Court of Justice of the European Communities (including Court of First Instance Decisions)

(Failure of a Member State to fulfil obligations Directive 2001/23/EC Transfers of undertakings Safeguarding of employees' rights National legislation providing for non-application to transfers of undertakings in 'critical difficulties')

In Case C-61/07,

ACTION under Article 226 EC for failure to fulfil obligations, brought on 18 December 2007,

Commission of the European Communities, represented by J. Enegren and L. Pignataro, acting as Agents, with an address for service in Luxembourg,

applicant,

Italian Republic, represented by R. Adam, acting as Agent, assisted by W. Ferrante, avvocato dello Stato, with an address for service in Luxembourg,

defendant,

composed of C.W.A. Timmermans, President of the Chamber, J.'C. Bonichot, J. Makarczyk, L. Bay Larsen (Rapporteur), and C. Toader, Judges,

Advocate General: J. Mazák,

Registrar: M. Ferreira, Principal Administrator,

having regard to the written procedure and further to the hearing on 22 January 2009,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

1. By its application the Commission of the European Communities requests the Court to declare that, by maintaining in force the provisions of Article 47(5) and (6) of Law No 428 of 29 December 1990 where an undertaking is in critical difficulties within the meaning of subparagraph (c) of the fifth paragraph of Article 2 of Law No 675 of 12 August 1977 so that the rights of employees set out in Articles 3 and 4 of Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses (OJ 2001 L 82, p. 16) are not safeguarded in the event of the transfer of an undertaking which has been declared to be in critical difficulties, the Italian Republic has failed to fulfil its obligations under that directive.

Legal context

Community law

2. Article 3 of Directive 2001/23 provides:

'1. The transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer shall, by reason of such transfer, be transferred to the transferee.

Member States may provide that, after the date of transfer, the transferor and the transferee shall be jointly and severally liable in respect of obligations which arose before the date of transfer from a contract of employment or an employment relationship existing on the date of the transfer.

2. Member States may adopt appropriate measures to ensure that the transferor notifies the transferee of all the rights and obligations which will be transferred to the transferee under this Article, so far as those rights and obligations are or ought to have been known to the transferor at the time of the transfer. ...

3. Following the transfer, the transferee shall continue to observe the terms and conditions agreed in any collective agreement on the same terms applicable to the transferor under that agreement, until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.

Member States may limit the period for observing such terms and conditions with the proviso that it shall not be less than one year.

4. (a) Unless Member States provide otherwise, paragraphs 1 and 3 shall not apply in relation to employees' rights to old-age, invalidity or survivors' benefits under supplementary company or intercompany pension schemes outside the statutory social security schemes in Member States.

(b) Even where they do not provide in accordance with subparagraph (a) that paragraphs 1 and 3 apply in relation to such rights, Member States shall adopt the measures necessary to protect the interests of employees and of persons no longer employed in the transferor's business at the time of the transfer in respect of rights conferring on them immediate or prospective entitlement to old age benefits, including survivors' benefits, under supplementary schemes referred to in subparagraph (a).'

3. In accordance with Article 4 of Directive 2001/23:

'1. The transfer of the undertaking, business or part of the undertaking or business shall not in itself constitute grounds for dismissal by the transferor or the transferee. This provision shall not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce.

...'

4. Pursuant to Article 5 of Directive 2001/23:

'1. Unless Member States provide otherwise, Articles 3 and 4 shall not apply to any transfer of an undertaking, business or part of an undertaking or business where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of a competent public authority (which may be an insolvency practitioner authorised by a competent public authority).

2. Where Articles 3 and 4 apply to a transfer during insolvency proceedings which have been opened in relation to a transferor (whether or not those proceedings have been instituted with a view to the liquidation of the assets of the transferor) and provided that such proceedings are under the supervision of a competent public authority (which may be an insolvency practitioner determined by national law) a Member State may provide that:

(a) notwithstanding Article 3(1), the transferor's debts arising from any contracts of employment or employment relationships and payable before the transfer or before the opening of the insolvency proceedings shall not be transferred to the transferee, provided that such proceedings give rise, under the law of that Member State, to protection at least equivalent to that provided for in situations covered by 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 (OJ 1980 L 283, p. 23), as amended by the Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded (OJ 1994 C 241, p. 21, and OJ 1995 L 1, p. 1), and, or alternatively, that,

(b) the transferee, transferor or person or persons exercising the transferor's functions, on the one hand, and the representatives of the employees on the other hand may agree alterations, in so far as current law or practice permits, to the employees' terms and conditions of employment designed to safeguard employment opportunities by ensuring the survival of the undertaking, business or part of the undertaking or business.

3. A Member State may apply paragraph 20(b) to any transfers where the transferor is in a situation of serious economic crisis, as defined by national law, provided that the situation is declared by a competent public authority and open to judicial supervision, on condition that such provisions already existed in national law on 17 July 1998.

...'

National legislation

5. Article 47(5) and (6) of Law No 428/1990 provides:

'5. Where the transfer concerns an undertaking or production unit declared by the CIPI (Interministerial Committee for the coordination of industrial policy), pursuant to Article 2(5)(c) of Law No 675 of 12 August 1977, to be in critical difficulties, ... Article 2112 of the Civil Code shall not, unless the agreement lays down more favourable conditions, apply to employees whose employment relationship continues with the transferee. Such an agreement may additionally provide that surplus personnel are to be excluded from the transfer and that the latter are to continue, wholly or in part, in the service of the transferor.

6. Those employees who are not recruited by the transferee, the lessee or the new operator have a right of priority in respect of vacancies filled by the latter during a period of one year from the transfer or during a longer period fixed by collective agreement. Article 2112 of the Civil Code does not apply to those abovementioned employees, who are recruited by the transferee, the lessee or the new operator after the transfer of the undertaking.'

6. In accordance with Law No 675/1977, a declaration that an undertaking is in critical difficulties within the meaning of Article 2(5)(c) of that Law allows the undertaking to have the Cassa integrazione guadagni straordinaria (Extraordinary Redundancy Benefit Fund; 'CIGS') temporarily assume responsibility for the remuneration of all or some of its employees.
7. Article 2112 of the Civil Code, as amended by Legislative Decree No 18 of 2 February 2001 (GURI No 43 of 21 February 2001; 'the Civil Code'), provides:

'(1) On the transfer of an undertaking, the employment relationship shall continue with the transferee and the employee shall retain all rights under that relationship.

(2) The transferor and the transferee shall be jointly and severally liable in respect of all rights which the employee had on the date of the transfer ...

(3) The transferee shall be bound to apply the economic and regulatory measures provided for in collective agreements, including company agreements, in force at the date of the transfer, until their expiry, unless they are replaced by other collective agreements applicable to the transferee's undertaking.

(4) Notwithstanding a worker's ability to exercise his right to leave an undertaking on the basis of the provisions applicable to dismissal, the transfer of an undertaking shall not in itself constitute grounds for dismissal ...

...'

Pre-litigation procedure

8. By letter of formal notice of 10 April 2006, the Commission drew the attention of the Italian authorities to the fact that Article 47(5) and (6) of Law No 428/1990 is liable to infringe Directive 2001/23, on the ground that the employees of the undertaking admitted to the system of the CIGS transferred to the transferee lose the rights laid down in Article 2112 of the Civil Code, subject to any guarantees provided for in a collective agreement.
9. By letter of 8 August 2006, the Italian Republic disputed that it had failed to fulfil its obligations, submitting that Article 47(5) and (6) complies with Directive 2001/23.
10. By letter of 23 March 2007, the Commission sent the Italian Republic a reasoned opinion in which it concluded that the Italian Republic had failed to fulfil its obligations under Directive 2001/23 and requested it to adopt the measures necessary to comply with the opinion within two months of its notification. The Italian Republic replied to the opinion by letter of 29 May 2007, essentially reiterating its earlier arguments.
11. In those circumstances, the Commission decided to bring the present action.

The action

12. At the outset, it is necessary to state that, in its application, the Commission argues that Article 47(5) and (6) of Law No 428/1990 does not comply with Directive 2001/23 in that it does not give employees a guarantee that Article 2112 of the Civil Code, transposing the guarantees in Articles 3 and 4 of Directive 2001/23, will be applied in the event of the transfer of an undertaking which has been declared to be in critical difficulties.
13. Further to information provided by the Italian Republic and a question posed by the Court, in its reply and at the hearing the Commission abandoned its complaint alleging that Article 47(5) and (6) does not comply with the second subparagraph of Article 3(1) and Article 3(2) of Directive 2001/23.

Arguments of the parties

14. The Commission submits that, by barring application of Article 2112 of the Civil Code in the event of the transfer of an undertaking which has been declared to be in critical difficulties, employees whose undertaking is transferred lose the right to recognition of their length of service, their pay and their professional qualifications and the right to old-age benefits under the statutory social security scheme referred to in the first subparagraph of Article 3(1) of Directive 2001/23. They also lose the benefit of the maintenance, for a period of at least one year, of the terms and conditions agreed in any collective agreement, as guaranteed in Article 3(3) of the Directive.
15. The Commission points out that Article 3(4) of Directive 2001/23 permits the non-application of Article 3(1) and (3) in relation to employees' rights to old-age, invalidity or survivors' benefits under schemes outside the statutory social security schemes, but in that event Member States are to adopt the measures necessary to protect the interests of employees. Such is not the case of the Italian legislation at issue.
16. Moreover, Article 47(5) and (6) of Law No 428/1990 does not comply with Article 4 of Directive 2001/23 which, while prohibiting dismissal on the sole ground of a transfer, does not stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce. Thus, the fact that an undertaking is declared to be in critical difficulties does not automatically and systematically imply changes in the workforce within the meaning of that provision. In addition, a declaration that an undertaking is in critical difficulties applies only to the transferor, while the obligations under Article 4 of Directive 2001/23 also apply to the transferee.
17. In the view of the Commission, the transfer of an undertaking which has been declared to be in critical difficulties does not constitute a transfer of an undertaking where the transferor is the subject of proceedings which have been instituted with a view to the liquidation of the assets of the transferor and is under the supervision of a competent public authority. The latter is the sole situation provided for in Article 5(1) of Directive 2001/23 which permits the non-application of Articles 3 and 4 of that directive.
18. Neither does Article 5(2) of Directive 2001/23 apply to the procedure whereby an undertaking is declared to be in critical difficulties since, firstly, the premiss set out in that provision relates to the application of Articles 3 and 4 of Directive 2001/23 and, secondly, Article 5(2) of that directive applies only where transfer of an undertaking takes place during insolvency proceedings, to which the proceedings in question cannot be equated, having regard to the Court's ruling in Case C-72/93 Spano and Others [1995] ECR I-4321.
19. In the same way, it is impossible for Article 5(3) of Directive 2001/23, which permits application of Article 5(2)(b) in the event of transfer in a situation of serious economic crisis, to apply, given that Article 5(2)(b) of Directive 2001/23 authorises only the Member States to permit the transferee and the representatives of the employees to agree alterations to the employees' terms and conditions of employment and therefore does not allow them, as Article 47(5) and (6) of Law No 428/1990 does, to exclude application of Articles 3 and 4 of Directive 2001/23.
20. The Italian Republic disputes the alleged failure to fulfil obligations, submitting, firstly, that it cannot be criticised for failing to apply Article 2112 of the Civil Code when Directive 2001/23 provides for an optional guarantee. Such is the case, for example, with regard to old-age, invalidity or survivors' benefits under supplementary company or intercompany pension schemes transfer of which is precluded by Article 3(4)(a) of Directive 2001/23, except where the Member States provide otherwise.
21. Secondly, that Member State submits that, although Directive 2001/23 lays down obligatory guarantees, namely those in the first subparagraph of Article 3(1) and Article 4 of Directive 2001/23, it also expressly provides for the possibility of derogating therefrom in specific circumstances.
22. With regard to the guarantee laid down in Article 4 of Directive 2001/23, the Italian Republic points out that the procedure whereby an undertaking is declared to be in critical difficulties always relates to specific cases of undertakings in difficulties which are particularly important on a social level, for local employment and for the state of production in the economic sector concerned, which constitute circumstances justifying dismissal.
23. Article 5(2) and (3) of Directive 2001/23 constitutes a derogation from the guarantees laid down in Article 3(1) and (3) of that directive applicable to an undertaking which has been declared to be in critical difficulties such as that laid down by Law No 675/1977, since a finding that the undertaking is in critical difficulties implies that it is also insolvent.
24. Article 5(2)(a) of Directive 2001/23, which refers to insolvency proceedings which have been opened in relation to a transferor 'whether or not those proceedings have been instituted with a view to the liquidation of the assets of the transferor', applies to the procedure whereby an undertaking is declared to be in critical difficulties. In such a case, even if Articles 3 and 4 of Directive 2001/23 apply, that provision lays down a substantial derogation which permits, notwithstanding the provisions of Article 3(1) of Directive 2001/23, the non-transfer to the transferee of the transferor's debts arising from any contracts of employment, provided that such proceedings give rise to protection at least equivalent to that provided for in situations covered by Directive 80/987, as amended by the Act concerning the conditions of accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden and the adjustments to the Treaties on which the European Union is founded. The CIGS mechanism is of longer duration and, in accordance with Article 47(6) of Law No 428/1990, covers the employment of redundant staff by the transferee as a priority over the employment of any other staff which the transferee intends to hire in the year following the transfer of the undertaking.
25. In the same way, Article 5(3) of Directive 2001/23 which, by reference to Article 5(2)(b), permits alterations to the employees' terms and conditions of employment designed to safeguard employment opportunities by ensuring the survival of the undertaking in a situation of serious economic crisis, constitutes a specific derogation from the guarantee referred to in Article 3(3) of Directive 2001/23 which provides for the maintenance, for at least a year, of the terms and conditions of employment. Article 47(5) of Law No 428/1990 lays down a procedure compatible in all respects with that required for application of the derogation referred to in Article 5(3) of Directive 2001/23. A situation of grave economic crisis is declared by a public authority, the safeguarding of employment opportunities is required, an agreement between the transferee, the transferor and representatives of the employees is necessary and a judicial review is opened inasmuch as, if the procedure laid down is not followed with regard in particular to the conclusion of an agreement, the parties are entitled to bring an action before the competent legal authority.
26. The Italian Republic argues, finally, that an interpretation of Directive 2001/23 which has the effect of preventing surplus employees of the undertaking from being maintained in the transferor's service could be less favourable to those employees either because a potential transferee might be dissuaded from acquiring the undertaking if he had to retain the surplus personnel of the undertaking transferred or because the surplus personnel would be dismissed and thus lose the advantages which they might have derived from the continuance of their employment relationships with the transferor.

Findings of the Court

27. From the outset, it must be observed that the Italian Republic does not dispute that Article 47(5) and (6) of Law No 428/1990, by excluding application of Article 2112 of the Civil Code, deprives transferred employees admitted to the system of the CIGS, in the event of a declaration that the undertaking is in critical difficulties, of the guarantees at issue in the present proceedings. However, that Member State submits that that exclusion complies with Directive 2001/23 since, on the one hand, that directive provides for an optional guarantee in Article 3(4) thereof and, on the other, it expressly permits derogation from the obligatory guarantees laid down in the first subparagraph of Article 3(1) and Articles 3(3) and 4 thereof.
28. In those circumstances, it is necessary to ascertain, firstly, whether Article 3(4) of Directive 2001/23 lays down an optional guarantee exclusion of which is justified in Article 47(5) and (6) of Law No 428/1990.
29. In that regard, it must be noted that Article 3(4) of Directive 2001/23 provides for an exception to the application of Article 3(1) and (3) which require the transferee to maintain, for at least a year, the rights and obligations arising from a contract of employment or from an employment relationship, as well as the terms and conditions agreed in any collective agreement until the date of termination or expiry of the collective agreement or the entry into force or application of another collective agreement.
30. That exception relates to employees' rights to old-age, invalidity or survivors' benefits under supplementary company or intercompany pension schemes outside the statutory social security schemes. Thus, having regard to the general objective of safeguarding the rights of employees in the event of transfers of undertakings pursued by the Directive, the exception to that rule must be interpreted strictly (see, by analogy, Case C-64/00 Beckmann [2002] ECR I-4893, paragraph 29).
31. It must also be noted that, in accordance with Article 3(4)(b) of Directive 2001/23, even where the Member States apply that exception, they must adopt the measures necessary to protect the interests of employees in respect of rights conferring on them immediate or prospective entitlement to old age benefits, including survivors' benefits, under supplementary schemes referred to in Article 3(4)(a).
32. It follows that, even if the exclusion of the obligation to transfer the old-age, invalidity or survivors' benefits under supplementary schemes under Article 47(5) and (6) of Law No 428/1990 complies with Article 3(4)(a) of Directive 2001/23, it must nevertheless be held that the argument of the Italian Republic that exclusion, where an undertaking has been declared to be in critical difficulties, of the application of Article 2112 of the Civil Code to transferred employees complies with Article 3(4) of Directive 2001/23 is based on an incorrect and incomplete reading of that provision. On the one hand, only benefits granted outside the statutory social security schemes which are exhaustively listed in Article 3(4)(a) of Directive 2001/23 may be excluded from the obligation to transfer employees' rights. On the other, that exclusion from the obligation to transfer rights must go together with the adoption by the Member State of measures necessary to protect the interests of employees in accordance with Article 3(4)(b) of that directive as regards their rights to old-age benefits under supplementary schemes referred to in Article 3(4)(a), and the Italian Republic has not indicated that it has adopted any such measures.
33. Consequently, the arguments of the Italian Republic that Article 47(5) and (6) of Law No 428/1990 complies with Article 3(4) of Directive 2001/23 cannot be accepted.
34. Secondly, it is appropriate to ascertain whether non-application in Article 47(5) and (6) of Law No 428/1990 of Article 3(1) and (3) and Article 4 of Directive 2001/23 complies with the provisions of the Directive itself, inasmuch as it expressly provides for derogations from the obligatory guarantees which it lays down.
35. With regard, in the first place, to the argument of the Italian Republic that the grounds for dismissal in the event of transfer set out in Article 4(1) of Directive 2001/23 are met in specific cases of undertakings which have been declared to be in critical difficulties within the meaning of Article 2(5)(c) of Law No 675/1977, it must be borne in mind that Article 4(1) of Directive 2001/23 protects the rights of employees against dismissal on the sole ground of the transfer, both vis-à -vis the transferor as well as vis-à -vis the transferee, while not standing in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce.
36. Clearly, the fact that an undertaking is declared to be in critical difficulties within the meaning of Law No 675/1977 cannot necessarily or always imply changes in the workforce within the meaning of Article 4(1) of Directive 2001/23. Moreover, grounds for dismissal can be applied, under the Italian provisions in force, only in specific cases of undertakings in critical difficulties, as the Italian Republic itself accepts. Accordingly, the procedure whereby an undertaking is declared to be in critical difficulties cannot in every case and systematically constitute an economic, technical or organisational reason entailing changes in the workforce within the meaning of Article 4(1) of Directive 2001/23.
37. With regard, in the second place, to the Italian Republic's argument alleging that the derogation laid down in Article 5(2)(a) of Directive 2001/23 is applicable to the procedure whereby an undertaking is declared to be in critical difficulties as referred to in Article 47(6) of Law No 428/1990, it is apparent from the wording of the first of those provisions that, where Articles 3 and 4 of Directive 2001/23 apply to a transfer during insolvency proceedings which have been opened in relation to a transferor and provided that such proceedings are under the supervision of a competent public authority, Member States may provide that, notwithstanding Article 3(1) of that directive, certain of the transferor's debts are not to be transferred to the transferee in the situations set out in Article 5(2)(a) thereof.
38. Article 5(2)(a) of Directive 2001/23 thus permits Member States, on certain conditions, not to apply certain guarantees referred to in Articles 3 and 4 of that directive to transfers of undertakings provided that insolvency proceedings have been opened and that such proceedings are under the supervision of a competent public authority. The Court has held, in a preliminary ruling on whether Council Directive 77/187/EEC of 14 February 1977 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses (OJ 1977 L 61, p. 26), which preceded Directive 2001/23, applied to transfers of undertakings subject to a procedure whereby an undertaking is declared to be in critical difficulties, that that procedure is designed to promote the continuation of its business with a view to its subsequent recovery, does not involve any judicial supervision or any measure whereby the assets of the undertaking are put under administration, and does not provide for any suspension of payments (Spano and Others, paragraphs 28 and 29). In addition it must be noted that the CIPI merely declared that the undertaking was in critical difficulties and that that declaration allows the undertaking to have the CIGS temporarily assume responsibility for the remuneration of all or some of its employees.
39. In the light of those factors, it follows that the procedure whereby an undertaking is declared to be in critical difficulties cannot be regarded as pursuing an outcome analogous to that of insolvency proceedings such as those referred to in Article 5(2)(a) of Directive 2001/23, nor as being under the supervision of a competent public authority such as that referred to in the same provision.
40. Consequently, the conditions for application of Article 5(2)(a) of Directive 2001/23 are not met in the proceedings which are the subject of the present action for failure to fulfil obligations and the arguments put forward by the Italian Republic in that regard cannot therefore succeed.
41. What is more, even if Article 5(2)(a) of Directive 2001/23 were applicable to the procedure whereby an undertaking is declared to be in critical difficulties, as the Italian Republic submits, the fact remains that the basic assumption underlying that provision is application of Articles 3 and 4 of Directive 2001/23. Article 47(6) of Law No 428/1990, on the contrary, provides for their exclusion.
42. That interpretation is, furthermore, strengthened by a systematic reading of Article 5 of Directive 2001/23. Where the Community legislature sought to exclude application of Articles 3 and 4 of Directive 2001/23, it expressly provided for such exclusion, as is apparent from the very wording of Article 5(1) of that directive, pursuant to which Articles 3 and 4 do not apply to any transfer of an undertaking where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor, unless the Member States provide otherwise.
43. Thirdly, with regard to the Italian Republic's argument that Article 47(5) of Law No 428/1990 complies with Article 5(3) of Directive 2001/23, it must be noted that that provision permits Member States to provide that the terms and conditions of employment may be altered, in accordance with Article 5(2)(b) of that directive, in the event of transfer of an undertaking where the transferor is in a situation of serious economic crisis, provided that the situation is declared by a competent public authority and open to judicial supervision.
44. It follows therefrom that, assuming that the situation of the undertaking declared to be in critical difficulties can be regarded as constituting a situation of serious economic crisis, Article 5(3) of Directive 2001/23 authorises Member States to provide for alterations to the employees' terms and conditions of employment designed to safeguard employment opportunities by ensuring the survival of the undertaking, without depriving the employees of the rights guaranteed by Articles 3 and 4 of Directive 2001/23.
45. It is not disputed that Article 47(5) of Law No 428/1990 purely and simply deprives employees, in the event of transfer of an undertaking which has been declared to be in critical difficulties, of the guarantees laid down in Articles 3 and 4 of Directive 2001/23 and consequently does not merely alter the terms and conditions of employment as authorised in Article 5(3) of Directive 2001/23.
46. Contrary to the submissions of the Italian Republic, alteration of the terms and conditions of employment under Article 5(3) of Directive 2001/23 cannot constitute a specific derogation from the guarantee laid down in Article 3(3) of that directive which ensures maintenance, for at least a year after the transfer, of terms and conditions of employment agreed in any collective agreement. Since the rules of Directive 2001/23 must be considered to be mandatory, so that it is not possible to derogate from them in a manner unfavourable to employees, the rights and obligations arising from a collective agreement existing on the date of a transfer must, by reason of such transfer, be transferred to the transferee (see Case C-99/04 Werhof [2006] ECR I-2397, paragraphs 26 and 27). It follows that the alteration of the terms and conditions of employment authorised by Article 5(3) of Directive 2001/23 assumes that the transfer of the employees' rights to the transferor has already taken place.
47. Moreover, application of Article 5(3) of Directive 2001/23 is subject to the opening of the procedure at issue to judicial supervision. In that regard, the Italian Republic has stated that, if the procedure laid down is not followed, the parties are entitled to bring an action before the competent legal authority. That right cannot be regarded as constituting the judicial supervision referred to in that article since that assumes constant supervision, carried out by the court having jurisdiction, of the undertaking declared to be in a situation of serious economic crisis.
48. Furthermore, with regard to the Italian Republic's argument that an interpretation of Directive 2001/23 which has the effect of preventing surplus employees of the undertaking from being maintained in the transferor's service could be less favourable to those employees, it is clear that the Court has held, in that regard, that a provision such as Article 47(5) of Law No 428/1990, the effect of which is to deprive the employees of an undertaking of the guarantees afforded to them by the directive, cannot constitute a provision which is more favourable to employees, within the meaning of Article 8 of that directive (Spano and Others, paragraph 33).
49. It follows that the Italian Republic's argument that the exclusion in Article 47(5) and (6) of Law No 428/1990 of the guarantees laid down in Article 3(1) and (3) and Article 4 of Directive 2001/23 complies therewith cannot be accepted.
50. Having regard to the foregoing considerations, the action brought by the Commission must be considered well founded.
51. Consequently, it must be held that, by maintaining in force the provisions of Article 47(5) and (6) of Law No 428/1990 where an undertaking is in critical difficulties within the meaning of subparagraph (c) of the fifth paragraph of Article 2 of Law No 675/1977 so that the rights of employees set out in Articles 3 and 4 of Directive 2001/23 are not safeguarded in the event of the transfer of an undertaking which has been declared to be in critical difficulties, the Italian Republic has failed to fulfil its obligations under that directive.

Costs

52. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Italian Republic has been unsuccessful, it must be ordered to pay the costs.

On those grounds, the Court (Second Chamber) hereby:

1. Declares that, by maintaining in force the provisions of Article 47(5) and (6) of Law No 428 of 29 December 1990 where an undertaking is in critical difficulties within the meaning of subparagraph (c) of the fifth paragraph of Article 2 of Law No 675 of 12 August 1977 so that the rights of employees set out in Articles 3 and 4 of Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses are not safeguarded in the event of the transfer of an undertaking which has been declared to be in critical difficulties, the Italian Republic has failed to fulfil its obligations under that directive;

2. Orders the Italian Republic to pay the costs.

[Signatures]

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* Language of the case: Italian.