Court of Justice 07-05-2002 ECLI:EU:C:2002:283

Opinion of Advocate General

Mischo

delivered on 7 May 2002^(*)

By order of 29 January 2001 the Corte d'appello di Milano (Court of Appeal, Milan) (Italy) referred a question to the Court of Justice for a preliminary ruling concerning the interpretation of Articles 43 EC and 49 EC.

In Italy, exercise of activities in connection with ‘Obligations relating to the employment, social security and social assistance of employees’, such as the preparation and printing of pay slips, is subject to special legislation. Law No 12 of 11 January 1979 for the regulation of the profession of employment consultant^(*) (‘Law 12/79’), as amended by Article 58(16) of Law No 144 of 17 May 1999^(*) (Law 144/99), lays down the following rules:

Article 1(1) of Law 12/79:

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

Article 1(4) of Law 12/79:

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

Article 58(16) of Law 144/99:

‘The following paragraphs shall be added at the end of Article 1 of Law No 12 of 11 January 1979, as subsequently amended:

For the purpose of performing the calculating and printing operations relating to the obligations referred to in paragraph 1, and of carrying out the technical and ancillary activities relating to those operations, the undertakings referred to in paragraph 4 may use the services of data-processing centres (DPCs) provided that they are established and staffed exclusively by persons registered with the professional associations previously mentioned in this law...

... Undertakings with more than 250 employees which do not have their own internal departments to carry out the abovementioned operations may entrust them also to data-processing centres (set up by or external to themselves), which must in any event be assisted by one or more of the persons referred to in paragraph 1...’

That legislation therefore prohibits, in absolute terms, the use by undertakings with fewer than 250 employees of external data-processing centres (DPCs) not exclusively staffed by persons registered with the abovementioned professional associations.

I would observe, as Payroll Data Services Srl (Italy) (‘Payroll’)^(*) points out, that Article 9(i) of Law 12/79 includes a certificate of residence among the documents to be submitted in order to obtain registration as an employment consultant.

Payroll, a company incorporated under Italian law, is a subsidiary of two French undertakings, ADP Europe SA and ADP GSI SA, whose activity is the provision of data-processing services for the preparation and printing of pay slips. Since Payroll did not meet the requirements with regard to its staff laid down in Article 1 of Law 12/79, as amended by Law 144/99 (‘the contested provision’), the Tribunale di Milano (Italy) refused its application for approval of an amendment to the objects of that company, which read as follows:

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

In the case in the main proceedings before the Corte d'appello di Milano, Payroll, together with ADP Europe SA and ADP GSI SA, are challenging the refusal to approve the amendment, and contend that the contested provision should not be applied because it conflicts with the principles of freedom of establishment and freedom to provide services laid down in Articles 43 EC and 49 EC. They contend that that legislation by no means seeks to protect the public interest and in fact merely serves to protect persons who are registered with the abovementioned professional associations from competition.

Since a matter relating to the interpretation of Community law was thus raised before it, the Corte d'appello di Milano considered it necessary, in order to resolve that matter, to refer the following question to the Court of Justice:

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

May I say, by way of a preliminary remark, that the case in the main proceedings does contain the foreign element required in order for Articles 43 EC and 49 EC to apply. The adoption and extension of the objects of a subsidiary company by two undertakings whose registered office is located in the territory of another Member State does indeed fall within the scope of Article 43 EC.^(*)

In the wording of the question it has referred for a preliminary ruling the national court mentions that the Italian legislation ‘prohibits, in absolute terms’ undertakings having less than 250 employees from using ‘external undertakings providing services’ relating to the preparation and printing of their pay slips. In that regard, a reading of the order for reference shows that it prohibits more particularly recourse to external service providers which are not staffed exclusively by persons registered with the abovementioned professional associations.

The Italian Government, for its part, contends that the prohibition is not absolute and that undertakings with fewer than 250 employees may indeed use the services of external providers established in other Member States which are merely assisted by employment consultants or the like. This is in direct conflict with the interpretation of national law given by the Corte d'appello in the grounds of its order for reference.

I find it difficult at first sight to reconcile the Italian Government's assertion with the actual text of the contested provision, which clearly states that in the present case DPCs must be ‘established and staffed exclusively by persons registered with the professional associations previously mentioned...’.

Moreover, the Court cannot take into consideration the Ministry of Employment's Circular No 14 of 15 March 2000, quoted by the Italian Government. It is settled case-law that the existence of circulars or administrative practices cannot make national law conform to Community law where national laws are incompatible with the latter.^(*)

In any event, it is for the Court to interpret Community law in the light of the factual and legal situation as described by the national court so that it may give that court the information it requires in order to resolve the dispute before it.

In essence, it is necessary therefore to answer the question whether Articles 43 EC and 49 EC preclude legislation requiring undertakings with fewer than 250 employees which wish to entrust the preparation and printing of their pay slips to external DPCs, to use only centres that are established and staffed exclusively by employment consultants and the like who are registered with a professional association.

From a reading of the order for reference, it appears that the Corte d'appello di Milano does not find in either the text or the application of the contested legislation any discrimination against the subsidiaries of foreign companies. Nor do I myself find any direct discrimination on grounds of nationality.

However, the rules regarding equality of treatment forbid not only overt discrimination based on nationality but also all covert forms of discrimination which, by the application of other distinguishing criteria, lead to the same result.^(*)

It would none the less be wrong to consider, as Payroll suggests in its observations, that the national legislation is indirectly discriminatory in that it does not allow knowledge acquired in another Member State to be taken into account, especially since the description ‘employment consultant’has no equivalent in the majority of the legal systems of the other Member States.

According to the Italian Government, the qualification required in Italy in order to become an employment consultant is a qualification awarded on completion of a course of higher education in subject areas such as social science, economics and law. The equivalence of similar qualifications awarded in another Member State is a priori recognised in Italy.^(*) Thus it is apparently perfectly possible for a professional who has completed such studies in another Member State to register with the Italian association of employment consultants. Furthermore, exercise of the activity in question is not only open to employment consultants as such, but also to other professions treated as of equivalent status, such as those of lawyer or accountant. However, such qualifications acquired in other Member States are, by virtue of the principle of the equivalence of qualifications and the relevant directives, also accepted for registration in the relevant Italian professional registers. Thus, the fact that the profession of employment consultant as such is an activity particular to Italy does not in itself lead to indirect discrimination.

I would point out in that connection that under the relevant articles of the EC Treaty freedom of establishment and freedom to provide services are exercised under conditions laid down by the host State for its own nationals. Thus the mere fact that the profession of employment consultant is regulated in Italy although this is not so in other Member States does not in itself mean that the Italian provisions are incompatible with Community law.^(*)

It remains to be seen whether the requirement of registration with a professional association leads to a different assessment of the validity of the contested provision.

In that regard, it is relevant to point out first of all that although the court making the reference is asking the Court of Justice to assess the effects of the legislation at issue with regard both to freedom to provide services and freedom of establishment, it is not clear from the order for reference that a provision of cross-border services is at issue in this case. It is true that Payroll states in its observations that the legislation at issue has prevented its parent company, ADP, which is established in France, from offering its services itself to undertakings established in Italy. However, the dispute in the main proceedings concerns the wish of a company already established in Italy to amend its objects in order to be able to engage in activities reserved by statute to members of certain professional associations.

It follows that, since it relates to the freedom to provide services, the question raised by the national court is not necessary in order to resolve the dispute in the main proceedings, and so the Court of Justice is not required to answer it. It is therefore only for the sake of completeness that I shall consider below the national provision as regards Article 49 EC in greater depth.

Payroll and the Commission submit that the Italian Republic is infringing the Treaty provisions relating to right of establishment by requiring a ‘data-processing centre’ like Payroll to be ‘staffed exclusively’ by specialists registered in particular professional registers.

In that regard, I would observe, first of all, that, as a company established in Italy, Payroll should be in a position to recruit within that country employment consultants, lawyers, ‘dottori commercialisti’, accountants, etc., who are already registered in the relevant professional registers.

If, none the less, it wishes to recruit also, or even exclusively, persons who have resided up until that time in another Member State, I consider that the Italian Government has demonstrated convincingly that such persons can have their qualifications recognised and be registered in the relevant professional registers.

In addition, as regards establishment (as opposed to freedom to provide services), the requirement that nationals of other Member States should be registered in professional registers cannot be regarded as incompatible with the Treaty.

Article 43 EC states that ‘freedom of establishment shall include the right to take up and pursue activities as self-employed persons... under the conditions laid down for its own nationals by the law of the country where such establishment is effected’. There can be no question of rendering that provision simply meaningless by stating that nationals of other Member States are not required to comply with those conditions if no such conditions exist in their country of origin or if they entail certain formalities being completed.

Far from resulting in creating throughout the Community conditions similar to those of the ‘internal market’ of a Member State, this would result in creating on the internal market of each Member State different sets of arrangements for the exercise of the same profession: one applicable to the State's own nationals and to foreigners who have resided in that country from childhood, and another applying to nationals of other Member States who establish themselves in that State and who bring with them the special aspects of their own national legislation.

I consider, on the contrary, that it is clear from Articles 43 EC and 100a of the EC Treaty (now, after amendment, Article 95 EC) that the ‘wider internal market’ should be created through harmonising the laws of the Member States.

In that context, one cannot fail to criticise the judgment in Commission v Italy,^(*) cited by the Commission in its observations. The action for failure to fulfil obligations brought by the Commission concerned the provision of services. It sought a declaration that, by maintaining rules requiring that Community nationals who carried on haulage activities as service providers in Italy be entered on the professional register kept by the Chambers of Commerce following authorisation by the Ministry of the Interior, the Italian Republic had failed to fulfil its obligations under Articles 12 EC, 43 EC and 49 EC.

In its judgment the Court held that there had been an infringement as described by the Commission, including infringement of Article 43 EC.

With regard to that provision, only the requirement for foreign undertakings and companies to obtain prior authorisation from the Ministry of the Interior was open to criticism, although the Court did not make that clear.

I therefore consider that, as regards registration in professional registers, it is necessary to apply more generally the position adopted by the Court in Gullung^(*) in respect of lawyers, namely that‘the requirement that lawyers be registered at a bar laid down by certain Member States must be regarded as lawful in relation to Community law provided, however, that such registration is open to nationals of all Member States without discrimination. The requirement seeks to ensure the observance of moral and ethical principles and the disciplinary control of the activity of lawyers and thus pursues an objective worthy of protection’.^(*)

In Corsten,^(*) the Court at least envisaged the possibility that the requirement on foreign skilled-trade undertakings to be entered in the trades register could be justified in the case of establishment.

I consider that I may therefore conclude that the requirement imposed on persons who become established in Italy in order to engage in calculating operations and the printing of pay slips, either as self-employed persons or employees of a company such as Payroll, to be registered in the relevant professional register does not infringe Article 43 EC.

Payroll points out, however, that Article 9(i) of Law 12/79 includes a certificate of residence among the documents to be submitted in order to obtain registration as an employment consultant. Does that requirement constitute indirect discrimination on grounds of nationality where it is imposed on non-Italians? As we well know, in Case C-145/99,^(*) the Court held that the requirement that lawyers reside in the judicial district of the court to which the Bar at which they are enrolled is attached is ‘incompatible with Article 52 of the Treaty, inasmuch as it prevents members of the Bar established in Member States other than the Italian Republic from maintaining an establishment in Italy'. The Court based its ruling on the case-law that ’the right of establishment enshrined in Article 52 of the Treaty entails the right to set up and maintain, subject to observance of the rules of professional practice, more than one place of work within the Community'.^(*)

Are we to infer from this that any citizen of the Community may, generally, assert his right of establishment even if he has no base whatsoever with the country in question, in the same way as, on the other hand, he may, on the basis of Gebhard,^(*) rely on the rules relating to freedom to provide services whilst ‘[equipping] himself with some form of infrastructure in the host Member State... in so far as such infrastructure is necessary for the purposes of performing the services in question’.

The answer to that question can only be in the negative, since otherwise the result would be the complete removal of the boundary between freedom of establishment and freedom to provide services. It is important in that regard to point out that another passage from Gebhard, cited above, namely paragraph 28, which states that ‘a national from a Member State who... pursues a professional activity on a stable and continuous basis in another Member State where he holds himself out from an established professional base to, amongst others, nationals of that State’ relates to the chapter concerning the right of establishment.

The Member State of establishment is therefore entitled to require that anyone asserting the right of establishment should stay in that country continuously for fairly long and frequent periods, and should at least have a place of business there. In each case it is for the court having jurisdiction to ascertain whether those conditions are met. Provided the Member State concerned agrees to regard a document certifying that place of business as a ‘certificate of residence’ it cannot be accused of practising covert discrimination on grounds of nationality. It is for the national court to determine what the facts are in that regard.

The legislation at issue comprises, however, another aspect which leads me to conclude that indirect discrimination is being practised here. That aspect is the fact that not only must DPCs be ‘staffed’ exclusively by persons registered with the professional associations mentioned in the law, but they must also be ‘established’ by such persons.

In my view, this means that the founding members and the members of the boards of management of DPCs must also be such persons.

That requirement therefore precludes the board members of foreign parent companies from being founder members or from sitting on the board of management of an Italian subsidiary unless they arrange to be registered with the relevant professional associations.

It is not clear why persons who are not responsible for the actual day-to-day management of a subsidiary, and still less involved in calculation operations and the printing of pay slips, and who may be financial experts or merely shareholders, should be registered with one of the professional associations in question.

I therefore think that this is a covert form of discrimination which, through the application of a criterion other than nationality, achieves the same result as discrimination which is overtly based on nationality. The rule in question constitutes an improper restriction on the right ‘to set up and manage undertakings’, within the meaning of the second paragraph of Article 43 EC.

I do not see how that restriction could be justified on grounds of public policy, public security or public health (Article 56 of the EC Treaty (now, after amendment, Article 46 EC)).

In short, I have therefore established that the contested legislation contains indirect discrimination from the point of view of the ‘setting up’ of DPCs but not from the point of view of their exclusive ‘staffing’ by professionals registered with the associations mentioned in Law 12/79. It remains for me now to consider the rule relating to exclusive ‘staffing’ in the light of the case-law^(*) in which the Court has held that, even where they apply in a non-discriminatory manner, national measures liable to hinder or make less attractive the exercise of fundamental freedoms guaranteed by the Treaty must be justified by overriding requirements relating to the public interest; they must be suitable for securing the attainment of the objective which they pursue; and they must not go beyond what is necessary in order to attain it.

Even though I may have doubts on the question whether those decisions do not extend the scope of Article 43 EC too far,^(*) I am forced to acknowledge that they are becoming settled case-law. The court making the reference refers to them expressly.

I shall now consider whether the contested provision can be justified by overriding requirements relating to the public interest.

In that regard it should be pointed out first of all that the Court has already accepted that certain types of activity may be reserved for persons with special qualifications.

In Reisebüro Broeder, cited above, which concerned freedom to provide services, the Court held that ‘Article 59 of the EC Treaty does not preclude a national rule which prohibits an undertaking established in another Member State from securing judicial recovery of debts owed to others on the ground that the exercise of that activity in a professional capacity is reserved to the legal profession’.

The Court considered that such legislation was justified on grounds of public interest associated with the protection of creditors or in order to ensure the proper administration of justice as regards the provision of professional legal services, and that the Member State in question was entitled to consider that the objectives pursued by that legislation could not be attained by less restrictive means.

The Court added that the fact that the Member State of origin of the service provider imposed less strict rules than another Member State did not mean that those rules were disproportionate and hence incompatible with Community law (paragraphs 41 and 42 of Reisebüro Broeder, cited above).

In Mac Quen and Others, cited above, the Court held, on the basis of similar reasoning, that, as Community law stood at that time, Article 52 of the EC Treaty (now, after amendment, Article 43 EC) did not preclude certain types of eye examination being reserved, for reasons relating to the protection of public health, for a category of professionals holding specific qualifications, such as ophthalmologists, to the exclusion, in particular, of opticians who were not qualified medical doctors.

It is therefore a priori conceivable that one Member State might be entitled to adopt stricter provisions than the others to ensure that, according to Law 12/79 ‘all obligations relating to the employment, and social security and assistance of employed staff’ are strictly observed, in order in particular to ensure that those workers would not one day have the unpleasant surprise of being refused certain benefits which would have been due to them if all their contributions had been paid correctly.

Protection for employees is one of the overriding requirements relating to the public interest already recognised by the Court of Justice (see in particular Webb,^(*)Arblade and Others,^(*) Mazzoleni and ISA,^(*)Finalarte and Others^(*) and Portugaia Construções^(*) ).

It remains to be seen whether the specific rule at issue here, which applies only to undertakings with fewer than 250 employees, can be justified on grounds of overriding requirements relating to the public interest.

In that connection, there first arises the question as to what is to be understood by ‘calculating and printing’ operations. If, as Payroll has claimed, the employers themselves supply to the DPCs, under their own exclusive responsibility, software which already contains all the information on individual employees, including all the deductions to be made from their wages in respect of the various social security and social insurance schemes, then it may be concluded, as the Court held in Säger, that these are ‘tasks, which... are essentially of a straightforward nature and do not call for specific professional aptitudes, as is indicated by the high level of computerisation which, in the present case, appears to have been attained by the defendant in the main proceedings’.^(*)

In this case no obvious overriding requirement relating to the public interest can be relied upon in order to justify the legislation in question.

If, however, as the Italian Government states, ‘fulfilment of the obligations in question is not a simple matter of carrying out instructions received by the employer, but directly engages the responsibility of a qualified professional’, in other words, if the undertaking which prepares the pay slips undertakes as a first step the intellectual work of determining the net wages of each employee, in accordance with the relevant legislation, it is necessary to consider the legislation in greater depth.

In the grounds of its order for reference, the national court, although it does not take a clear view on the exact nature of the tasks performed by DPCs, states that it cannot see what overriding requirement relating to the public interest might justify the contested legislation. Payroll and the Commission share that view. The Italian Government refers to a motive of protecting workers' rights.

For my part, I am also of the view that the distinction drawn in Law 12/79 between undertakings according to the number of staff they employ is hard to reconcile with any objective of worker protection. How is it to be explained that such protection does not require, depending on the size of the undertaking or, moreover, on whether pay slips are produced within or outside it, the same intervention by employment consultants or persons with equivalent status? As Payroll quite rightly points out, the interests of the employees are the same whether the undertaking which employs them is large or small. Such a segmentation precludes in reality any justification by an alleged concern for worker protection.

The Italian Government has, moreover, put forward no convincing justification to explain this difference in treatment. The argument that the differentiation is explained by a concern ‘to protect competition in the context of the liberalisation of the market in accordance with the European directives’ appears to me to be extremely obscure and most unconvincing. Far from seeking the liberalisation of the market, that segmentation gives rise, on the contrary, to the suspicion that its purpose is to preserve an area of competence reserved for Italian employment consultants.

The argument founded on the necessity of the intervention of the professionals concerned in order to assure the protection of the employees is also contradicted by the fact that, as Payroll points out, whatever the number of staff the undertaking employs, and so even if it is fewer than 250, the employer is always entitled to carry out the work concerned himself, without any assistance from those professionals.

Even assuming, none the less, that justification by an objective of worker protection were permissible, it seems to me that that objective could also be attained, with respect to the services provided to undertakings with fewer than 250 employees, by a less stringent obligation and that the contested national measure would therefore in any event be contrary to the principle of proportionality. Thus, it must be observed that the requirements of the Italian legislation are met where assistance is provided by one or more employment consultants in the case of undertakings with more than 250 employees which use external DPCs. However, as the national court correctly points out, it is not clear why the tasks in question are less complex when the number of employees increases.

The other arguments relied upon by the Italian Government meet with the same objections. Thus, the ‘overriding principle of the personal nature of the services provided by liberal professions and of directness in the relationship between the professional and the client’, even if it were such as to justify in principle the obligation to use employment consultants, which has still to be established, cannot on any view find expression in different requirements depending on whether the number of staff which the undertakings concerned employ is more or less than 250.

It could be added, lastly, if it were necessary, that the above considerations apply a fortiori as regards the freedom to provide services. The requirement that a DPC established in another Member State which wishes to engage from time to time in calculating operations and the printing of pay slips for an Italian undertaking must be ‘established and staffed exclusively by’ persons registered in one of the Italian professional registers would clearly make the provision of such services impossible.

I am therefore led to the conclusion that Article 43 EC and, so far as may be relevant, Article 49 EC preclude the application by the national court of the Italian legislation prohibiting external service providers not staffed exclusively by employment consultants or persons with equivalent status from offering their services of calculation and the printing of pay slips to undertakings with fewer than 250 employees.

Conclusions

For the above reasons, I propose that the answer to the question from the Corte d'appello di Milano should be as follows:

Article 43 EC and, so far as may be relevant, Article 49 EC preclude the application by the national court of provisions such as Article 1 of Law No 12 of 11 January 1979, as amended by Article 58(16) of Law No 144 of 17 May 1999, regulating the profession of employment consultant (‘consulente del lavoro’), to the extent to which it prohibits, in absolute terms, data processing centres (DPCs) not established and staffed exclusively by professionals registered with the associations listed in that law from providing services consisting of the calculation of pay and the printing of pay slips to undertakings having fewer than 250 employees.