The Dr Sophie Redmond Stichting v. Hendrikus Bartol and Others (Case C-29/91) Before the Court of Justice of the European Communities ECJ

Transcription

1 The Dr Sophie Redmond Stichting v. Hendrikus Bartol and Others (Case C-29/91) Before the Court of Justice of the European Communities ECJ (Presiding, Due C.J.; Joliet, Schockweiler and Grévisse PP.C.; Moitinho de Almeida, RodrÍguez Iglesias and DÍez de Velasco JJ.) Mr Walter van Gerven, Advocate General. 19 May 1992 Reference from the Netherlands by Kantongerecht (Magistrates Court), Groningen, under Article 177 EEC. Provision considered: Dir. 77/187 (Art. 1(1)) Employment. Business transfer. Continuity of employment. Where a public authority which finances, through subsidies, the activities of an organisation (in casu: a foundation counselling drug addicts) decides to discontinue the subsidies, and thus causes the organisation to cease its activities and transfer them to another carrying on the same activities the resulting operation may fall within the scope of Article 1(1) of the Business Transfer Directive 77/187. The fact that the transfer decision was taken unilaterally by the public authority and was not the result of an agreement between it and the subsidised bodies does not render the directive inapplicable. Nor does the fact that the origin of the operation lies in the grant of subsidies to organisations whose services are allegedly provided without remuneration. [14]-[18] P. Bork International A/s v. Foreningen AF Arbejdsledere I Danmark (101/87): [1988] E.C.R. 3057, [1990] 3 C.M.L.R. 701, applied.

2 Employment. Business transfer. Continuity of employment. Insolvency. Under Abels only transfers relating to undertakings *266 declared insolvent are excluded from the scope of the Business Transfer Directive 77/187. The fact that an undertaking is experiencing difficulties in honouring its commitments at the date of transfer is not, in itself, sufficient to exclude the application of the directive. [20] Employment. Business transfer. Continuity of employment. The decisive criterion for establishing whether there has been a transfer of an undertaking for the purposes of the Business Transfer Regulation 77/187 is whether the entity in question retains its identity as indicated by the fact that its operation is actually continued or resumed. To determine this, it is necessary to consider all the facts characterising the transaction in question, including the type of undertaking or business, whether or not tangible assets, such as buildings and movable property, are transferred, the value of intangible assets at the time of the transfer, whether or not the majority of employees are taken on by the new employer, whether or not customers are transferred and the degree of similarity between the activities carried on before and after the transfer and the period, if any, for which those activities were suspended. All those circumstances, which are for the national court to assess, are merely single factors which must be considered together as a whole. [23]-[25] Spijkers v. Gebroeders Benedik Abattoir CV (24/85): [1986] E.C.R. 1119, [1986] 2 C.M.L.R. 296, followed. Employment. Business transfer. Continuity of employment. The exclusion of either the movable property or the social and recreational activities of an undertaking from its transfer does not, in itself, prevent the application of the Business Transfer Directive 77/187 and it is for the national court to appraise their importance in its overall assessment of the operation. The mere fact that the social and recreational activities of the undertaking constitute an independent function is not sufficient to disapply the directive since its provisions were laid down not only for transfers of undertakings, but also for transfers of businesses or parts of businesses with which activities of a special nature may be equated. [29]-[30] The Court interpreted Article 1(1) of the Business Transfer Directive 77/187 in the context of a City Council having transferred funding for the counselling of drug addicts from Foundation R to Foundation S with the result that the former foundation had to cease its activities and transfer them to the latter to the effect that the structure of the transfer was analogous to that in Bork and there had been a "legal transfer" within the meaning of Article 1(1) of the *267 directive notwithstanding it resulted from a unilateral decision by the council and was related to the supply of subsidies for the provision of charitable services, that the fact that Foundation R was allegedly in financial difficulties was irrelevant, that

3 whether or not there had been "a transfer of an undertaking" within the meaning of Article 1(1) depended on the entity retaining its identity, which was a matter for the national court, taking into account the factual circumstances of the transaction, that the following facts were all essential features of the transfer for this purpose: R ceased its operations; both foundations pursued the same or similar aim; S partially absorbed R; the foundations co-operated in finalising the transfer operation; it was agreed that R's knowledge and resources would be transferred to S; premises rented to R were leased to S; S offered new employment contracts to some of R's former employees, and that the fact that neither movable property used for the social and recreational activities of R, or those activities themselves, were transferred to S prevented the application of the directive, it being irrelevant the social and recreational activities constituted an independent function. Representation R. van Asperen, of the Groningen Bar, for the plaintiff foundation. T. Y. Miedema and G. W. Brouwer, of the Groningen Bar, for the defendants. B. J. Drijber and Karen Banks, of the Legal Service of the E.C. Commission, for the Commission as amicus curiae. The following cases were referred to in the judgment: 1. Abels v. Bedriifsvereniging voor de Metaalindustrie en de Electrotechnische Industrie (135/83), 7 February 1985: [1985] E.C.R. 470, [1987] 2 C.M.L.R P. Bork Internatonal A/s v. Foreningen AF Arbejdsledere I Danmark (101/87), 15 June 1988: [1988] E.C.R. 3057, [1990] 3 C.M.L.R Landsorganisationen I Danmark v. Ny Molle Kro (287/86), 17 December 1987: [1987] E.C.R. 5465, [1989] 2 C.M.L.R Tellerup v. Daddy's Dance Hall (324/86), 10 February 1988: [1988] E.C.R. 739, [1989] 2 C.M.L.R Berg v. Besselsen ( /87), 5 May 1988: [1988] E.C.R. 2559, [1989] 3 C.M.L.R Foreningen AF Arbejdsledere I Danmark v. Danmols Inventar (105/84), 11 July 1985: [1985] E.C.R. 2639, [1986] 1 C.M.L.R Re the Business Transfer Directive: E.C. Commission v. Belgium (237/84), 15 April 1986: [1986] E.C.R. 1247, [1988] 2 C.M.L.R Spijkers v. Gebr Benedik Abattoir CV (24/85), 18 March 1986: [1986] E.C.R. 1119, [1986] 2 C.M.L.R. 296 *268. The following further cases were referred to by the Advocate General: 9. D'Urso v. Ercole Marelli Eletromeccanica Generale SpA (C-362/89), 25 July 1991: [1991] I E.C.R. 4105, [1993] 3 C.M.L.R Wendelboe v. L.J. Music ApS (19/83), 7 February 1985: [1985] E.C.R. 457, [1986] 1 C.M.L.R Vandevenne (C-7/90), 2 October 1991: [1991] I E.C.R. 4371, [1993] 3

4 C.M.L.R Höfner and Elser v. Macrotron GmbH (C-41/90), 23 April 1991: [1991] I E.C.R. 1979, [1993] 4 C.M.L.R Lawrie-Blum v. Land Baden Württemberg (66/85), 3 July 1986: [1986] E.C.R. 2121, [1987] 3 C.M.L.R Brown v. Secretary of State for Scotland (197/86), 21 June 1988: [1988] E.C.R. 3205, [1988] 3 C.M.L.R Bettray v. Staatssecretaris Van Justitie (344/87), 31 May 1989: [1989] E.C.R. 1621, [1991] 1 C.M.L.R Bernini v. Minister for Education and Science (3/90), 26 February 1992: [1992] I E.C.R Kempf v. Staatssecretaris Van Justitie (139/85), 3 June 1986: [1986] E.C.R. 1741, [1987] 1 C.M.L.R ACF v. E.C. Commission (41/69), 15 July 1970: [1970] E.C.R Buchler v. E.C. Commission (44/69), 15 July 1970: [1970] E.C.R Boehringer v. E.C. Commission (45/69), 15 July 1970: [1970] E.C.R Tipp-Ex v. E.C. Commission (279/87), 8 February 1990: [1990] I E.C.R. 261 (summary). 22. Sandoz v. E.C. Commission (277/87), 11 January 1990: [1990] I E.C.R. 45 (summary). 23. Van Landewyck v. E.C. Commission ( /78 & 218/78), 30 October 1978: [1980] E.C.R. 3125, [1981] 3 C.M.L.R TABULAR OR GRAPHIC MATERIAL SET FORTH AT THIS POINT IS NOT DISPLAYABLE Facts Applicable Community legislation According to Article 1(1) of Council Directive 77/187 [FN1] 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, the directive is *269 applicable to "the transfer of an undertaking, business or part of a business to another employer as a result of a legal transfer or merger". FN1 [1977] O.J. L61/26. The first subparagraph of Article 3(1) of the directive provides that "The transferor's rights and obligations arising from a contract of employment or from an employment relationship existing on the date of a transfer within the meaning of Article 1(1) shall, by reason of such transfer, be transferred to the transferee". In addition, under Article 4(1), "The transfer of an undertaking, business or part of a 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

5 take place for economic, technical or organisational reasons entailing changes in the workforce". National legislation applicable to the main proceedings According to the Dutch Civil Code, an employment contract may be set aside at the request of the employer or the employee by decision of the Kantongerecht (Cantonal Court). The procedure whereby such a decision may be obtained is laid down in Article 1639w of the Civil Code, which reads as follows: 1. Each of the parties [to an employment contract] shall be authorised to apply at any time to the Kantongerecht in order to have the contract of employment set aside on serious grounds The following [in particular] shall be regarded as constituting serious grounds... changes in circumstances such as where it is necessary for the employment relationship to cease immediately or within a brief period on grounds of fairness If the court accedes to the application on grounds of a change in circumstances, he may, if it seems fair to him in the case, grant one of the parties the right to compensation from the other party No appeal or appeal on a point of law shall lie against a decision taken pursuant to this article. The Act of 15 May 1981 transposing the provisions of Council Directive 77/187 added Articles 1639aa to 1639dd to the fourth book of the Dutch Civil Code. Article 1639aa provides as follows: For the purposes of this section (a) undertaking means any business or service; (b) transfer of an undertaking means any transfer of an undertaking or part of an undertaking pursuant to an agreement, in particular an agreement of sale, hire, lease or grant in usufruct... Article 1639bb provides as follows: On the transfer of an undertaking the employer's rights and obligations existing on the date of such transfer pursuant to a contract of employment between him and the employees of the undertaking shall automatically be transferred to the transferee... *270 Article 1639dd is worded as follows: If the transfer of the undertaking results in a change of circumstances which is unfavourable to the employee and the contract of employment is set aside on that ground under Article 1639w, that contract shall be deemed to have been set aside under paragraph 8 of that article on a ground attributable to the employer. Thus, where there is a transfer of an undertaking, the employee may request, under Article 1639w, that his contract of employment be set aside if the transfer is unfavourable to him. In principle, the employer will have to pay him compensation of such amount as the court shall determine. Facts of the case

6 The Dr Sophie Redmond Foundation (Dr Sophie Redmond Stichting, hereinafter referred to as "the Redmond Foundation"), the plaintiff in the main proceedings, is a legal person governed by private law which engages in particular in providing assistance for drug addicts belonging to certain minority groups in Dutch society. Its resources have always consisted solely of subsidies from the Municipality of Groningen. The defendants are bound to the Redmond Foundation by employment contracts governed by private law to which the provisions of the Dutch Civil Code apply. The Municipality of Groningen ceased to grant the plaintiff in the main proceedings subsidies with effect from 1 January 1991 and transferred them to another foundation engaged in assisting drug addicts, the Sigma Foundation. The Redmond Foundation applied to the Kantongerecht, Groningen, under Article 1639w of the Civil Code to set aside its contracts of employment with such members of its staff who were not taken on by the Sigma Foundation. Since one of the pleas relied on by the defence related to Articles 1639aa et seq. cited above, the Kantongerecht, which decides at first and last instance, was therefore induced to consider the intepretation of Directive 77/187. Accordingly, by order of 21 January 1991, it decided to stay the proceedings until such time as the Court gave a preliminary ruling on the following questions: (a) Does "transfer of an undertaking... to another employer as a result of a legal transfer or merger" within the meaning of Council Directive 77/187 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 also cover the situation in which the subsidising body decides to terminate the subsidy paid to one legal person, as a result of which the activities of that legal person are fully and definitively terminated, and simultaneously to switch it to another legal person with identical or comparable aims and objects, it being intended by and agreed between the two legal persons and the subsidising body not only that, so far as possible, the clients/patients of *271 the first legal person should be "switched" to the second legal person but also that, thereupon, a lease should be granted to the second legal person of the immovable property leased by the first legal person from the subsidising body and that, so far as is possible (and desirable), use should be made of the "knowledge and the resources (e.g. staff)" of the first legal person? (b) For the purpose of answering the foregoing question, does it make any difference that the inventory of the first legal person is not also transferred to the second legal person? (c) Is it of any significance, for the purpose of answering Question (b), whether the untransferred inventory consists exclusively or well-nigh exclusively of aids for the purposes of the abovementioned social and recreational function? (d) Can (the transferred part of) the undertaking still be said to retain its identity if the abovementioned social and recreational function of the first legal person is not transferred but the function of providing assistance is? (e) For the purpose of answering Question (d), does it make any difference whether the social and recreational activities must be regarded as constituting a

7 separate object or solely as an aid for the purposes of an optimum provision of assistance? (f) For the purposes of answering the above questions, does it, lastly, still make any difference that the (intended) transfer of the activities of the first legal person to the second was not brought about in the first instance by (an) agreement(s) to that end between the subsidising body and the two legal persons but by a decision, based on a change of policy on the part of the subsidising public body, to terminate the subsidy paid to the first legal person and to switch it to the second legal person? Opinion of the Advocate General (Mr Van Gerven) 1. The Kantongerecht (Cantonal Court), Groningen, has referred to the Court for a preliminary ruling under Article 177 EEC a number of questions on the interpretation of Council Directive 77/187 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 ("the directive"). [FN2] FN2 [1977] O.J. L61/26. Those questions were raised in proceedings brought by the plaintiff in the main proceedings, the Dr Sophie Redmond Stichting ("the Redmond Foundation"), in order to have set aside certain contracts of employment between it and members of its staff, including the defendants in the main proceedings, H. Bartol and others. Background to the case 2. The Redmond Foundation is a foundation governed by Dutch law which is engaged, inter alia, in providing assistance to drug addicts, alcoholics and persons addicted to medicinal products from certain minority groups in Dutch society (in particular persons of Surinamese or Antilles, including Aruban, origin). In addition, it also acts as a *272 social and recreational centre for such persons in need of assistance. Its income has always been entirely dependent on subsidies from the Municipality of Groningen, where it is based. The defendants work for the Redmond Foundation. They concluded with it employment contracts governed by private law to which the rules of the Burgerlijk Wetboek ("the Civil Code") apply. With effect from 1 January 1991, the Municipality of Groningen ceased to subsidise the Redmond Foundation. At the same time, it decided to switch the subsidy for Surinamese and Antilles drug addicts to another foundation providing assistance to drug addicts, the Sigma Foundation ("Sigma"), on condition that as a general foundation for the provision of assistance to drug addicts it should also be accessible to them. With effect from 1 January 1991, the premises rented by the Municipality to the Redmond Foundation, which it used both for the provision of assistance and for its social and recreational purposes, were leased to Sigma.

8 The Redmond Foundation and Sigma stated that they were prepared actively to co-operate on the transfer to Sigma of the Redmond Foundation's clients/patients. A working group on the "incorporation of the Redmond Foundation's activities in the Sigma Foundation" was set up. The Municipality of Groningen expressed the wish that when the provision of assistance was taken over by Sigma "use should be made of the knowledge and resources (e.g. staff) of the Redmond Foundation". Sigma offered new employment contracts to a number of the Redmond Foundation's employees. 3. In late 1990 the Redmond Foundation asked the national court for leave to set aside the employment contracts between it and those members of its staff who had not been taken on by Sigma. It asked for such leave under a provision of Article 1639w of the Civil Code, according to which a change in circumstances may justify setting aside a contract of employment immediately or within a brief period. [FN3] FN3 For the relevant part of the provision, see the Report for the Hearing. One of the objections raised in the national court by the defendants against the application made by the Redmond Foundation to set aside their employment contracts relates to Article 1639aa et seq. of the Civil Code by which the Netherlands implemented the directive. To ensure a sound understanding of the case, I shall set forth its most important provisions: Article 1639aa For the purposes of this section (a) undertaking means any business or service; (b) transfer of an undertaking means any transfer of an undertaking or part of an undertaking pursuant to an agreement, in particular an agreement of sale, hire, lease or grant in usufruct... *273 Article 1639bb On the transfer of an undertaking the employer's rights and obligations existing on the date of such transfer pursuant to a contract of employment between him and the employees of the undertaking shall automatically be transferred to the transferee... Article 1639dd If the transfer of the undertaking results in a change of circumstances which is unfavourable to the worker and the contract of employment is set aside on that ground under Article 1639w, that contract shall be deemed to have been set aside under paragraph 8 of that article on a ground attributable to the employer. 4. The national court considers that whether the Redmond Foundation's application to set aside the employment contracts may be granted depends on whether the directive, or Article 1639aa et seq. of the Civil Code based on that

9 directive, apply to the dispute before it. Faced with a question relating to the interpretation of the directive, the national court therefore referred the following questions to the Court for a preliminary ruling: (a) Does "transfer of an undertaking... to another employer as a result of a legal transfer or merger" within the meaning of Council Directive 77/187 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 also cover the situation in which the subsidising body decides to terminate the subsidy paid to one legal person, as a result of which the activities of that legal person are fully and definitively terminated, and simultaneously to switch it to another legal person with identical or comparable aims and objects, it being intended by and agreed between the two legal persons and the subsidising body not only that, so far as possible, the clients/patients of the first legal person should be "switched" to the second legal person but also that, thereupon, a lease should be granted to the second legal person of the immovable property leased by the first legal person from the subsidising body and that, so far as is possible (and desirable), use should be made of the "knowledge and the resources (e.g. staff)" of the first legal person? (b) For the purpose of answering the foregoing question, does it make any difference that the inventory of the first legal person is not also transferred to the second legal person? (c) Is it of any significance, for the purpose of answering Question (b), whether the untransferred inventory consists exclusively or well-nigh exclusively of aids for the purposes of the abovementioned social and recreational function? (d) Can (the transferred part of) the undertaking still be said to retain its identity if the abovementioned social and recreational function of the first legal person is not transferred but the function of providing assistance is? (e) For the purpose of answering Question (d), does it make any difference whether the social and recreational activities must be regarded as constituting a separate object or solely as an aid for the purposes of an optimum provision of assistance? (f) For the purposes of answering the above questions, does it, lastly, still make any difference that the (intended) transfer of the activities of the first legal person to the second was not brought about in the first *274 instance by (an) agreement(s) to that end between the subsidising body and the two legal persons but by a decision, based on a change of policy on the part of the subsidising public body, to terminate the subsidy paid to the first legal person and to switch it to the second legal person? 5. The key question seems to me to be whether the transfer from the Redmond Foundation to Sigma of (part of) the activity of the undertaking and the dismissals of staff related thereto fall within the scope of the directive. That question is in two parts. First, it is necessary to consider whether this case involves a "transfer of an undertaking" within the meaning of the directive (see sections 11 to 16 below). However, that part of the question is subject to a preliminary question, namely whether the Redmond Foundation is an "undertaking" within the meaning of the directive (see sections 6 to 10 below). The second part of the question is

10 whether or not there was a legal transfer or a merger within the meaning of the directive (sections 17 to 24 below). The term "undertaking" within the meaning of the directive 6. As the Commission rightly observes, the question arises as to whether the Redmond Foundation is in fact an "undertaking". Under Dutch law, the answer is obvious: in implementing the directive, the Dutch legislature expressly included in the definition of "undertaking" "instellingen" [institutions] (which include foundations; see Article 1639aa(a) of the Civil Code, cited in section 2 above). I shall nevertheless consider this question since, regardless of the situation arising under the Dutch implementing provisions, the answer to it is important in order correctly to define the scope of the directive. Under Dutch law, a foundation is in principle a non-profit-making legal person. By design, the Dutch legislature sought to distinguish foundations from companies, inter alia, by prohibiting a foundation from including amongst its objects making distributions to its founders, members of its constituent bodies or other persons, unless in the latter case the distributions have a charitable or social purpose. [FN4] Although Dutch foundations are often used in practice for commercial purposes and more specifically in connection with groups of companies, [FN5] the *275 question arises as to whether, where that is not the case, the directive nevertheless applies to a non-profit-making institution, such as the Redmond Foundation, whose income consists exclusively of subsidies. FN4 Civil Code, Article 285(3). See, in particular, Asser/Van der Grinten "De rechtspersoon" Vol. II of Asser's handleiding tot de beoefening van het Nederlands burgerlijk recht, (Zwolle, Tjeenk Willink, 1986), section 471, pp FN5 See in this connection, inter alia, V. A. M. Van der Burg, "De onderneming in het stichtingsgewaad", in Van vennootschappelijk belang (Maeijerbundel), (Zwolle, Tjeenk Willink, 1988), pp. 21 et seq.; Dijk/Van der Ploeg, Van vereniging, coöperatie en stichting, (Arnhem, Gouda Quint, 1991), p. 13. The use of foundations in connection with groups in this connection appears, inter alia, from the numerous purchasing and sales centres set up as foundations, research foundations, foundations involved in implementing the rules on competition, foundations operating as administrative offices in connection with the certification of shares in public limited companies (whereby the foundation holds the shares and issues certificates to the former shareholders) and the placing of shares in a foundation by large shareholders without successors with a view to ensuring the continuity of the undertaking: W. J. Slagter, Compendium van het ondernemingsrecht, (Deventer, Kluwer, 1990), p The Court has not yet gone into this. To date it has considered only cases in which profit-making undertakings were transferred. 7. Article 1(1) determines the scope of the directive in very general terms: This directive shall apply to the transfer of an undertaking, business or part of a

11 business to another employer as a result of a legal transfer or merger. The actual text of the directive makes no distinction depending on whether an undertaking is commercial or non-commercial. There is one exception only to its scope ratione materiae, that for sea-going vessels (Article 1(3)). The directive, it appears from the preamble thereto, was prompted by changes in the structure of commercial undertakings, caused by economic trends at both national and Community level. This is in fact the situation which arises most frequently: it is precisely those restructuring operations, takeovers and mergers of undertakings which often have substantial repercussions as far as employees are concerned. [FN6] The fact that the prime objective of the directive is to prevent this restructuring process within the Common Market from taking place to the detriment of employees of the undertakings concerned was confirmed by the Court in the judgments in Abels [FN7] and D'Urso. [FN8] FN6 See the first and second recitals in the preamble to the directive. FN7 Case 135/83, Abels v. Bedrijfsvereniging voor de Metaalindustrie en de Electrotechnische Industrie: [1985] E.C.R. 470, [1987] 2 C.M.L.R. 406, para. [18] in fine. FN8 Case C-362/89, D'Urso: [1991] I E.C.R. 4105, [1993] 3 C.M.L.R. 513, para. [23]. However, there is nothing in the wording of the directive to rule out a broad interpretation of the term "undertaking" used therein. Quite the contrary, it appears from various factors that that term is to be given a clearly social meaning: the directive is part of the Community's social action programme [FN9]; its title stresses the "safeguarding of employees' rights" in the event of transfers of undertakings; according to the preamble, it aims to provide for "the protection of employees in the event of a change of employer", [FN10] and, still according to the preamble, the directive seeks through the approximation of national laws to maintain the improvement described in Article 117 of the Treaty, which includes the improvement of working conditions. [FN11] FN9 It was announced in the Council Resolution of 21 January 1974 concerning a social action programme ([1974] O.J. C13/1, more specifically at p. 4). FN10 Second recital in the preamble to the directive. FN11 Fifth recital in the preamble ([1977] O.J. L61/26); see also in this connection Abels, cited above, para. [18]. 8. The Court has repeatedly stressed the clearly social objective pursued by the directive. The Court has held that: *276 the purpose of the directive is to ensure, so far as possible, that the rights of employees are safeguarded in the event of a change of employer by enabling

12 them to remain in employment with the new employer on the terms and conditions agreed with the transferor. [FN12] FN12 Case 287/86, Ny Molle Kro: [1987] E.C.R. 5465, [1989] 3 C.M.L.R., para. [12], in Case 324/86, Tellerup v. Daddy's Dance Hall: [1988] E.C.R. 739, [1989] 2 C.M.L.R. 517, para. [9], in Joined Cases 144 & 145/87, Berg v. Besselsen: [1988] E.C.R. 2559, [1989] 3 C.M.L.R. 817, para. [12], in Case 101/87, Bork International v. Foreningen AF Arbejdsledere I Danmark: [1988] E.C.R. 3057, [1990] 3 C.M.L.R. 701, para. [13] and in d'urso, cited above, para. [9]. It is recognised that: the rules applicable in the event of a transfer of an undertaking or a business to another employer are intended to safeguard, in the interests of the employees, the existing employment relationships which are part of the economic entity transferred. [FN13] FN13 Berg, para. [13], and D'Urso, para. [9]. It is precisely to that end that the directive provides, inter alia: for the transfer of the transferor's rights and obligations arising from a contract of employment or from an employment relationship (Article 3(1)), the continued observance by the transferee of the terms and conditions agreed in any collective agreement (Article 3(2)) and protection for the employees concerned against dismissal by the transferor or the transferee solely by reason of the transfer (Article 4(1)). [FN14] FN14 Ny Molle Kro, para. [11]; and see the earlier judgment in Case 19/83, Wendelboe: [1985] E.C.R. 457, [1986] 1 C.M.L.R. 476, para. [15], and Berg, cited above, para. [13]. 9. The emphasis laid on the directive's social aim is important, since in various fields the Court has consistently held that, as a general rule, the term "undertaking" should be given the most appropriate meaning having regard to the objective of the Community rules concerned and to their effectiveness. A striking example is afforded by two recent judgments, to which I shall confine myself, namely the judgments in Vandevenne and Höfner and Elser. The first was concerned, inter alia, with the interpretation of the term "undertaking" in Article 15 of Council Regulation 3820/85 on the harmonisation of certain social legislation relating to road transport. The Court expressly stated that: the definition of "undertaking" within the meaning of Article 15 of Regulation 3820/85 must be considered in the light of the system established by the regulation and its aims. [FN15] FN15 Case C-7/90, Vandevenne: [1991] I E.C.R. 4371, [1993] 3 C.M.L.R. 608, para. [6].

13 In Höfner and Elser the Court considered that a public employment agency, engaged, inter alia, in employment procurement activities, was an undertaking within the meaning of economic law relating to competition laid down in Articles 85 and 86 of the Treaty: It must be observed, in the context of competition law, first that the concept of an undertaking encompasses every entity engaged in an economic activity, regardless of the legal status of the entity and the way in *277 which it is financed and, secondly, that employment procurement is an economic activity. [FN16] FN16 Case C-41/90, Höfner and Elser: [1991] I E.C.R. 1979, [1993] 4 C.M.L.R. 306, para. [21]. It is significant for the purposes of the present case that in Höfner and Elser the Court did not consider the way in which the undertaking was financed to be decisive. The service in question, namely employment procurement, was provided free of charge and largely financed by employers' and employees' contributions. 10. In the light of the foregoing, it may be stated that, in order to establish whether a given natural or legal person is an undertaking within the meaning of a directive which, like that at issue in these proceedings, pursues a clearly social aim, decisive importance attaches to whether one or more persons have the status of an employee vis-à-vis that natural or legal person under a contract of employment or an employment relationship within the meaning of Article 3(1) of the directive. Unlike the interpretation of the term "worker" contained in Article 48 of the Treaty, [FN17] the term "employee" in this case covers, according to the Court, any person who, in the Member State concerned, is protected as an employee under national employment law. [FN18] FN17 See, inter alia, Case 66/85, Lawrie-Blum: [1986] E.C.R. 2121, [1987] 3 C.M.L.R. 389, para. [17], in Case 197/86, Brown: [1988] E.C.R. 3205, [1988] 3 C.M.L.R. 403, para. [21], in Case 344/87, Bettray: [1989] E.C.R. 1621, [1991] 1 C.M.L.R. 459, para. [12], and in Case C-3/90, Bernini: [1992] I E.C.R. 1071, para. [14]. FN18 Case 105/84, Danmols Inventar: [1985] E.C.R. 2639, [1986] 1 C.M.L.R.316, para. [28], and Case 237/84, E.C. Commission v. Belgium: [1986] E.C.R. 1247, [1988] 2 C.M.L.R. 865, para. [13]. "Transfer of an undertaking" within the meaning of the directive 11. The question now is whether a "transfer of an undertaking, business or part of a business" within the meaning of the directive took place in this case. It appears from the facts described in section 2 above that at least a partial transfer took place. The point at issue between the parties to the main proceedings relates above all to the question whether the undertaking retained its identity in that transfer.

14 The Redmond Foundation claims that it did not. It considers that the nature of the assistance provided by the two foundations is very different, in view of the omission of the target group (drug addicts from Surinam and the Antilles) and of the social and recreational function of the Redmond Foundation's day centre. In response, one of the defendants contends that the undertaking retained its identity, since the core of the Redmond Foundation's activities, namely the provision of assistance to drug addicts and other victims of substance abuse, was taken over. The fact that certain forms of assistance or certain activities were not continued does not prevent there having been a transfer of an undertaking or at least of part of an undertaking. * In the past, the Court has repeatedly ruled on the need for identity to be maintained in the event of the transfer of an undertaking, business or part of a business within the meaning of the directive. In the judgments in Spijkers v. Benedik and Ny Molle Kro, the Court held that the decisive criterion for ascertaining whether a transfer within the meaning of the directive had taken place was whether the undertaking concerned had retained its identity. [FN19] To that end it should be considered: whether the business was disposed of as a going concern, as 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 activities. [FN20] FN19 Case 24/85, Spijkers v. Benedik: [1986] E.C.R. 119, [1986] 2 C.M.L.R. 296, paras. [11] and [15], and in Ny Molle Kro, cited above, para. [18]. FN20 Spijkers, para. [12] and Ny Molle Kro, para. [18]. In making that determination, the Court went on to hold: it is necessary to consider all the facts characterising the transaction in question, including the type of undertaking or business, whether or not the business's tangible assets, such as buildings and movable property, are transferred, the value of its intangible assets at the time of the transfer, whether or not the majority of its employees are taken over by the new employer, whether or not its customers are transferred and the degree of similarity between the activities carried on before and after the transfer and the period, if any, for which those activities were suspended. It should be noted, however, that all those circumstances are merely single factors in the overall assessment which must be made and cannot therefore be considered in isolation. [FN21] FN21 Spijkers, para. [13]. The Court reiterated a number of those factors in Bork International, para. [15]. According to Article 1(1), the directive is also applicable where, not all the undertaking, but only one or more of its businesses or parts of its businesses are transferred to another employer. Where such a partial transfer takes place, it is self-evident that those factors, establishing that the undertaking has retained its identity, should be applied only in respect of the business of the undertaking or,

15 as the case may be, the part of such business which has been transferred. 13. It appears from the facts of the case, in so far as I am aware of them, that a number of factors mentioned by the Court were present in this instance. The activities of the two foundations, that is to say, receiving and assisting drug addicts, are substantially the same. In my view, it is not of fundamental importance that, as the Redmond Foundation maintains, the target groups did not correspond entirely (Surinamese and Antilles drug addicts, alcoholics and persons addicted to medicinal products in the case of the Redmond Foundation, as against drug addicts in general in the case of Sigma) or that the social and recreational function of the Redmond Foundation's day centre was not resumed (see section 15). There was also a de facto transfer of tangible assets, in so far as the *279 premises leased to the Redmond Foundation by the Municipality of Groningen were leased to Sigma with effect from 1 January As regards taking over the staff, counsel for the Redmond Foundation stated at the hearing that two or three employees had not been taken over and that four and a half (a part-time worker) had. That number is not inconsistent per se with the undertaking's or the business's retaining its identity in the transfer: in Bork International the Court held that the directive was applicable in a situation in which, first, all the staff were dismissed and, subsequently, "more than half" were taken on again. [FN22] FN22 This appears from para. [4] of the judgment. Continuity has also been established with regard to the clients: both the Redmond Foundation and Sigma declared that they were willing to transfer the former's clients/patients to the latter. Lastly, although this aspect does not appear amongst the factors listed by the Court--in any case solely by way of example and not exhaustively--it seems to me in this case that the transferral of the funding of the entity is of decisive importance. The subsidy granted by the Municipality of Groningen was the sole source of the Redmond Foundation's operating funds. The Municipality's decision to grant that subsidy to Sigma with effect from 1 January 1991 was in the circumstances undoubtedly the most important factor in the transfer to Sigma of the undertaking operated by the Redmond Foundation. 14. The ultimate appraisal as to whether, having regard to the facts described above, there has been a continuation, under a new employer, of the same undertaking or at least of a substantial part of the undertaking falls to the national court. As the Court held in Spijkers: It is for the national court to make the necessary factual appraisal, in the light of the criteria set out above, in order to establish whether or not there is a transfer in the sense indicated above. [FN23] FN23 Spijkers, para. [14]. Accordingly, it is the national court which is best placed to assess, having regard

16 to the aforementioned evaluation criterion and to the connecting factors mentioned, the importance of the facts mentioned in its second and third questions, namely the fact that the Redmond Foundation's inventory was not transferred to Sigma and the fact that the Redmond Foundation's inventory consisted exclusively or almost exclusively of aids intended for the social and recreational function which it performed and which was not resumed by Sigma. However, as the Court emphasised in the judgment in Spijkers (see section 12, above), an overall assessment should be made of the transfer and, in assessing whether the undertaking or business concerned retained its identity in the transfer, disproportionate attention should not be paid to factual or legal matters which are of lesser significance. 15. Accordingly, it is also for the national court to determine the importance to be attached to the circumstance adverted to in the *280 fourth question, according to which Sigma no longer provides the social and recreational services offered by the Redmond Foundation. I would also observe, however, that it is by no means essential for the application of the directive that the undertaking's activity before and after the transfer should be the same. To require this would run counter to the broad scope of the directive and to its wording, according to which, I repeat, both the transfer of a business and of part of a business of an undertaking are covered. It seems to me that, apart from the social and recreational services which are no longer provided, that which remains of the activity of the undertaking can undeniably be described as part of the activity of the Redmond Foundation, which "retains its identity". In addition, the directive expressly contemplates the possible reorientation of the undertaking's activity following the transfer. In that regard, Article 4(1) makes clear that the protection afforded to employees in connection with a transfer of an undertaking does not stand in the way of "dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce". [FN24] As a result, the fact that the undertaking's activity has been reoriented does not stand in the way of the applicability of the directive. FN24 According to the Court, in order to determine whether the employees were dismissed for those reasons or solely as a result of the transfer, it is necessary to take into consideration the objective circumstances in which the dismissal took place: Bork International, para. [18]. 16. At the hearing, counsel for the Redmond Foundation expanded an argument which does not appear from the national court's questions. According to that argument, the decision of the Municipality of Groningen to cease paying the subsidy meant that the Redmond Foundation's Board had to wind it up. That task was entrusted to its lawyer in September A plan was subsequently drawn up with the Redmond Foundation's accountant with a view, in the context of the winding up, to terminate the contract to lease its premises concluded with the Municipality of Groningen and to set aside the employment contacts concluded with its employees, in each case with effect from 1 January It follows that since September 1990 the Redmond Foundation has in fact

17 been in liquidation, a situation which should be equated with insolvency. Consequently, in the light of the judgment in Abels, the directive is not applicable. I can deal with this point briefly. That argument is based on an appraisal of a factual situation which does not appear in the assessment of the facts made by the national court. In the context of the co-operation introduced by the preliminary ruling procedure between the national court and the Court of Justice, it is for the national court to determine and assess the facts of the case and for the Court of Justice to *281 examine the question submitted for a preliminary ruling solely in the light of the national court's assessment. [FN25] FN25 See, expressly, Case 139/85, Kempf: [1986] E.C.R. 1741, [1987] 1 C.M.L.R. 764, para. [12]. In case the Court should nevertheless wish to consider this argument, suffice it to say that none of the evidence in the documents before the Court suggests that, at the time when its activities were transferred to Sigma, the Redmond Foundation had suspended payment of its debts, let alone that any proceedings for insolvency or suspension of payments had been brought against it. I need only refer to the Court's judgment in Danmols Inventar, which was concerned with a transfer of an undertaking after the transferor had suspended payment of its debts but before it was declared insolvent. The Court considered that the fact that the transfer had occurred after the transferor had suspended payment of its debts was in itself not enough to exclude the transfer from the scope of the directive. [FN26] I conclude therefore that a fortiori nothing in this case prevents the directive from applying. FN26 Danmols Inventar, cited above, para. [10]. The absence of a "legal transfer" or a "merger" 17. It is clear that the prime cause of the transfer to Sigma of the Redmond Foundation's activities was not a "takeover" agreement. As the national court observes, the transfer was the result of a decision of the Municipality of Groningen to the effect that the Redmond Foundation's subsidy would henceforth be paid to Sigma. The Redmond Foundation considers that it should be inferred from the lack of any agreement (even an indirect agreement) between itself, Sigma and the Municipality of Groningen that the directive is not applicable. It denies the existence of any agreements as to the way in which the assistance would be provided by Sigma after 1 January 1991, as the relevant negotiations came to naught. For their part, the defendants consider that the relationship between the Municipality of Groningen and the institutions which it subsidises must be regarded as a contractual relationship. Given that immediately after the Municipality terminated its relationship with the Redmond Foundation it entered into relations with Sigma, there was a transfer of an undertaking or at least of part of an undertaking within the meaning of the directive.

18 18. In the first place, I would observe that in assessing whether, in a given situation, there has been a transfer resulting from a "legal transfer or merger" within the meaning of the directive, the Court has invariably started out from the premise that that question has to be considered in the light of the final outcome of the transaction in question. According to the Court, the directive is applicable: *282 where, following a legal transfer or merger, there is a change in the legal or natural person who is responsible for carrying on the business and who by virtue of that fact incurs the obligations of an employer vis-à-vis the employees of the undertaking. [FN27] FN27 Ny Molle Kro, para. [12], Daddy's Dance Hall, para. [9], and Berg, para. [17]. Next, it clearly appears from the case law that, as regards the scope of the directive and, in particular, the question as to when a legal transfer is involved, the Court has always used a teleological approach. The beginnings of this approach are to be found in the judgment in Abels, where, for the first time, the Court came up against major terminological differences between the various language versions of the relevant provision. Whereas most of the versions, including the Dutch, refer only to contractual transfers, [FN28] the English ("legal transfer") and Danish ("overdragelse") in particular indicate a wider scope. In view of those divergences, the Court held that: the scope of the provision at issue cannot be appraised solely on the basis of a textual interpretation. Its meaning must therefore be clarified in the light of the scheme of the directive... and its purpose. [FN29] FN28 In particular the German ("vertragliche Übertragung"), French ("cession conventionnelle"), Greek ("<<sigma>><<upsilon>>µβα<<tau>><<iota>><<kappa>><< eta>> <<epsilon>><<kappa>><<chi>><<rho>><<eta>><<sigma>><<eta>>"), Italian ("cessione contrattuale") and Dutch ("overdracht krachtens overeenkomst"): see Abels, para. [11]. FN29 Para. [13]. More specifically with regard to the question referred for a preliminary ruling, the Court added that the meaning of the provision had to be clarified in the light of "its place in the system of Community law in relation to the rules on insolvency", ibid. 19. In keeping with this approach, the Court has systematically given a very broad interpretation to the expression "legal transfer". Striking illustrations are to be found in Berg, Daddy's Dance Hall and Bork International. The first of those cases was concerned with the transfer of an establishment under a lease-purchase agreement, followed by the restoration of the establishment to the vendor pursuant to a court ruling terminating the agreement on the ground of the purchasers' non-performance. The Court answered the