EEC of 20 October 1980on the approximation of the laws of the Member States relating to the protectionof employees in the event of the insolvency of their employer (OJ 1980 L 283,p. 23, hereinafter 'the Directive‘).

3.

    The Directive is intended to guarantee to 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 provides in particular for specific guarantees of payment of outstandingclaims to remuneration.

4.

    Under Article 11(1) of the Directive, the Member States were required to bringinto force the laws, regulations and administrative provisions necessary to complywith the Directive before 23 October 1983.

5.

    The Italian Republic failed to fulfil that obligation, as the Court found in itsjudgment in Case 22/87 Commission v Italy [1989] ECR 143.

6.

    Furthermore, in Joined Cases C-6/90 and C-9/90 Francovich and Others [1991] ECRI-5357 (hereinafter 'Francovich I‘), the Court held, first, that the provisions of theDirective which determine the rights of employees must be interpreted as meaningthat the persons concerned could not enforce those rights against the State inproceedings before the national courts where no implementing measures wereadopted within the prescribed period and, secondly, that the Member State wasrequired to make good loss or damage caused to individuals by failure to transposethe Directive.

7.

    On 27 January 1992, the Italian Government adopted Legislative Decree No 80(GURI No 36, 13 February 1992, hereinafter 'the Legislative Decree‘), pursuantto Article 48 of Enabling Law No 428 of 29 December 1990.

8.

    Article 2(7) of the Legislative Decree lays down the conditions governingreparation for the loss or damage caused by the belated transposition of theDirective, by reference to the terms laid down, pursuant to the Directive, for givingeffect to the liability of the guarantee institutions in favour of employees who have

suffered as a result of their employer's insolvency. That provision is worded asfollows:

'For the purposes of determining any compensation to be paid to employees underthe procedures referred to in Article 1(1) (namely, insolvency, composition withcreditors, compulsory administrative liquidation and the extraordinaryadministration of large undertakings in periods of crisis) by way of reparation of theloss or damage resulting from the failure to transpose Directive 80/987/EEC withinthe prescribed period, the relevant time-limits, measures and procedures shall bethose referred to in Article 2(1), (2) and (4). The action for reparation must bebrought within a period of one year to run from the date of entry into force of thisDecree.‘

9.

    Rosalba Palmisani had been employed by the firm Vamar from 10 September 1979to 17 April 1985, the date on which the company was declared insolvent by theTribunale (District Court), Frosinone. Only a very small part of her salary claimswas paid on distribution of the final dividend from the liquidation of theundertaking.

10.

    On 13 October 1994, that is to say after the limitation period of one year providedfor in the Legislative Decree had expired, Rosalba Palmisani brought an action forreparation under Article 2(7) of the Legislative Decree against the INPS, theagency responsible for managing the Guarantee Fund.

11.

    She cited as justification for the delay in bringing proceedings the uncertainty, notdispelled by Article 2(7), as to the identity of the public body liable to payreparation and as to the court in which that type of action should be brought. Shealso pointed to the manifest difference between the system established by theLegislative Decree and the general system of reparation in cases of non-contractualliability, in particular as regards the time-limits for bringing actions.

12.

    The national court shares the doubts of the plaintiff in the main proceedings onlyin part. It raises the question whether the Italian State may, in the light of theprinciples set out by the Court of Justice, lay down in national law different — and,in certain respects, less favourable — rules of procedure with regard to reparationof the loss or damage sustained as a result of the belated transposition of theDirective as compared with the ordinary system of reparation, in matters of non-contractual liability, under Article 2043 of the Italian Civil Code. The nationalcourt states in that connection that pursuant to Article 2(7) of the LegislativeDecree, an action for reparation must be brought within a limitation period of 12months running from the date of entry into force of the Legislative Decree,whereas an action for reparation under Article 2043 of the Civil Code is subject toa prescription period of five years under Article 2947 of the Civil Code, which maybe interrupted, in particular by extra-judicial acts, and suspended, pursuant toArticles 2941 et seq. of the Civil Code.

13.

    The national court also refers, for purposes of comparison, first to the prescriptionperiod of one year laid down in Article 2(5) of the Legislative Decree governingapplications for the benefits provided for in the Directive, which runs from the dateon which the application is submitted to the Guarantee Fund, and secondly to thelimitation period of one year from the date on which the application is submitted,which may not be interrupted or suspended, provided for by Article 4 of Law No438 of 14 November 1992 governing applications for social security benefits (otherthan pensions).

14.

    In the light of the foregoing, the national court decided to refer the followingquestion to the Court for a preliminary ruling:

'Is a law of a Member State which, in laying down the procedural rules by whichcitizens who have a right to the reparation of damage conferred on them byCommunity law following the failure to implement directives which are not directlyapplicable, requires the injured party to bring judicial proceedings subject to a one-year limitation period starting from the date when the aforementioned domesticrules entered into force compatible with the correct interpretation of Article 5 ofthe Treaty, as construed in the light of the principles laid down in the case-law ofthe Court of Justice cited in the grounds of this order (see Case C-208/90 Emmott[1991] ECR I-4269; Joined Cases 331/85, 376/85 and 378/85 Bianco et Girard [1988]ECR 1099; Case 199/82 San Giorgio [1983] ECR 3595; Joined Cases 205/82 to215/82 Deutsche Milchkontor and Others [1983] ECR 2633; Case 826/79 Mireco[1980] ECR 2559; Case 811/79 Ariete [1980] ECR 2545; Joined Cases 66/79, 127/79and 128/79 Salumi and Others [1980] ECR 1237; Case 68/79 Just [1980] ECR 501;Case 33/76 Rewe [1976] ECR 1989 and Joined Cases 6/90 and C-9/90 FrancovichI, cited above), where, in contrast, under the domestic law of the Member State inquestion actions for the reparation of non-contractual damage are normally subjectto a five-year prescription period and the action for obtaining social securitypayments under the statutory system arising out of the full implementation of theDirective [80/987/EEC] is subject to a one-year time-limit, which, however, is a prescription period, thereby introducing, for the purposes of the judicial protectionof rights based on Community law, a procedural mechanism which differs in theaforementioned respects from ”similar” actions and remedies provided for by thedomestic law of the Member State in question, bearing in mind that, in any event,all claims for payments to be made by the agency which is required by law to makereparation for the damage are subject at present to a one-year limitation periodunder the domestic law of the Member State in question? Is the national courtbound, where appropriate, to disapply that limitation period, thereby enablingcitizens who have suffered damage to bring an action outside the one-yearlimitation period and, if so, within the five-year prescription period prescribed forthe ordinary action for reparation or within the one-year prescription period laiddown for obtaining social security payments under the ”basic” system?‘

Admissibility of the question submitted

15.

    The INPS contends that Community law can furnish no information to assist thenational court in determining the dispute in the main proceedings other than thatwhich the Court of Justice has already had occasion to provide in Joined CasesC-6/90 and C-9/90 Francovich I, cited above.

16.

    The INPS adds that the Court has no jurisdiction to interpret the provisions of adirective which do not have direct effect, that any conflict between Community lawand national law must be resolved by the Corte Costituzionale (ConstitutionalCourt) which has already adjudicated on the validity of Article 2(7) of theLegislative Decree, and that if the national court continued to entertain doubts asto the validity of the national provision at issue it should have referred the matterback to the Corte Costituzionale.

17.

    Lastly, the INPS considers that examination of the compatibility of thecompensation scheme established by the Legislative Decree with the principles setout by the Court is a matter solely for the national courts.

18.

    According to settled case-law, it is solely for the national courts before whichactions are brought, and which must bear the responsibility for the subsequentjudicial decision, to determine in the light of the particular facts of each case boththe need for a preliminary ruling in order to enable them to deliver judgment andthe relevance of the questions which they submit to the Court (see, in particular,Case C-297/94 Bruyère and Others v Belgian State [1996] ECR I-1551, paragraph19). Only where it is quite obvious that the interpretation of Community law orexamination of the validity of a Community rule sought by a national court bearsno relation to the actual facts of the main action or its purpose may a reference fora preliminary ruling be held to be inadmissible (see, in particular, Case C-415/93Bosman [1995] ECR I-4921, paragraph 61).

19.

    In this case, it need merely be noted that the national court considered it necessaryto seek a ruling from the Court concerning the interpretation of Community lawin order to enable it to assess the compatibility therewith of the procedural rulesgoverning an action for reparation of loss or damage sustained as a result of thebelated transposition of the Directive.

20.

    Furthermore, Article 177 of the Treaty gives national courts the power and, where appropriate, imposes on them the obligation to refer a case for a preliminaryruling, once the judge perceives either of his own motion or at the request of theparties that the substance of the dispute raises a point referred to in the firstparagraph of Article 177. It follows that national courts have the widest discretionin referring matters to the Court of Justice if they consider that a case pendingbefore them raises questions involving interpretation, or consideration of thevalidity, of provisions of Community law, necessitating a decision on their part

(Case 166/73 Rheinmühlen v Einfuhr-und Vorratsstelle Getreide [1974] ECR 33,paragraphs 3 and 4).

21.

    Lastly, under Article 177, the Court has jurisdiction to give preliminary rulingsconcerning the interpretation of acts of the Community institutions, regardless ofwhether they are directly applicable (Case 111/75 Mazzalai v Ferrovia del Renon[1976] ECR 657, paragraph 7).

22.

    Consequently, the objections raised by the INPS regarding the admissibility of thequestion referred for a preliminary ruling and the jurisdiction of the Court cannotbe upheld. The question submitted must therefore be answered.

The question submitted for a preliminary ruling

23.

    By its question the national court asks, essentially, whether Community lawprecludes a Member State from requiring any action for reparation of the loss ordamage sustained as a result of the belated transposition of the Directive to bebrought within a limitation period of one year from its transposition into nationallaw.

24.

    In that connection, the Court has repeatedly held that the principle of State liabilityfor loss or damage caused to individuals as a result of breaches of Community lawfor which the State can be held responsible is inherent in the system of the Treaty(Francovich I, cited above, paragraph 35; Joined Cases C-46/93 and C-48/93Brasserie du Pêcheur and Factortame [1996] ECR I-1029, paragraph 31; CaseC-392/93 British Telecommunications [1996] ECR I-1631, paragraph 38; and CaseC-5/94 Hedley Lomas [1996] ECR I-2553, paragraph 24; Joined Cases C-178/94,C-179/94, C-188/94, C-189/94 and C-190/94 Dillenkofer and Others [1996] ECRI-4845, paragraph 20).

25.

    With regard to the conditions under which a Member State is required to makereparation for the loss or damage thus caused, it follows from the case-law citedabove that these are three in number, namely that the rule of law infringed musthave been intended to confer rights on individuals; the breach must be sufficientlyserious; and there must be a direct causal link between the breach of the obligationresting on the State and the damage sustained by the injured parties (Brasserie duPêcheur and Factortame, paragraph 51; British Telecommunications, paragraph 39;Hedley Lomas, paragraph 25; and Dillenkofer and Others, paragraph 21). Thoseconditions are to be applied according to each type of situation (Dillenkofer andOthers, paragraph 24).

26.

    As for the extent of the reparation payable by the Member State responsible forthe breach of Community law, it follows from Brasserie du Pêcheur and Factortame,cited above, paragraph 82, that reparation must be commensurate with the loss or

damage sustained, that is to say so as to ensure effective protection for the rightsof the individuals harmed.

27.

    Lastly, it follows from consistent case-law since Francovich I, cited above, atparagraphs 41 to 43, that subject to the foregoing, it is on the basis of the rules ofnational law on liability that the State must make reparation for the consequencesof the loss or damage caused; further, the conditions, in particular time-limits, forreparation of loss or damage laid down by national law must not be less favourablethan those relating to similar domestic claims (principle of equivalence) and mustnot be so framed as to make it virtually impossible or excessively difficult to obtainreparation (principle of effectiveness).

28.

    As regards the compatibility of a time-limit of the kind provided for in theLegislative Decree with the principle of the effectiveness of Community law, thesetting of reasonable limitation periods for bringing proceedings satisfies thatrequirement in principle, inasmuch as it constitutes an application of thefundamental principle of legal certainty (see, in particular, Case 33/76 Rewe, citedabove, paragraph 5).

29.

    Furthermore, a time-limit of one year commencing from the date of the entry intoforce of the measure transposing the Directive into national law, which not onlyenables the beneficiaries to ascertain the full extent of their rights but also specifiesthe conditions under which loss or damage sustained as a result of the belatedtransposition will be made good, cannot be regarded as making it excessivelydifficult or, a fortiori, virtually impossible to lodge a claim for reparation.

30.

    In that connection, however, Rosalba Palmisani claims that Article 2(7) of theLegislative Decree has left a degree of uncertainty as regards the public law bodyresponsible for making good the loss or damage and as regards the court beforewhich an action for reparation should be brought. That uncertainty was onlyremoved, in her view, by a circular issued by the INPS on 18 February 1993, thatis to say ten days before the limitation period expired.

31.

    As the Advocate General stated in paragraph 30 of his Opinion, it follows fromsettled case-law that Article 177 of the Treaty instituted a system of directcooperation between the Court of Justice and the national courts by way of a non-contentious procedure which is completely independent of any initiative by theparties, who are merely invited to state their case within the legal limits laid downby the national court (see, in particular, Case 62/72 Bollmann [1973] ECR 269,paragraph 4). In this case the national court, in the order for reference, expresslyrejected the plaintiff's allegations; they cannot therefore be taken into account inthe context of the reference for a preliminary ruling.

32.

    As regards the question whether a time-limit of the kind provided for by theLegislative Decree complies with the principle that it must be equivalent to theconditions relating to similar domestic claims, it should be noted that the national

court refers more specifically to the procedural rules governing applications forbenefits submitted to the guarantee body under the Legislative Decree, actions forobtaining social security benefits (other than pensions) pursuant to Law No 438 of14 November 1992 and ordinary actions for damages governed by Article 2043 etseq. of the Italian Civil Code.

33.

    Although, in principle, it is for the national courts to ascertain whether theprocedural rules intended to ensure that the rights derived by individuals fromCommunity law are safeguarded under national law, and in particular that loss ordamage caused to individuals by breaches of Community law for which a MemberState can be held responsible are made good, comply with the principle ofequivalence, certain aspects of the case provide a basis for the following remarksby the Court.

34.

    First, as Rosalba Palmisani and the Commission emphasize, the measuresimplementing the Directive contained in the Legislative Decree pursue an objectivethat differs from that of the compensation scheme established by that Decree. While the former aim to provide employees, by means of specific guarantees ofpayment of unpaid remuneration, with protection under Community law in theevent of the insolvency of their employer, the latter seeks, by definition, to makegood to a sufficient extent the loss or damage sustained by the beneficiaries of theDirective as a result of its belated transposition.

35.

    In that connection, moreover, the Court has stated, in its judgments of today's datein Joined Cases C-94/95 and C-95/95 Bonifaci and Others and Berto and Others[1997] ECR I-0000, at paragraph 53, and Case C-373/95 Maso and Others [1997]ECR I-0000, at paragraph 41, that reparation cannot always be wholly ensured byretroactive and proper application in full of the measures implementing theDirective. It is for the national court to ensure that reparation of the loss ordamage sustained by the beneficiaries is adequate. Retroactive and properapplication in full of the measures implementing the Directive will suffice for thatpurpose unless the beneficiaries establish the existence of complementary losssustained on account of the fact that they were unable to benefit at the appropriatetime from the financial advantages guaranteed by the Directive with the result thatsuch loss must also be made good.

36.

    Since applications made in connection with the implementation of the Directiveand those made under the compensation scheme laid down by it differ as to theirobjective, there is no need to undertake a comparison of the procedural rulesgoverning them.

37.

    For the same reason, that must also be true of actions under national law forobtaining social security benefits other than pensions.

38.

    As far as the ordinary system of non-contractual liability is concerned, it must bepointed out that, unlike the procedures examined under paragraphs 34 to 37 of thisjudgment, that system is on the whole, in terms of its objective, similar to thatintroduced by Article 2(7) of the Legislative Decree, inasmuch as it is intended toguarantee reparation of the loss or damage sustained as a result of the conduct ofthe perpetrator. However, in order to establish the comparability of the twosystems in question, the essential characteristics of the domestic system of referencemust be examined. In that regard the Court does not have all the informationnecessary to determine more specifically whether an action for damages broughtby an individual pursuant to Article 2043 of the Italian Civil Code is capable ofbeing directed against public authorities on the ground that they have failed to actor have committed an unlawful act for which they can be held responsible in theexercise of their powers. It falls therefore to the national court to undertake thatexamination.

39.

    If the ordinary Italian system of non-contractual liability were to prove incapableof serving as a basis for an action against public authorities for unlawful conductfor which they can be held responsible in the exercise of their powers and thenational court were unable to undertake any other relevant comparison betweenthe time-limit at issue and the conditions relating to similar claims of a domesticnature, the conclusion would have to be drawn, in view of the foregoing, thatCommunity law does not preclude a Member State from requiring any action forreparation of the loss or damage sustained as a result of the belated transpositionof the Directive to be brought within a limitation period of one year from the dateof its transposition into national law.

40.

    In the light of the foregoing considerations, the answer to the question referred tothe Court must be that Community law, as it stands at present, does not precludea Member State from requiring any action for reparation of the loss or damagesustained as a result of the belated transposition of the Directive to be broughtwithin a limitation period of one year from the date of its transposition intonational law, provided that that procedural requirement is no less favourable thanprocedural requirements in respect of similar actions of a domestic nature.

Costs

41.

    The costs incurred by the Italian and United Kingdom Governments and 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 action pending before the national court, thedecision on costs is a matter for that court.

On those grounds,

THE COURT (Fifth Chamber),

in answer to the question referred to it by the Pretura Circondariale, Frosinone, byorder of 27 June 1995, hereby rules:

Community law, as it stands at present, does not preclude a Member State fromrequiring any action for reparation of the loss or damage sustained as a result ofthe belated transposition 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 to be brought within alimitation period of one year from the date of its transposition into national law,provided that that procedural requirement is no less favourable than proceduralrequirements in respect of similar actions of a domestic nature.

Moitinho de AlmeidaSevón Edward                 Jann                        Wathelet

Delivered in open court in Luxembourg on 10 July 1997.

R. Grass

J.C. Moitinho de Almeida

Registrar

President of the Fifth Chamber

1: Language of the case: Italian.