Sunday, November 1, 2009


Transfer of businesses in "Critical difficulties": Italian law does not comply with EU law

By Vittorio Pomarici, Marco Sartori
Bonelli Erede Pappalardo - Studio Legale

The EU Court of Justice, in its Judgment of 11 June 2009, C- 561/07, stated that Italy has failed to fulfill its obligations in terms of Council Directive 2001/23/EC, which safeguards employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses.

The Directive provides for two fundamental principles in the event of a transfer of an undertaking: the transferor’s rights, and the obligations arising from any employment contract relationship that exist on the date of a transfer, must, by reason of the transfer, be transferred to the transferee (Sect. 3); the transfer of an undertaking does not in itself constitute grounds for dismissal of an employee by the transferor or the transferee (Sect. 4).

Member States may provide a derogation to the guarantees laid down in Sect. 3 and Sect. 4, when the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted to liquidate the assets of the transferor, and are under the supervision of a competent public authority (Sect. 5).

Accordingly, if a proceeding is designed to liquidate the debtor’s assets in order to satisfy creditors, the transfer effected under this legal framework is not subject to Sect. 3 and Sect. 4. Conversely, when the purpose of the proceeding is primarily to safeguard the assets and, where possible, to continue the business, then Sect. 3 and Sect. 4 are applicable.

Presently, Article 47(5) and (6) of Italian Statute No. 428 of 29 December 1990 allows the transferor and the transferee, where an agreement with the trade unions has been reached in the context of the information and consultation procedure, to be exempted from the application of Sect. 3 and Sect. 4, provided that the concerned undertaking has been declared to be in «critical difficulties» by certain Italian competent authorities.

But the EU Court of Justice has stated that the above exemption is not in compliance with the Directive as the declaration of «critical difficulties» under Italian Law cannot be regarded as pursuing an outcome analogous to that of insolvency proceedings. In fact, according to the Court decision, this procedure is designed to promote the continuation of the business with a view to its subsequent recovery, and does not involve any judicial supervision or any measure whereby the assets of the undertaking are put under administration.

As a consequence, the Republic of Italy must take the necessary measures to carry out the EU Court decision in order to avoid the relevant penalties related to the breach committed.

In the meantime, Italian Courts could decide to directly apply Sect. 3 and Sect. 4 in the relevant case, according to the principle of primautè of EU law, instead of Article 47(5) and (6) of Italian Statute No. 428 of 29 December 1990. Moreover, any individual may file a claim against Italy for any damages suffered because of this EU law violation.