In Joined Cases C-6/90 and C-9/90,
REFERENCE to the Court under Article 177 of the EEC Treaty by the
Pretura di Vicenza (Italy) (in Case C-6/90) and by the Pretura di Bassano
del Grappa (Italy) (in Case C-9/90) for a preliminary ruling in the
proceedings pending before those courts between
Andrea Francovich
and
Italian Republic
and between
Danila Bonifaci and
Others
and
Italian Republic
on the interpretation of the third
paragraph of Article 189 of the EEC Treaty and Council Directive
80/987/EEC of 20 October 1980 on the approximation of the laws of the
Member States relating to the protection of employees in the event of the
insolvency of the employer (Official Journal 1980 L 283, p. 23),
THE
COURT,
composed of: O. Due, President, Sir Gordon Slynn, R. Joliet,
F.A. Schockweiler, F. Grévisse and P.J.G. Kapteyn (Presidents of
Chambers), G.F. Mancini, J.C. Moitinho de Almeida, G.C. Rodríguez
Iglesias, M. Díez de Velasco and M. Zuleeg, Judges,
Advocate General:
J. Mischo,
Registrar: D. Louterman, Principal Administrator,
after
considering the written observations submitted on behalf of
- Andrea
Francovich and Danila Bonifaci and Others by Claudio Mondin, Aldo Campesan
and Alberto dal Ferro, of the Vicenza Bar,
- the Italian Government by
Oscar Fiumara, Avvocato dello Stato, acting as Agent,
- the Government
of the Netherlands by B.R. Bot, Secretary-General at the Ministry of
Foreign Affairs, acting as Agent,
- the United Kingdom by J.E.
Collins, of the Treasury Solicitor' s Department, acting as Agent,
assisted by Richard Plender QC,
- the Commission of the European
Communities by Giuliano Marenco and Karen Banks, members of its Legal
Service, acting as Agents,
having regard to the Report for the
Hearing,
after hearing oral argument on behalf of Andrea Francovich
and Danila Bonifaci, the Italian Government, the United Kingdom, the
German Government, represented by Jochim Sedemund, Rechtsanwalt, Cologne,
acting as Agent, and the Commission at the hearing on 27 February 1991,
after hearing the Opinion of the Advocate General at the sitting on 28
May 1991, gives the following
Judgment
1 By orders of 9 July and 30 December 1989,
which were received at the Court on 8 January and 15 January 1990
respectively, the Pretura di Vicenza (in Case C-6/90) and the Pretura di
Bassano del Grappa (in Case C-9/90) referred to the Court for a
preliminary ruling under Article 177 of the EEC Treaty a number of
questions on the interpretation of the third paragraph of Article 189 of
the EEC Treaty and Council Directive 80/987/EEC of 20 October 1980 on the
approximation of the laws of the Member States relating to the protection
of employees in the event of the insolvency of their employer (Official
Journal 1980 L 283, p. 23).
2 Those questions were raised in the
course of proceedings brought by Andrea Francovich and by Danila Bonifaci
and Others (hereinafter referred to as "the plaintiffs") against the
Italian Republic.
3 Directive 80/987 is intended to guarantee
employees a minimum level of protection under Community law in the event
of the insolvency of their employer, without prejudice to more favourable
provisions existing in the Member States. In particular it provides for
specific guarantees of payment of unpaid wage claims.
4 Under Article
11 the Member States were required to bring into force the laws,
regulations and administrative provisions necessary to comply with the
directive within a period which expired on 23 October 1983. The Italian
Republic failed to fulfil that obligation, and its default was recorded by
the Court in its judgment in Case 22/87 Commission v Italy ([1989] ECR
143).
5 Mr Francovich, a party to the main proceedings in Case C-6/90,
had worked for CDN Elettronica SnC in Vicenza but had received only
sporadic payments on account of his wages. He therefore brought
proceedings before the Pretura di Vicenza, which ordered the defendant to
pay approximately LIT 6 million. In attempting to enforce that judgment
the bailiff attached to the Tribunale di Vicenza was obliged to submit a
negative return. Mr Francovich then claimed to be entitled to obtain from
the Italian State the guarantees provided for in Directive 80/987 or, in
the alternative, compensation.
6 In Case C-9/90 Danila Bonifaci and 33
other employees brought proceedings before the Pretura di Bassano del
Grappa, stating that they had been employed by Gaia Confezioni Srl, which
was declared insolvent on 5 April 1985. When the employment relationships
were discontinued, the plaintiffs were owed more than LIT 253 million,
which was proved as a debt in the company' s insolvency. More than five
years after the insolvency they had been paid nothing, and the receiver
had told them that even a partial distribution in their favour was
entirely improbable. Consequently, the plaintiffs brought proceedings
against the Italian Republic in which they claimed that, in view of its
obligation to implement Directive 80/987 with effect from 23 October 1983,
it should be ordered to pay them their arrears of wages, at least for the
last three months, or in the alternative to pay compensation.
7 It was
in those circumstances that the national courts referred the following
questions, which are identical in both cases, to the Court for a
preliminary ruling:
"(1) Under the system of Community law in force,
is a private individual who has been adversely affected by the failure of
a Member State to implement Directive 80/897 - a failure confirmed by a
judgment of the Court of Justice - entitled to require the State itself to
give effect to those provisions of that directive which are sufficiently
precise and unconditional, by directly invoking the Community legislation
against the Member State in default so as to obtain the guarantees which
that State itself should have provided and in any event to claim
reparation of the loss and damage sustained in relation to provisions to
which that right does not apply?
(2) Are the combined provisions of
Articles 3 and 4 of Council Directive 80/987 to be interpreted as meaning
that where the State has not availed itself of the option of laying down
limits under Article 4, the State itself is obliged to pay the claims of
employees in accordance with Article 3?
(3) If the answer to Question
2 is in the negative, the Court is asked to state what the minimum
guarantee is that the State must provide pursuant to Directive 80/987 to
an entitled employee so as to ensure that the share of pay payable to that
employee may be regarded as giving effect to the directive."
8
Reference is made to the Report for the Hearing for a fuller account of
the facts of the main proceedings, the procedure and the written
observations submitted to the Court, which are mentioned or discussed
hereinafter only in so far as is necessary for the reasoning of the Court.
9 The first question submitted by the national courts raises two
issues, which should be considered separately. It concerns, first, the
direct effect of the provisions of the directive which determine the
rights of employees and, secondly, the existence and scope of State
liability for damage resulting from breach of its obligations under
Community law.
The direct effect of the provisions of the directive
which determine the rights of employees
10 The first part of the first
question submitted by the national courts seeks to determine whether the
provisions of the directive which determine the rights of employees must
be interpreted as meaning that the persons concerned can enforce those
rights against the State in the national courts in the absence of
implementing measures adopted within the prescribed period.
11 As the
Court has consistently held, a Member State which has not adopted the
implementing measures required by a directive within the prescribed period
may not, against individuals, plead its own failure to perform the
obligations which the directive entails. Thus wherever the provisions of a
directive appear, as far as their subject-matter is concerned, to be
unconditional and sufficiently precise, those provisions may, in the
absence of implementing measures adopted within the prescribed period, be
relied upon as against any national provision which is incompatible with
the directive or in so far as the provisions of the directive define
rights which individuals are able to assert against the State (judgment in
Case 8/81 Becker v Finanzamt Muenster-Innenstadt [1982] ECR 53).
12 It
is therefore necessary to see whether the provisions of Directive 80/987
which determine the rights of employees are unconditional and sufficiently
precise. There are three points to be considered: the identity of the
persons entitled to the guarantee provided, the content of that guarantee
and the identity of the person liable to provide the guarantee. In that
regard, the question arises in particular whether a State can be held
liable to provide the guarantee on the ground that it did not take the
necessary implementing measures within the prescribed period.
13 With
regard first of all to the identity of the persons entitled to the
guarantee, it is to be noted that, according to Article 1(1), the
directive applies to employees' claims arising from contracts of
employment or employment relationships and existing against employers who
are in a state of insolvency within the meaning of Article 2(1), the
latter provision defining the circumstances in which an employer must be
deemed to be in a state of insolvency. Article 2(2) refers to national law
for the definition of the concepts of "employee" and "employer". Finally,
Article 1(2) provides that the Member States may, by way of exception and
under certain conditions, exclude claims by certain categories of
employees listed in the annex to the directive.
14 Those provisions
are sufficiently precise and unconditional to enable the national court to
determine whether or not a person should be regarded as a person intended
to benefit under the directive. A national court need only verify whether
the person concerned is an employed person under national law and whether
he is excluded from the scope of the directive in accordance with Article
1(2) and Annex 1 (as to the necessary conditions for such exclusion, see
the judgments in Case 22/87 Commission v Italy, cited above, paragraphs 18
to 23, and Case C-53/88 Commission v Greece [1990] ECR I-3917, paragraphs
11 to 26), and then ascertain whether one of the situations of insolvency
provided for in Article 2 of the directive exists.
15 With regard to
the content of the guarantee, Article 3 of the directive provides that
measures must be taken to ensure the payment of outstanding claims
resulting from contracts of employment or employment relationships and
relating to pay for the period prior to a date determined by the Member
State, which may choose one of three possibilities: (a) the date of the
onset of the employer' s insolvency; (b) that of the notice of dismissal
issued to the employee concerned on account of the employer' s insolvency;
(c) that of the onset of the employer' s insolvency or that on which the
contract of employment or the employment relationship with the employee
concerned was discontinued on account of the employer' s insolvency.
16 Depending on the choice it makes, the Member State has the option,
under Article 4(1) and (2), to restrict liability to periods of three
months or eight weeks respectively, calculated in accordance with detailed
rules laid down in that article. Finally, Article 4(3) provides that the
Member States may set a ceiling on liability, in order to avoid the
payment of sums going beyond the social objective of the directive. Where
they exercise that option, the Member States must inform the Commission of
the methods used to set the ceiling. In addition, Article 10 provides that
the directive does not affect the option of Member States to take the
measures necessary to avoid abuses and in particular to refuse or reduce
liability in certain circumstances.
17 Article 3 of the directive thus
leaves the Member State a discretion in determining the date from which
payment of claims must be ensured. However, as is already implicit in the
Court' s case-law (see the judgments in Case 71/85 Netherlands v FNV
[1986] ECR 3855 and Case 286/85 McDermott and Cotter v Minister for Social
Welfare and Attorney General [1987] ECR 1453, paragraph 15), the right of
a State to choose among several possible means of achieving the result
required by a directive does not preclude the possibility for individuals
of enforcing before the national courts rights whose content can be
determined sufficiently precisely on the basis of the provisions of the
directive alone.
18 In this case, the result required by the directive
in question is a guarantee that the outstanding claims of employees will
be paid in the event of the insolvency of their employer. The fact that
Articles 3 and 4(1) and (2) give the Member States some discretion as
regards the means of establishing that guarantee and the restriction of
its amount do not affect the precise and unconditional nature of the
result required.
19 As the Commission and the plaintiffs have pointed
out, it is possible to determine the minimum guarantee provided for by the
directive by taking the date whose choice entails the least liability for
the guarantee institution. That date is that of the onset of the employer'
s insolvency, since the two other dates, that of the notice of dismissal
issued to the employee and that on which the contract of employment or the
employment relationship was discontinued, are, according to the conditions
laid down in Article 3, necessarily subsequent to the onset of the
insolvency and thus define a longer period in respect of which the payment
of claims must be ensured.
20 The possibility under Article 4(2) of
limiting the guarantee does not make it impossible to determine the
minimum guarantee. It follows from the wording of that article that the
Member States have the option of limiting the guarantees granted to
employees to certain periods prior to the date referred to in Article 3.
Those periods are fixed in relation to each of the three dates provided
for in Article 3, so that it is always possible to determine to what
extent the Member State could have reduced the guarantee provided for by
the directive depending on the date which it would have chosen if it had
transposed the directive.
21 As regards Article 4(3), according to
which the Member States may set a ceiling on liability in order to avoid
the payment of sums going beyond the social objective of the directive,
and Article 10, which states that the directive does not affect the option
of Member States to take the measures necessary to avoid abuses, it should
be observed that a Member State which has failed to fulfil its obligations
to transpose a directive cannot defeat the rights which the directive
creates for the benefit of individuals by relying on the option of
limiting the amount of the guarantee which it could have exercised if it
had taken the measures necessary to implement the directive (see, in
relation to an analogous option concerning the prevention of abuse in
fiscal matters, the judgment in Case 8/81 Becker v Finanzamt
Muenster-Innenstadt [1982] ECR 53, paragraph 34).
22 It must therefore
be held that the provisions in question are unconditional and sufficiently
precise as regards the content of the guarantee.
23 Finally, as
regards the identity of the person liable to provide the guarantee,
Article 5 of the directive provides that:
"Member States shall lay
down detailed rules for the organization, financing and operation of the
guarantee institutions, complying with the following principles in
particular:
(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 the public authorities;
(c) the institutions'
liabilities shall not depend on whether or not obligations to contribute
to financing have been fulfilled."
24 It has been submitted that since
the directive provides for the possibility that the guarantee institutions
may be financed entirely by the public authorities, it is unacceptable
that a Member State may thwart the effects of the directive by asserting
that it could have required other persons to bear part or all of the
financial burden resting upon it.
25 That argument cannot be upheld.
It follows from the terms of the directive that the Member State is
required to organize an appropriate institutional guarantee system. Under
Article 5, the Member State has a broad discretion with regard to the
organization, operation and financing of the guarantee institutions. The
fact, referred to by the Commission, that the directive envisages as one
possibility among others that such a system may be financed entirely by
the public authorities cannot mean that the State can be identified as the
person liable for unpaid claims. The payment obligation lies with the
guarantee institutions, and it is only in exercising its power to organize
the guarantee system that the State may provide that the guarantee
institutions are to be financed entirely by the public authorities. In
those circumstances the State takes on an obligation which in principle is
not its own.
26 Accordingly, even though the provisions of the
directive in question are sufficiently precise and unconditional as
regards the determination of the persons entitled to the guarantee and as
regards the content of that guarantee, those elements are not sufficient
to enable individuals to rely on those provisions before the national
courts. Those provisions do not identify the person liable to provide the
guarantee, and the State cannot be considered liable on the sole ground
that it has failed to take transposition measures within the prescribed
period.
27 The answer to the first part of the first question must
therefore be that the provisions of Directive 80/987 which determine the
rights of employees must be interpreted as meaning that the persons
concerned cannot enforce those rights against the State before the
national courts where no implementing measures are adopted within the
prescribed period.
Liability of the State for loss and damage
resulting from breach of its obligations under Community law
28 In the
second part of the first question the national court seeks to determine
whether a Member State is obliged to make good loss and damage suffered by
individuals as a result of the failure to transpose Directive 80/987.
29 The national court thus raises the issue of the existence and scope
of a State' s liability for loss and damage resulting from breach of its
obligations under Community law.
30 That issue must be considered in
the light of the general system of the Treaty and its fundamental
principles.
(a) The existence of State liability as a matter of
principle
31 It should be borne in mind at the outset that the EEC
Treaty has created its own legal system, which is integrated into the
legal systems of the Member States and which their courts are bound to
apply. The subjects of that legal system are not only the Member States
but also their nationals. Just as it imposes burdens on individuals,
Community law is also intended to give rise to rights which become part of
their legal patrimony. Those rights arise not only where they are
expressly granted by the Treaty but also by virtue of obligations which
the Treaty imposes in a clearly defined manner both on individuals and on
the Member States and the Community institutions (see the judgments in
Case 26/62 Van Gend en Loos [1963] ECR 1
and Case 6/64 Costa v ENEL 
