Court of Justice 30-05-1991 ECLI:EU:C:1991:228

The Italian special administration procedure

The special administration procedure for large undertakings in critical difficulty is one of the procedures laid down by Italian legislation for the event that an undertaking is not in a position to meet its obligations. Besides that procedure, there are also bankruptcy proceedings properly so called (‘fallimento’), compulsory administrative winding-up (‘liquidazione coatta amministrativa’)^(*), preventive arrangements and composition (‘concordato preventivo’) and supervised administration (‘amministrazione controllata’), which, as the Agent of the Italian Government confirmed at the hearing, is comparable to a procedure like ‘surséance van betaling’.^(*)

The special administration was introduced into the Italian legal system by Decree-Law No 26 of 30 January 1979,^(*) which, with amendments, was converted into Law No 95 of 3 April 1979^(*) (hereinafter referred to as ‘Law No 95/79’), which was subsequently amended.

According to Article 1 of Law No 95/79, the special administration procedure is applicable to large undertakings, that is to say those having had more than 300 employees (including workers entitled to claim benefits under the CIGS rules) for more than one year and whose debts to credit institutions and social security institutions exceed both set a minimum and five times the paid-up capital. The special administration procedure is applicable to those undertakings, to the exclusion of the bankruptcy procedure.

The decision to apply the procedure is taken by ministerial decree. However, it is first necessary for the court to have found that the undertaking is insolvent or that at least three months' salaries have not been paid. The court can arrive at that finding on its own initiative or on the application of the undertaking itself, one of its creditors or the Public Prosecutor's Department.

The procedure is conducted by one or three auditors who are appointed by the Ministry for Industry and act under his supervision.

Save where Law No 55/79 otherwise provides, the course of the procedure is governed by the insolvency legislation on compulsory administrative winding-up.^(*) It follows from this inter alia that the organs of the undertaking cease their functions and lose their power to manage the undertaking and dispose of its assets.

Article 2 of Law No 95/79 provides that the ministerial decree commencing the procedure after the court has found that the undertaking is in a state of insolvency or has failed to make payments may authorize the undertaking to continue in trading under the supervision of the auditor for a period not exceeding two years; that authorization may be extended two times for a total period not exceeding two years.

The auditor draws up a programme which must be approved by the supervisory authority. That programme contains, as far as possible and taking into account the interests of creditors, a restructuring plan compatible with the main thrust of industrial policy. The plan identifies the plants to be brought back into operation and those which must be transferred. Article 2 of Law No 95/79 expressly provides that the integrity of the operating plant must be preserved as far as possible, even in the case of plant which is to be transferred.

Article 2bis of Law No 95/79 provides that the State may guarantee debts incurred vis-à-vis credit institutions in order to finance the day-to-day running or recommissioning of certain plants.

Article 3 provides that the procedure may be extended to all companies in the group to which the undertaking under special administration belongs, including parent companies, subsidiaries and sister companies, even if, considered on their own, they may not be regarded as ‘large’ undertakings.

Article 5bis of the Law grants a fiscal advantage in the event of the transfer of an undertaking or a part of an undertaking whilst Article 6bis allows the auditor, subject to authorization from the supervisory authority and after consultation with a supervisory committee comprising representatives of creditors, to derogate from the obligation to transfer an undertaking or a part of an undertaking by way of public sale.

Opinions differ on the purpose of the special administration procedure. In the order for reference the referring court states that the procedure is mainly intended to restructure the undertaking, having regard above all to the safeguarding of jobs. According to the referring court, the ‘conservatory’ purpose of the procedure is clear from the following circumstances:

1. The report on Decree Law No 26/1979 clearly states that the purpose of the procedure is to save the parts of an undertaking or group of undertakings which are basically sound, by transferring ownership of the undertaking — but not its debts — from the insolvent transferor to the transferee;

2. An undertaking placed under special administration may obtain from credit institutions sums of money whose repayment is guaranteed by the State, for the purpose of:

3. Bringing back into operation and supplementing plant, land and buildings and industrial equipment (Article 2bis of Law No 95/79);

4. The protection of creditors' interests is less extensive than in other liquidation procedures; in particular, creditors are not involved in decisions relating to the continued operation of the undertaking and, above all, they have no possibility of having the court determine whether continued operation is in their interests;

5. The preference shown for continuing the operation of the undertaking is so great that the law does not deal with the converse, but theoretically possible, case, nor does it deal with the situation in which the restructuring plan proves to be impracticable after the continued operation of the business has been decided upon. ’

The Commission observes that the aim of the procedure is to protect both the interests of creditors and jobs. In practice, however, it is not always possible to reconcile those two aims. This explains the differences of view between academic writers regarding the nature of the special administration procedure: for some, it is a winding-up procedure designed to protect the interests of creditors; for others, it is a conservatory and restructuring procedure. The Commission takes the view, however, that in academic writing and above all in case-law the main emphasis is placed on the winding-up function of the procedure. It points out in this regard that the fact that the provisions of the bankruptcy legislation which govern compulsory administrative winding-up are in principle applicable to the special administration procedure and the fact that the latter procedure may not be applied where insolvency is temporary and reversible.

The defendants in the main proceedings state categorically that the interpretation of the referring court is wrong. According to them, it is unanimously accepted in Italian academic writing that special administration is a creditors' arrangement procedure having liquidation as its purpose. The fact that the undertaking concerned may continue its operations for two or three years does not alter anything. That period allows the liquidation to go ahead under conditions which allow the production units to be maintained but not the undertaking itself.

The plaintiffs in the main proceedings state that the principle aim of the procedure is to enable undertakings or parts of undertakings under special administration to be transferred to third parties.

Finally, according to the Italian Government, the aim of the procedure is to save as far as possible the viable parts of the undertakings by transferring them to a new employer so as to limit the economic and social damage which may be caused when large undertakings cease to operate.

At the hearing the Italian Government produced figures showing that on 30 April 1990 the procedure had been declared applicable to 40 groups of undertakings representing in total 300 undertakings. At that date seven undertakings had been authorized to continue trading, 273 were in the course of being wound up and the procedure had been closed in respect of 20 of them. Those undertakings employed 60 000 workers before the procedure was commenced. Application of the procedure had enabled 29 000 workers to be transferred. 24 400 workers had opted for voluntary redundancy or been made redundant. As at 30 April 1990, 7 600 workers were still employed in the undertakings under special administration and 6 600 of them were receiving benefits from CIGS.

Case-law of the Court of Justice

Article 1(1) of Directive 77/187 defines the scope of the directive as follows:

This directive shall apply to the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger.’

The Court interpreted the expression ‘transfer of an undertaking, business or part of a business to another employer’ in its judgment in the Spijkers^(*) case. According to the Court (paragraphs 11 and 12), the decisive criterion for establishing whether there is a transfer for the purposes of the directive is whether the business in question retains its identity. The mere fact that assets are disposed of is therefore not sufficient. On the contrary, the entity transferred must be a going concern, which would be indicated, inter alia, by the fact that its operation was actually continued or resumed by the new employer, with the same or similar economic activities.

This case concerns other terms of the aforementioned directive, more particularly those according to which the directive is applicable only to transfers carried out as a result of ‘a legal transfer or merger’ (which is not in issue in this case). Those terms, too, have also been interpreted by the Court. In particular in the Abels case,^(*) it considered whether it followed from those terms that the directive is applicable where the transferor of the undertaking (in that case, pursuant to Netherlands law) has been declared insolvent or obtained a ‘surséance van betaling’ (judicial leave to suspend payment of debts). In that judgment, the Court ruled that:

‘Article 1(1) of Council Directive No 77/187 of 14 February 1977 does not apply to the transfer of an undertaking, business or part of a business where the transferor has been adjudged insolvent and the undertaking or business in question forms part of the assets of the insolvent transferor, although the Member States are at liberty to apply the principles of the directive to such a transfer on their own initiative. The directive does, however, apply where an undertaking, business or part of a business is transferred to another employer in the course of a procedure such as a “surséance van betaling” (judicial leave to suspend payment of debts).’

Given the importance of that judgment in replying to the question submitted in the present case, I propose to examine the grounds of that judgment in more detail.

The Court noted first of all that there were discrepancies between the various language versions of Article 1(1) of the directive. Some versions indicated that transfers arising as a result of an administrative or judicial decision were excluded whilst others seemed to indicate a wider scope of application. Moreover, the term ‘legal transfer’^(*) had different meanings in the insolvency law of the Member States. Whilst in certain Member States it was considered that a sale effected in insolvency proceedings was a normal contractual sale, even if judicial intervention was a preliminary requirement for the conclusion of such a contract, under other legal systems the sale is regarded as taking place by virtue of a measure adopted by a public authority. In view of those differences, the Court considered that the scope of the provision at issue could not be appraised solely on the basis of a textual interpretation; its meaning had to be clarified in the light of the scheme of the directive, its place in the system of Community law in relation to the rules of insolvency, and its purpose.

The Court went on to state that insolvency law was characterized by special procedures intended to weigh up the various interests involved, in particular those of the various classes of creditors; consequently, in all the Member States there were specific rules which might derogate, at least partially, from other provisions, of a general nature, including provisions of social law.

The specificity of insolvency law was also confirmed in Community law. Thus, Council Directive 75/129 of 17 February 1975, on the approximation of the laws of the Member States relating to collective redundancies,^(*) excluded from its scope workers affected by termination of an establishment's activities ‘where that is the result of a judicial decision’. Moreover, according to the Court, the specificity of insolvency law was also reflected in Council Directive 80/987 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, cited above (in footnote 2). That directive created a system to ensure the payment of outstanding claims relating to pay which applied equally to undertakings which had been adjudged insolvent.

The fact that insolvency law is the subject of specific rules both in the legal systems of the Member States and in the Community legal order and the fact that the rules on insolvency and analogous proceedings are very different in the various Member States led the Court to state (in paragraph 17) that:

‘if the directive had been intended to apply also to transfers of undertakings in the context of such proceedings, an express provision would have been included for that purpose’.

The Court derived its second argument in support of its judgment from the aim of the directive. Referring to its preamble, it stated that the directive aimed to afford protection to workers in the event of transfers of undertakings in view of the need, referred to in Article 117 of the EEC Treaty, ‘to promote improved working conditions and an improved standard of living for workers’.

The Court observed that the parties in the Abels case were divided as to whether, if the directive were held to be applicable to liquidation or similar proceedings, the resulting social and economic effects would be favourable or prejudicial to the interests of employees. In this regard, I would observe that, in the present case, the parties are also divided as to the effect of the possible applicability of the directive where the transfer took place in the course of a special administration procedure.

Certain parties in the Abels case considered that the directive ought to be applicable in the event of insolvency on the ground that it is precisely the employees of the employer declared insolvent which most need protection. However, other parties in that case, including the Commission pointed to a number of unfavourable economic consequences which, in their view, would arise if the directive were to apply to transfers of undertakings in the event of insolvency or a ‘surséance van betaling’. In their view, such an extension of the scope of the directive might dissuade a potential acquirer from acquiring an undertaking on conditions acceptable to the body of creditors, which might lead them to sell the assets of the undertaking separately. That would entail the loss of all the jobs in the undertaking, which would defeat the useful effect of the directive.

According to the Court, that difference of opinion showed that there was considerable uncertainty about the impact on the labour market of transfers of undertakings in the event of an employer's insolvency and about the appropriate measures to be taken in order to ensure the best protection of workers' interests. The Court's conclusion from this was that:

‘... a serious risk of general deterioration in working and living conditions of workers, contrary to the social objectives of the Treaty, cannot be ruled out. It cannot therefore be concluded that Directive 77/187 imposes on the Member States the obligation to extend the rules laid down therein to transfers of undertakings, businesses or parts of businesses taking place in the context of insolvency proceedings instituted with a view to the liquidation of the assets of the transferor under the supervision of the competent judicial authority.’ (paragraph 23)

However, the Court went on to state that, even though transfers of that kind did not fall within the scope of the directive, the Member States were at liberty independently to apply the principles of the directive, wholly or in part, on the basis of their national law alone. Article 7 in fact provides that the directive ‘shall not effect the right of Member States to apply or introduce ... provisions which are more favourable to employees’.

The Court thus arrived at the same conclusion as Advocate General Sir Gordon Slynn who, in his Opinion, had warned against the perverse affect of the application of the directive:

‘The counterproductive result of applying the Directive, which seems to be a real possibility, is so contrary to its objectives that in the absence of other clear indications, it seems to me that the intention was not to apply the provisions to undertakings which are in liquidation.’^(*)

The Abels case also raised the question whether a transfer taking place in the Netherlands ‘surséance van betaling’ procedure fell outside the ambit of Directive 77/187. According to Advocate General Sir Gordon Slynn, in such a context it was simpler to consider the sale of the undertaking by the owner as a contractual transfer.

That observation must be considered against the background of the provisions of the Netherlands Faillissementswet (Law on insolvency) relating to surséance van betaling.^(*) In accordance with those provisions, the court first grants a provisional surséance, which, however, it can do only upon the application of the debtor himself on the ground of his belief that he is no longer in a position to meet his debts which have fallen due (Article 213 of the Faillissementswet). The court then appoints one or more administrators to manage the debtor's business affairs together with the debtor. At a later stage it decides whether to order a definitive suspension of payments. However, even after a definitive suspension, the debtor does not lose his power of disposal and control over his assets but simply has no power to effect transactions concerning his assets without consultation with, or the authority or assistance of the administrator or administrators (Article 228(1) of the Faillissementswet). The clear aim of the surséance procedure is to prevent liquidation brought about by agreement between the creditors (Article 252 of the Law) and is not intended to produce a ‘forced’ liquidation of the debtor's assets.

Despite the clearer consensual nature of the sale of an undertaking in a surséance procedure, the Advocate General came to the conclusion that a transfer in the course of such a procedure also had to be excluded from the scope of the directive because it could give rise to the same problems as a transfer in liquidation proceedings if, in the event of the transfer of the business, all the workers had to be taken on.

On this point, the Court did not follow the Advocate General. Proceedings such as those relating to a surséance van betaling have, according to the Court, certain features in common with liquidation proceedings in so far as both are of a judicial nature. They are, however, different from liquidation proceedings

‘in so far as the supervision exercised by the court over the commencement and the course of such proceedings is more limited. Moreover, the object of such proceedings is primarily to safeguard the assets of the insolvent undertaking and, where possible, to continue the business of the undertaking by means of a collective suspension of the payment of debts with a view to reaching a settlement which will ensure that the undertaking is able to continue operating in the future. If no such settlement is reached, proceedings of this kind may, as in the present case, lead to the debtor's being put into liquidation’ (paragraph 28).

It follows, according to the Court, that the directive is applicable to transfers of undertakings taking place in proceedings such as the surséance van betaling procedure ‘taking place at an earlier stage’.

The Court confirmed its judgment in the Abels case in three other judgments delivered on the same day.^(*) In its judgment in the Mikkelsen case,^(*) delivered a few months later, the Court also referred to the judgment in Abels. However, that judgment related to the transfer of an undertaking which had taken place after the transferor company had ceased its payments but before it had been declared insolvent. According to the Court, it followed from the judgment in Abels that:

‘... the mere fact that the transfer of an undertaking, business or part of a business has occurred after the transferor has suspended payment of its debts is not enough to exclude the said transactions from the scope of Directive 77/187. It therefore applies to a transfer as defined in Article 1(1) which is effected in the course of a procedure, or at a stage, prior to the commencement of liquidation proceedings’ (paragraph 10).

On my understanding of that ground of the judgment, it is not sufficient, in order for the transfer of an undertaking to be excluded from the scope of the directive, for the conditions under which the transferring undertaking would be adjudged insolvent to be fulfilled; the transferring undertaking must actually be adjudged insolvent.

The position taken in the Abels case is therefore settled law. I shall therefore use that judgment as a starting point in assessing the second question referred for a preliminary ruling.

Similarities and differences between liquidation and suspension of payments

I infer from the Court's judgment in the Abels case that it did not wish strictly to limit its assessment to a situation in which the transferor has been adjudged insolvent. In both paragraph 17 and paragraph 19, the Court refers to ‘liquidation or similar proceedings’, thus suggesting that a transfer taking place in a procedure other than a liquidation procedure may also be excluded from the scope of the directive. It is only in regard to a transfer effected in the course of a procedure of the surséance van betaling type, in contrast to a transfer in liquidation proceedings, that the Court has hitherto held that it is not excluded from the scope of Directive 77/187, on account of the clear differences between the two procedures and thus a lack of any ‘similarity’.

In order to determine whether Directive 77/187 is applicable, the question to be examined now is what are the other procedures, amongst those existing in the Member States governing financial incapacity^(*), which are more akin to liquidation than to surséance van betaling. In the present case, that question is raised only in connection with a procedure like the ‘special administration’ procedure, as it is described above. Therefore, it is only with regard to that procedure that the question must be answered.^(*)

The expression ‘anajogous procedures’ (that is to say procedures similar to bankruptcy, winding-up and like procedures) also appears in other Community law texts. For example, the second subparagraph of Article 1(2) of the Convention of 27 September 1968 on Jurisdiction and the Enforcement of Judgments in Civil and Commercial Matters excludes from the scope of that convention ‘bankruptcy, proceedings relating to the winding-up of solvent companies or other legal persons, judicial arrangements, compositions and analogous proceedings’.^(*) In the Gourdain case^(*) in which the Court was asked to rule on the question whether a judgment delivered by a French court in a action en comblement du passif social fell within the scope of that convention, the Court (in paragraph 4) defined the terms used in Article 1 as follows:

‘Les faillites, concordats et autres procédures analogues sont des procédures fondées, selon les diverses législations des parties contractantes, sur l'état de cessation de paiement, l'insolvabilité ou l'ébranlement du crédit du débiteur impliquant une intervention de l'autorité judiciaire aboutissant à une liquidation forcée et collective des biens ou, à tout le moins, un contrôle de cette autorité.’^(*)

Mention may also be made of the draft Convention on Bankruptcy, Winding-up, Arrangements, Compositions and Similar Proceedings,^(*) which in a protocol annexed to that draft indicates the procedures — bankruptcy procedures and other procedures — to which the convention is to apply.

The ‘analogous procedures’ referred to in the provisions cited above, as defined by the Court in the Gourdain judgment, also include procedures of the surséance van betaling type. In the protocol annexed to the draft Convention on Bankruptcy, the surséance van betaling procedure provided for in Netherlands law is, moreover, expressly referred to in the list of procedures other than bankruptcy to which the convention is to apply.

The expression ‘analogous procedures’ within the meaning of the judgment in Gourdain cannot therefore help us in identifying the procedures which must be classified as procedures similar to bankruptcy procedures within the meaning of the Abels judgment nor, therefore, in determining whether they fall within the scope of Directive 77/187. However, the judgment in Gourdain does indicate the characteristics common to bankruptcy procedures and the surséance van betaling procedure (see below paragraph 21).

In order to determine whether a procedure of the ‘special administration’ kind in Italian law is akin to liquidation proceedings, which, in its judgment in Abels, the Court excluded from the scope of Directive 77/187, or to a procedure of the surséance van betaling type, which the Court considers to fall within the scope of that directive,^(*) it is necessary to look more closely at the similarities and differences between bankruptcies and suspensions of payments.

As the Court stated in Gourdain with regard to the concept of ‘analogous procedures’ in the broad sense (see above, at paragraph 19), these two procedures have in common that they are based on the suspension of payments, insolvency of the debtor or his inability to raise credit, which involve the judicial authorities. As the Court noted in Abels (paragraph 28), the surséance procedure is also ‘of a judicial nature’. That common feature is to be explained by the fact that a declaration that a debtor is unable to meet his liabilities, whether on account of liquidity or solvency problems, requires judicial intervention since it is a situation in which the debtor and his creditors are subject to a procedure entailing some restriction of their rights.

In the Abels judgment, the Court also indicated the differences between bankruptcy (faillite) and surséance (suspension of payment). In my view, there are three.

The first difference concerns the aim of the two procedures. In the ground of judgment set out in paragraph 16 above, the Court indicated that the object of the surséance procedure is ‘primarily to safeguard the assets of the insolvent undertaking and, where possible, to continue the business of the undertaking’. That object is achieved by means of ‘a collective suspension of the payment of debts’. That characteristic indicates the nature of a suspension of payments which is designed to resolve temporary payment difficulties^(*) and not to liquidate the debtor's assets but, on the contrary, to prevent winding-up. Bankruptcy proceedings are fundamentally different: their aim is to liquidate all the assets and discharge the liabilities. That realization of the assets may be done by way of sale (or contribution of capital) of the assets separately, but also by way of sale (or contribution of capital) of all or part of the assets as elements of a ‘going concern’ within the meaning of the judgment in Spijkers, referred to above (paragraph 9).

According to what the Court stated in Abels (see above, at paragraph 16), a second difference consists in the fact that, in the case of a suspension of payments, ‘the supervision exercised by the court over the commencement and the course of such proceedings is more limited’.

As far as the commencement of the proceedings is concerned, the Court had in view the Netherlands rules according to which a suspension of payments may be applied for only by the debtor (and not by his creditors) and cannot be ordered by the court of its own motion.^(*) In the case of bankruptcy proceedings the situation is totally different: the declaration of bankruptcy may be pronounced upon application by the debtor or one or more creditors (and in certain cases upon application by the Public Prosecutor's Office) or by the court of its own motion. Furthermore, when declaring a state of bankruptcy, the court will also take other measures, concerning, for example, the retroactive effect of the declaration of bankruptcy (suspect period).

As regards the course of the proceedings, the supervision exercised by the court in the case of a suspension of payments is also more limited than in the case of bankruptcy. Whereas in the latter case the law provides for some form of permanent receivership and supervision thereof by a judge, such supervision, in the case of a suspension of payments, is limited to ensuring that the debtor honours the repayment commitments into which he has entered and any acts he carries out with the assistance of an auditor or an administrator.

A third difference is closely connected with the two previous ones and resides in the fact that, as mentioned above, the more extensive supervision of the court in the case of bankruptcy is accompanied by the imposition of a thoroughgoing form of administration or receivership in order to ascertain the assets, realise the assets and discharge the liabilities, the reverse side of which is that the debtor is placed under compulsory receivership and loses all powers of disposition and control. Here again, the situation is totally different than in the case of a suspension of payments: at the most, one or more auditors or administrators are appointed who supervise the debtor who is assisted by them and authorized to carry out certain acts but who does not, however, lose his powers of disposal and control over his property.

In the judgment in Abels, this third difference was not explicitly mentioned. The Court did, however, point out (see paragraph 11 above) that in some Member States a sale carried out in the course of bankruptcy proceedings is regarded as a normal contractual sale, even though the intervention of the judicial authority (or, more precisely, the intervention of the receiver acting under the supervision, or with the authority, of the court) is first required for the conclusion of such a contract, whereas under other legal systems the sale is regarded as taking place by virtue of a measure adopted by a public authority. However, common to both views is the fact that the sale carried out pursuant to bankruptcy proceedings may take place without the consent or cooperation of the bankrupt person and in this sense constitutes a ‘forced’ sale in his regard. In the case of a suspension of payments, the situation is again different since the debtor retains his power to carry out acts of disposition, even if with the assistance, cooperation or authorization of an auditor or an administrator.

Non-applicability of the directive to transfers carried out in a ‘special administration procedure’

Where, then, having regard to the similarities and differences described above, does a procedure of the ‘special administration’ kind appear on the scale of analogous procedures: is it more akin to bankruptcy or more akin to a suspension of payments?

As regards the similarities, it is clear that the special administration procedure is also based on ‘inability to meet liabilities, insolvency or the collapse or the debtor's creditworthiness’, to use the terms used in the Gourdain judgment (see above at paragraph 19). Indeed, before the decision to commence the procedure is taken by ministerial decree, the court must have first declared a state of insolvency or a failure to pay salaries (see above at paragraph 5).

As regards the first difference, regarding the purpose of the proceedings, the national court and the parties differ in their view as to whether the special administration procedure is designed to restructure or liquidate the undertaking. In my view, this difference of opinion is based on a misunderstanding and, more precisely, on a confusion between (compulsory) liquidation of the assets and the continuity of the undertaking transferred.

In this regard, it must be recalled that, according to the national court, which refers in this regard to the preamble to Law No 95/79 (see above at paragraph 7, point 1), the purpose of the special administration procedure is to ‘save the parts of an undertaking or group of undertakings which are basically sound, by transferring ownership of the undertaking — but not its debts — from the insolvent transferor to the transferee’. The process is therefore one of transferring a set of assets, in the form of a ‘going concern’, with a view to discharging the liabilities which are not transferred and which therefore remain in the estate under administration. As mentioned above (paragraph 22), the aim of bankruptcy proceedings is also to realize the assets in order to discharge the liabilities, but the assets may be transferred separately or together, as elements of a ‘going concern’. What distinguishes the special administration procedure from bankruptcy proceedings is therefore the fact that, for the sake of preserving jobs, it gives preference to the second mode of transfer, that is to say transfer (by way of sale or contribution of capital) of a set of assets which together form a going concern (and not of separate assets), which enables the undertaking's business to be maintained as far as possible.

In a procedure for the suspension of payments, on the other hand, there is no compulsory liquidation or realization of assets. The procedure is intended to resolve payment difficulties by granting the debtor a collective suspension of payments, possibly combined with a partial and conditional remission of debts, depending on the arrangements made by the creditors. If a sale of assets does take place, this is not the result of any compulsory liquidation.

I would make one final point: having regard to the fact that under the special administration procedure the emphasis is placed — even more than in bankruptcy proceedings — on the protection of jobs, the risk of a counterproductive effect which prompted the Court to exclude bankruptcy proceedings from the scope of the directive (see above, at paragraph 14) must be regarded as providing an additional reason for treating the special administration procedure in a way analogous to bankruptcy proceedings for the purposes of the directive.^(*)

As regards the second difference, regarding the supervision exercised by the court over the commencement and course of the procedure, one particular feature must be noted. Whereas in bankruptcy proceedings it is the court which supervises the commencement and the course of the proceedings, in a procedure of the special administration kind, this supervision may be exercised by an administrative authority, with the qualification, however, that, as in the case of the Italian legislation in question (see above, at paragraph 5), the prior intervention of the court is necessary in order for the state of insolvency to be determined and, as in the case of bankruptcy, that declaration may be made not only upon application by the debtor but also upon application by creditors, and possibly upon application by the Public Prosecutor's Office or by the court acting of its own motion.

The fact that the course of the procedure is subject to administrative supervision rather than judicial supervision — the difference cannot be overestimated since in both cases the conduct of the procedure is de facto in the hands of the auditors or receivers — is not, in my view, a reason for considering that a procedure such as the special administration procedure is more akin to one providing for the suspension of payments than to bankruptcy proceedings. Moreover, the conduct of the suspension of payments procedure, as that of bankruptcy proceedings, is subject to to judicial supervision, which means that, on this point too, the suspension of payments procedure differs from the special administration procedure. The reason why the conduct of the special administration is supervised by the administration is, clearly, that the restructuring of undertakings carried out under that procedure with a view to transferring a set of assets and maintaining jobs requires policy choices to be made and this is incompatible with the judicial function.

This same reason explains why in many countries^(*) undertakings such as credit institutions and insurance companies which play an important role in the economy and savings activities of a country are excluded from the bankruptcy procedure which is normally applicable and are liquidated according to special administrative procedures.^(*)

Finally, as regards the third difference, concerning the effects of the administration on the debtor's powers of disposal and management, it is clear that, in this regard too, a procedure of the special administration type is akin to bankruptcy proceedings. This is all the more evident since under the Italian special administration procedure reference is made, as far as the course of the procedure is concerned, and unless the law otherwise provides, to the bankruptcy legislation on compulsory administrative liquidation. This means, inter alia, that the debtor (in the case of a company, the company organs) loses all powers of disposition and management; these are transferred to the auditor or auditors appointed by the Minister for Industry (see above, at paragraph 5). The effect of this is, inter alia, that, both in the case of bankruptcy proceedings and in the case of special administration, and unlike in the case of a suspension of payments, agreements on the ‘transfer of an undertaking, business or part of a business’ within the meaning of Article 1(1) of the directive are concluded by the receivers or auditors (acting under judicial and administrative supervision respectively) without the involvement of the debtor and are not therefore agreements freely entered into by him. In my view, that last factor has decisive importance since it means in effect that the non-applicability of the directive in the event of the transfer of an undertaking under a special administration procedure, as in the case of bankruptcy proceedings, is not independent on a decision of the undertaking's owners.

It follows from the foregoing that a procedure of the special administration kind provided for in Italian law must be treated, for the purposes of the directive, as a bankruptcy procedure, bearing in mind, too, that the court stated in its judgment in the Mikkelsen case (see above, at paragraph 17) that the directive ceases to be applicable only from the time when the court adjudges the debtor to be insolvent.

This means more particularly that I cannot share the view, advanced by the Commission in this case, that, as long as an undertaking under special administration has been specifically authorized to continue trading, transfers which have already taken place fall within the scope of the directive whilst those which take place after the withdrawal of that authorization do not come under the directive.^(*) That decision is an incidental decision; it can also be taken in bankruptcy proceedings properly so called and its purpose is, depending on the circumstances, to enhance the value of assets pending their sale. Moreover, declaring the directive applicable where trading is continued and declaring it inapplicable where trading ceases may bring about an immediate cessation of trading although this may be the least favourable solution from the social point of view.

Nor can I share the French Government's view that a transfer which takes place in a procedure prior to a declaration of bankruptcy is not excluded from the scope of the directive. This view is based on the idea that, chronologically, bankruptcy proceedings are the final stage, which is not so in the case of a special administration procedure which is established in order to replace bankruptcy proceedings.

In view of the foregoing considerations, I propose to reply to the second question in the way indicated at the end of this Opinion, at paragraph 37.