CJEC, 5th chamber, October 17, 2002, No C-79/01

THE COURT (Fifth Chamber)

1. By order of 29 January 2001, received at the Court on 15 February 2001, the Corte d'appello di Milano (Court of Appeal, Milan) referred to the Court of Justice for a preliminary ruling under Article 234 EC a question on the interpretation of Articles 43 EC and 49 EC.

2. That question was raised in the course of an appeal against a refusal by the Tribunale di Milano to approve an amendment to the statutes of the company Payroll Data Services (Italy) Srl (hereinafter 'Payroll')

The relevant national legislation

3. Article 1(1) of the Legge No 12 of 11 January 1979 entitled 'Norme per l'ordinamento della professione di consulente del lavoro' (Law for the regulation of the profession of employment consultant, GURI No 20 of 20 January 1979, p. 363, hereinafter 'Law No 12-1979'), provides:

'Where they are not carried out by the employer, directly or through his employees, all obligations relating to the employment, and social security and assistance of employed staff must be carried out exclusively by professionally qualified persons who are registered with the association of employment consultants ... or with the associations of lawyers, accountants, or business consultants, who are required, in that event, to give notice thereof to the employment inspectors of the provinces in which they intend to carry out the abovementioned obligations.'

4. Article 1(4) of Law No 12-1979 provides for an exception to that rule:

'Undertakings regarded as artisanal ..., as well as other small undertakings, including those in the form of cooperatives, may entrust the performance of the obligations referred to in paragraph 1 to services established by the professional associations concerned. Those services may be organised with the assistance of employment consultants even if the latter are employed by the abovementioned associations.'

5. Article 58(16) of the Legge No 144 of 17 May 1999 entitled 'Misure in materia di investimenti, delega al Governo per il riordino degli incentivi all'occupazione e della normativa che disciplina l'INAIL, nonché disposizioni per il riordino degli enti previdenziali' (Law relating to measures governing investment, to statutory authorisation with a view to the reorganisation of employment incentives and the legislation governing the INAIL, and to the reorganisation of social security bodies, GURI No 118 of 22 May 1999, General Supplement, republished in the GURI No 136 of 12 June 1999, p. 5, hereinafter 'Law No 144-1999'), added the following provisions at the end of Article 1 of Law No 12-1979:

'For the purposes of performing the calculating and printing operations relating to the obligations referred to in paragraph 1, and of carrying out the technical and ancillary activities relating to those operations, the undertakings referred to in paragraph 4 may also use the services of data-processing centres (DPCs) provided that they are established and staffed exclusively by persons registered with the professional associations previously mentioned in this law ... . Undertakings with more than 250 employees which do not have their own internal departments to carry out the abovementioned operations may entrust them also to data-processing centres set up by or external to themselves, which must in any event be assisted by one or more of the persons referred to in paragraph 1.

...'

The main proceedings and the question referred

6. Payroll is a company which was formed under Italian law on 29 July 1999 on the initiative of two French companies, ADP Europe SA and ADP GSI SA, which together own its share capital. Those undertakings provide computer services for the calculation of salaries and the preparation and printing of pay slips.

7. By resolution of 29 December 1999, an extraordinary general meeting of Payroll amended the company's objects, as set out in Article 4 of its statutes, as follows:

'The objects of the company are calculating operations and the printing of documents in performance of the obligations resulting from the employment contracts and social security of employed staff for undertakings with less than 250 employees.'

8. By order of 16 October 2000, the Tribunale di Milano refused to approve that resolution of Payroll's extraordinary general meeting. The ground it stated for its order was that the amendment relating to Payroll's objects infringed Article 1 of Law No 12-1979, as amended by Article 58(16) of Law No 144-1999 (hereinafter 'the disputed provision').

9. Payroll, ADP Europe SA and ADP GSI SA (hereinafter together referred to as 'Payroll and Others') applied to the Corte d'appello di Milano to set aside that order of the Tribunale di Milano on the ground that the disputed provision could not be applied by reason of its incompatibility with the principles of the freedom of establishment and the freedom to provide services arising from Articles 43 EC and 49 EC. According to Payroll and Others, the sole function of the disputed provision is to protect from competition persons registered with a professional association, without this being dictated by a requirement relating to the public interest.

10. In that regard, the Corte d'appello di Milano makes it clear that the problem before it is confined to consideration of the alleged incompatibility between, on the one hand, the services described in the amendment to Payroll's statutes and intended for 'undertakings with less than 250 employees' and, on the other hand, the disputed provision which prevents such services from being entrusted to outside data-processing centres (hereinafter 'DPCs'), if the workforce of the client undertaking is less than 250 employees. It emphasises that limitation because Payroll and Others have criticised in very general terms the rules governing the activity of employment consultants, a criticism which does not appear relevant to it in the context of the application for approval before it.

11. Therefore, the Corte d'appello di Milano considers that it must ascertain whether the amendment to Payroll's statutes is in fact prohibited by the disputed provision and, if so, whether it must disapply that provision because of incompatibility with the principles arising from Articles 43 EC and 49 EC. In relation to the first point, it finds that the disputed provision seems to be unambiguous in the part which excludes DPCs from providing services to artisanal and small undertakings and to those with less than 250 employees. As for the second point, the Corte d'appello di Milano does not rule out the possibility that the disputed provision might be contrary to Community law. Although the Court of Justice has held that a non-discriminatory restriction on the freedom of establishment and the freedom to provide services may be justified under certain conditions, the Corte d'appello di Milano is uncertain whether those conditions are satisfied in the case in the main proceedings.

12. Therefore, since it considers that the outcome of the proceedings before it depends on the interpretation of rules of Community law, the Corte d'appello di Milano has referred the following question to the Court for a preliminary ruling:

'Do Articles 43 EC and 49 EC preclude Italian courts from applying Article 1 of Law No 12 of 11 January 1979, ... , as amended by Article 58(16) of Law No 144 of 17 May 1999, to the extent to which it prohibits, in absolute terms, external undertakings providing services relating to the preparation and printing of pay slips from providing their services to undertakings having less than 250 employees?'

The question referred for a preliminary ruling

Observations submitted to the Court

13. As regards the freedom of establishment guaranteed by Article 43 EC, Payroll and Others and the Commission submit that, according to settled case-law, measures taken by a Member State which apply without distinction to national suppliers and those of other Member States may hinder the exercise of the fundamental freedoms guaranteed by the EC Treaty only if they are justified by overriding requirements relating to the public interest, if they are appropriate for securing the attainment of the objective which they pursue and if they do not go beyond what is necessary in order to attain it.

14. In that regard, Payroll and Others claim that the disputed provision protects the interests of employment consultants and that those interests cannot be characterised as being of a public and non-economic nature in the sense contemplated by the Court. Furthermore, Payroll and Others submit that the disputed provision does not protect the interests of workers in view of the segmentation of the market which it establishes.

15. The Commission maintains, for its part, that the contested provision does not seem to be appropriate for securing the attainment of the objective which it pursues, because the restriction which it lays down does not apply to services rendered by the DPCs to undertakings with more than 250 employees.

16. As for the freedom to provide services guaranteed by Article 49 EC, Payroll and Others and the Commission maintain that the disputed provision restricts its exercise also, for the same reasons and in as unjustified a manner as those relating to the freedom of establishment.

17. In contrast, the Italian Government argues that the principles of the freedom of establishment and the freedom to provide services are not infringed by the disputed provision since the DPCs of Member States other than the Italian Republic may also provide their services to small and medium-sized Italian undertakings, on the sole condition that they are assisted by an employment consultant or person with equivalent status. Such restrictions apply in a non-discriminatory manner both to Italian DPCs and to those of other Member States.

18. Furthermore, the Italian Government states in its written observations, that, even though, in the main proceedings, the disputed provision contains a restriction on the freedom of establishment and the freedom to provide services, that restriction is justified by the necessity of personalising the services of the liberal professions and ensuring a direct relationship between the professional and the client. The fulfilment of the employer's obligations mentioned in the disputed provision is not a simple matter of carrying out instructions received by the employer, but directly engages the responsibility of the professional qualified for that purpose.

19. However, at the hearing, the Italian Government made it clear that the main purpose of the disputed provision is the protection of workers' rights, which is recognised in the Court's case-law as an overriding requirement relating to the public interest. There can be no doubt, in that regard, that the protection of workers' rights requires the fulfilment of the obligations relating to the pay slips of salaried staff and to social security schemes. Furthermore, according to the Italian Government, the disputed provision conforms to the principle of proportionality in that it allows resort to be had to the services of DPCs which are only required to have recourse to employment consultants.

The Court's reply

20. It is first necessary to determine the content of the national legislation mentioned in the question referred to the Court. On the one hand, the Italian Government has stated that the DPCs could offer their services to undertakings with less than 250 employees in the same way as to those with more than 250 employees, provided only that they were assisted by employment consultants or persons with equivalent status. On the other hand, according to the order for reference, such a possibility exists for the first category of undertaking only with regard to DPCs formed and staffed exclusively by employment consultants or persons with equivalent status.

21. In that regard, it is sufficient to observe that the disputed provision, which is cited in the order for reference, allows recourse to DPCs by undertakings with less than 250 employees only 'provided that they are established and staffed exclusively by persons registered with the professional associations previously mentioned'. Since the national court's question has been put by reference to that provision, it is on that basis that the Court must formulate its answer.

22. It should therefore be considered that, by its question, the referring court is seeking, essentially, to ascertain whether Articles 43 EC and 49 EC are to be interpreted as meaning that they preclude legislation of a Member State which requires undertakings with less than 250 employees, which wish to entrust the preparation and printing of their pay slips to DPCs, to have recourse only to those established and staffed exclusively by persons registered with certain professional bodies in that Member State.

23. Since the question referred concerns both Article 43 EC and Article 49 EC, it is appropriate to examine it first from the point of view of Article 43 EC.

24. In that regard, it is necessary to bear in mind that the freedom of establishment provided for in Articles 43 EC to 48 EC, is conferred both on natural persons who are nationals of a Member State and on legal persons within the meaning of Article 48 EC. Subject to the exceptions and conditions specified, it includes the right to take up and pursue all types of self-employed activity in the territory of any other Member State, to set up and manage undertakings, and to set up agencies, branches or subsidiaries (see, in particular, Case C-55-94 Gebhard [1995] ECR I-4165, paragraph 23, and Case C-255-97 Pfeiffer [1999] ECR I-2835, paragraph 18).

25. It is apparent from the documents before the Court that Payroll is a limited liability company under Italian law, formed on 29 July 1999 by the two French undertakings ADP Europe SA and ADP GSI SA which together own its share capital. As a subsidiary of those two undertakings, Payroll forms part of a group of companies, established in various Member States, which offer computer services for the calculation and printing of pay slips. The legal position of a company such as Payroll therefore comes within the scope of Community law by virtue of the provisions of Article 43 EC (see, to that effect, Case C-108-96 Mac Quen and Others [2001] ECR I-837, paragraph 16).

26. It must also be borne in mind that Article 43 EC requires the elimination of restrictions on the freedom of establishment and that all measures which prohibit, impede or render less attractive the exercise of such freedom must be regarded as constituting such restrictions (see, for example, Case C-439-99 Commission v Italy [2002] ECR I-305, paragraph 22).

27. In this case, even if the prohibition whereby DPCs which are not established and staffed solely by employment consultants or persons of equivalent status are not permitted to provide services consisting in the calculation and printing of pay slips to undertakings with less than 250 employees is not directly discriminatory, it constitutes, for an economic operator established in a Member State other than the Italian Republic, an obstacle to the carrying-on of his business through an undertaking in the latter Member State, which constitutes a restriction within the meaning of Article 43 EC.

28. However, it is clear from settled case-law, that where such measures apply to any person or undertaking carrying on an activity in the territory of the host Member State, they may be justified where they serve overriding requirements relating to the public interest, are suitable for securing the attainment of the objective which they pursue and do not go beyond what is necessary in order to attain it (see Case C-19-92 Kraus [1993] ECR I-1663, paragraph 32; Gebhard, cited above, paragraph 37; Case C-212-97 Centros [1999] ECR I-1459, paragraph 34; Pfeiffer, cited above, paragraph 19; Case C-424-97 Haim [2000] ECR I-5123, paragraph 57; Mac Quen and Others, cited above, paragraph 26, and Commission v Italy, cited above, paragraph 23).

29. Although, as regards the division of jurisdiction between the Community judicature and national courts, it is in principle for the national court to determine whether those conditions are fulfilled in the case pending before it, the Court, when giving a preliminary ruling, may, where appropriate, provide clarification designed to give the national court guidance in its interpretation (see, for example, Haim, cited above, paragraph 58).

30. In that regard, it may be observed that, at the hearing, the Italian Government relied upon protection of workers' rights in order to justify the restriction of the freedom of establishment resulting from the disputed provision.

31. It is true that the protection of workers is among the overriding requirements relating to the public interest which have been recognised by the Court as justifying a restriction on a fundamental freedom guaranteed by the Treaty (see Case 279-80 Webb [1981] ECR 3305, paragraph 19; Joined Cases 62-81 and 63-81 Seco and Desquenne & Giral [1982] ECR 223, paragraph 14; Case C-113-89 Rush Portuguesa [1990] ECR I-1417, paragraph 18; Joined Cases C-369-96 and C-376-96 Arblade and Others [1999] ECR I-8453, paragraph 36; Case C-165-98 Mazzoleni and ISA [2001] ECR I-2189, paragraph 27; Joined Cases C-49-98, C-50-98, C-52-98 to C-54-98 and C-68-98 to C-71-98 Finalarte and Others [2001] ECR I-7831, paragraph 33, and Case C-164-99 Portugaia Construções [2002] ECR I-787, paragraph 20).

32. However, it is appropriate to consider the further question whether the disputed provision is suitable for securing the attainment of the objective of protection of workers.

33. Payroll and Others and the Italian Government disagree on the nature of the activities of the DPCs which offer services consisting in the preparation and printing of pay slips. That Government maintains that the provision of such services does not involve merely the carrying out of instructions received from the employer but requires, beforehand, intellectual work consisting of determining, on the basis of the relevant legislation, the net salary of each worker. Payroll and Others, on the other hand, claim that their activities are only of a data-processing and administrative nature.

34. In that respect, it is appropriate to point out that it is for the national court to establish the nature of the activities of the DPCs. If it concludes that the services of preparing and printing pay slips offered by Payroll involve essentially the execution of instructions and do not require any special professional qualities, the disputed provision would not seem apt to protect workers' rights (see, to that effect, Case C-76-90 Säger [1991] ECR I-4221, paragraph 18).

35. Should Payroll's activities be essentially administrative in nature, the final responsibility for the data which appears on the pay slips, including the deductions to be made from salaries in respect of the various social and security schemes, would rest with the employers. Thus it does not seem necessary that such activities should be carried out only by DPCs formed and staffed exclusively by employment consultants or persons of equivalent status.

36. In any case, whatever may be the view to be taken on the nature of the activities of DPCs, it must be pointed out that the disputed provision may not go beyond what is necessary in order to attain the objective of protection of workers' rights.

37. In that regard, it must be pointed out that, under the Italian legislation, the DPCs which are not established and staffed only by employment consultants or persons of equivalent status may offer services of calculating and printing pay slips to undertakings with more than 250 employees, who do not appear to require less protection in that regard than those who work for undertakings with smaller work forces. Therefore, since the tasks in question cannot be any less complex when the number of salaried staff concerned increases, the disputed provision goes, in any event, beyond what is necessary to attain its objective of protection.

38. In so far as the question referred concerns Article 49 EC, there is no need to reply to it. Since the main proceedings relate to the approval of a draft amendment to the statutes of a company which benefits from the regime of the Treaty relating to the right of establishment, as has been pointed out at paragraph 25 of this judgment, Article 49 EC, which relates to the freedom to provide services, is not relevant in the context of the present proceedings.

39. Having regard to the foregoing, the reply to the question referred must be that Article 43 EC is to be interpreted as meaning that it precludes legislation of a Member State which requires undertakings with less than 250 employees which wish to entrust the preparation and printing of their pay slips to DPCs to have recourse only to DPCs established and staffed exclusively by persons registered with certain professional associations in that Member State if, under that legislation, undertakings with more than 250 employees may entrust such activities to DPCs on the sole condition that they are assisted by one or more such persons.

Costs

40. The costs incurred by the Italian Government and by the Commission, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision 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 Corte d'appello di Milano by order of 29 January 2001, hereby rules:

Article 43 EC is to be interpreted as meaning that it precludes legislation of a Member State which requires undertakings with less than 250 employees which wish to entrust the preparation and printing of their pay slips to data-processing centres to have recourse only to those established staffed exclusively by persons registered with certain professional associations in that Member State if, under that legislation, undertakings with more than 250 employees may entrust such activities to data-processing centres on the sole condition that they are assisted by one or more such persons.