Report for the Hearing delivered in Case 422/85

I — Facts aumd procedure

In proceedings before the Pretore di Montagnana (Magistrate, Montagnana), Graziano Mattiazzo is charged, in his capacity as manager of the Montagnana branch of the Banca popolare di Padova e Treviso and therefore as a person responsible for a public service within the meaning of Article 358 of the Italian Penal Code, with failing, contrary to Article 362 of the Penal Code, to notify the judicial authorities that banker's draft No 904528441 in the amount of LIT 7906000 had been issued without provision, although this fact had come to his attention in the exercise of his duties or as a result thereof. That charge presupposes that the provision of banking facilities constitutes a public service activity in Italy.

According to the order for reference, Article 1 of Royal Decree No 375 of 12 March 1936 provides that the receipt of savings and the grant of credit are activities pursued in the public interest. Also, Article 47 of the Constitution provides that: ‘The Italian Republic encourages and protects all forms of saving. It regulates, coordinates and supervises the grant of credit’. However, it is also clear from the order for reference that Presidential Decree No 350 of 27 June 1985, which contains rules to implement Council Directive 77/780/EEC of 12 December 1977 on the coordination of the laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions (Official Journal 1977, L 322, p. 30) laid down rules which appear to preclude the possibility of classifying the pursuit of banking business as a public service activity.

Article 1 of that decree provides that ‘the receipt of savings from the public in any form and the grant of credit are in the nature of business activities, whether the institutions which carry on those activities are public or private’. Article 1 (2) makes the pursuit of those activities conditional on the grant of authorization.

The Pretore considered that the classification of the receipt of savings as a commercial or business activity was objectively incompatible with the characteristic features of a public service, owing to the broad discretion and freedom of decision-making enjoyed by undertakings in a free-market system such as that established by the EEC Treaty. Moreover, the Pretore observed that the choice of a system involving the grant of authorization brought the activity of credit institutions strictly within the scope of private law, since authorization was an administrative measure which merely removed a bar to the exercise of a preexisting right vested in the persons to whom authorization was granted and was consequently not such as to establish or confer upon that person a new legal status or a status formerly enjoyed by the public administration, as would be the case if the measure in question were in the nature of a concession.

By order of 25 October 1985 the Pretore decided pursuant to Article 177 of the EEC Treaty to stay the proceedings until the Court of Justice had given a preliminary ruling on the following questions:

‘(1) Under Directive 77/780/EEC regulating the taking up of the business of credit institutions, was the receipt of savings intended to constitute merely a business activity, governed as such by the fundamental freedoms guaranteed by the Treaties, or were the requirements of the protection of savings and of individual savers regarded as being of paramount importance and the activity of credit institutions thus treated as an activity pursued in the public interest of the Community, with all the consequences attaching thereto in terms of the differences in the classification of that activity in the legal systems of the Member States? (2) Is the concept of authorization defined in Article 1 of the direttive intended to refer to an instrument which is issued in any form by the authorities of the Member States but which in any event establishes the legal status of, or confers a legal status upon, the credit institution concerned (precisely. on account of the fact that the activity carried on by that institution is in the public interest) or is that concept intended to refer to any instrument authorizing in general terms the pursuit of a business activity, which — as a reflection of the freedom to engage in economic activity — already forms an integral part of the body of rights vested in every individual under the legal systems of the Member States? (3) In the light of the objectives of the directive set out in the preamble thereto, is national legislation compatible with the aims pursued by the Community where it limits, restricts or confers a particular status on anybody carrying on business as a credit institution on account of the fact that the activity carried on constitutes a public service? ’

The order made by the Pretore was lodged at the Court Registry on 16 December 1985.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted by the Italian Government, represented by Luigi Ferrari Bravo, Head of the Department for Diplomatic Contentious Affairs, assisted by Pier Giorgio Ferri, Avvocato dello Stato, and by the Commission of the European Communities, represented by Guido Berardis, a member of its Legal Department, acting as Agent, assisted by Silvio Pieri, an Italian civil servant seconded to the Commission under the exchange scheme for Community and national civil servants.

Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory enquiry. By order of 3 December 1986 the Court assigned the case to the Second Chamber pursuant to Article 95 (1) and (2) of the Rules of Procedure.

II — Written observations submitted to the Court

(a) Preliminary remarks

The Commission sets out the special characteristics of the Italian banking system and the provisions of the Italian Penal Code concerning offences committed by public officials and persons responsible for a public service.

The Commission points out that it cannot endorse some of the assertions made by the Pretore, namely that a business activity is objectively incompatible in Italian law with the characteristics of a public service, that a business activity subject to authorization by the public authorities must necessarily always be strictly within the scope of private law (and therefore cannot constitute the performance of a public service) and, lastly, that under Italian law the fact that banking is a ‘business’ activity cannot be reconciled with the classification of that activity as a ‘public service’.

(b) First question

The Italian Government claims that, as Article 57 of the EEC Treaty acknowledges, the banking profession is strictly regulated by measures concerned with the protection of savings. It follows, as is stated in the fourth recital of the preamble to Directive 77/780/EEC, that in the coordination achieved by the directive overriding importance must necessarily be ascribed to that aspect of public interest in defining the conditions governing the taking up and pursuit of credit activities.

Article 1 of the directive uses the word ‘undertaking’. However, in the Italian Government's view the fact that a credit institution is regarded as an undertaking does not seem to be an essential part of the uniform rules laid down by the directive; the coordination of provisions of national law is based rather on the fact that banking activities may be pursued only if certain conditions concerned with the persons directing such activities and with funds, intended to ensure that such activities are compatible with the public interest in the protection of savings, are fulfilled. The Italian Government therefore considers that it is vital that the taking up and pursuit of banking activities should always be subject to supervision on the part of the public authorities.

Directive 77/780/EEC is not, according to the Italian Government, based on the principle that Community freedom can always be achieved by reducing as far as possible, or even eliminating, intervention on the part of the national public authorities. On the contrary, it is possible that the strengthening of the means of supervision available to the national authorities may contribute to the attainment of Community freedoms. That is the idea underlying Articles 7 and 12 (2) of the directive concerning the obligation imposed on the competent authorities of the Member States to collaborate and exchange information, and in that context the Italian Government refers to the judgment of the Court of 11 December 1985 in Case 110/84 Hillegom v Hillenius [1985] ECR 3947. The Italian Government proposes that the Court should answer the first question as follows:

‘In general Directive 77/780/EEC is intended to coordinate national legislation on the basis that institutions pursuing banking activities are subject to the supervision of the public authorities since they affect the public interest, in particular as regards the protection of savings. The system laid down by national law whereby credit institutions are supervised by the public authorities does not in principle conflict with the objectives of the Community, in particular the right of establishment and freedom to provide services.’

The Commission states that the directive accepted the situation as it existed in the various Member States without attempting to change it and merely sought to protect savers against the risk of banks becoming insolvent by coordinating supervision of banks before they are opened and after they commence their activities. That is confirmed by the extremely wide definition of a credit establishment contained in Article 1 of the directive, and also by the fact that the fifth recital in the preamble to the directive states that the scope of the coordinating measures should be as broad as possible and should cover all institutions whose business is to receive repayable funds from the public whether in the form of deposits or in other forms such as the continuing issue of bonds and other comparable securities and to grant credits for their own account. Furthermore, that recital points out that the credit institutions to which the directive does not apply are exceptions which must be expressly provided for. As regards Italy, the directive excludes from the scope of its provisions only the central bank, the Cassa Depositi e Prestiti and the post office giro institution.

The Commission proposes that the Court should give the following reply to the first question :

‘Council Directive 77/780/EEC of 12 December 1977 on the coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions does not require Member States to provide that credit institutions are always covered by private law and guaranteed absolute freedom of action or to provide that such institutions always provide a service in the public interest. In this respect the Member States are free to make whatever arrangements they wish.’

(c) The second question

The Italian Government observes that Article 3 of the directive provides that the Member States must require credit institutions to obtain authorization before commencing their activities. The requirements for such authorization are defined by national law; the applicant must always be required to show that certain conditions laid down in Article 3 (2) concerning the persons directing the business of the institution and the funds of the institution are fulfilled and that he is in possession of the documents referred to in Article 3 (4); on the other hand, national law cannot provide for the grant of authorization to be conditional upon the economic needs of the market except for a limited time and subject to the rules laid down in Article 3 (3). That being so, it seems from the degree of coordination achieved by the directive that the provisions of Article 3 (together with Article 8, which governs the withdrawal of authorization) are not enough to define clearly and fully the structure of the system. Community law contains only certain basic rules specifying the effect of authorization and the requirements which must be met for authorization to be granted. The ninth recital in the preamble to the directive acknowledges that the progressive reduction of the discretionary powers to grant authorization constitutes an important part of the harmonization of the rules on authorization in the Member States. Consequently, if national rules are intended to lay down other requirements for authorization in addition to the minimum requirements specified in Article 3 (2) and (4) of the directive, they must be adopted by means of a measure of general application containing sufficiently clear provisions, and in this connection the Italian Government refers to the Court's judgment of 1 March 1983 in Case 300/81 Commission v Italian Republic [1983] ECR 449.

The Italian Government proposes that the Court should reply to the second question as follows:

‘According to Directive 77/780/EEC the authorization provided for in Article 3 is granted by the public authorities where the minimum requirements laid down in Article 3 and other requirements provided for by national law are satisfied, in the absence of which the taking up and pursuit of the business of credit institutions must be adjudged unlawful and therefore punishable.’

According to the Commission the reply to be given to the second question is clear from the very terms of Article 1 of the directive: ‘Authorization’ means an instrument issued in any form by the authorities by which the right to carry on the business of a credit institution is granted. In meeting the clear need to fix a rule which would apply in all the Member States, the legislature was not concerned with the special features of the national law of the Member States on the concept of ‘authorization’ but opted for a wide, general and non-technical definition.

The Commission proposes that the second question should be answered as follows:

‘The definition of the term “authorization” contained in the directive in question covers an instrument issued in any form whatsoever conferring the right to carry on the business of a credit institution.’

(d) Third question

The Italian Government states that since the activities of credit institutions have a direct and special effect on general public interests, in particular those concerned with the protection of savings, it follows that apart from the coordination achieved by the binding rules of the directive each national legislature is in principle entitled to attribute whatever importance it considers appropriate to this aspect of such activities, that is to say the fact that they fulfil an essential social need and conversely may cause serious damage if rules of professional conduct and banking practice or regulations adopted by the competent authorities are not complied with. Consequently, if it were considered necessary for precedence to be given under national law to the importance to the public of the activities of credit institutions, involving the imposition of special responsibilities on the persons pursuing such activities, this would not constitute a breach of Community law.

The Italian Government proposes that the Court should answer the third question as follows :

‘Directive 77/780/EEC does not prevent national law from treating the activities of credit institutions as being of public importance to a greater or lesser extent and therefore imposing on those pursuing such activities corresponding special responsibilities.’

The Commission maintains that none of the provisions of the directive in question prevents the Member States from classifying persons carrying on banking activities (and therefore employees of credit institutions) as public officials or as persons responsible for a public service. As is clear from Article 2, the directive applies to the taking up and pursuit of the business of credit institutions. It does not apply to certain institutions or services which are indisputably public institutions and perform functions in the public interest, but it cannot be concluded from that that it does not apply to all the other banking institutions which are public institutions or that all credit institutions covered by the directive must be strictly covered by private law and that the status of a public service may not be conferred on any credit institution, either within or outside the scope of the directive, apart from the central banks, the post office giro institution and the Cassa Depositi e Prestiti.

Since the classification of a person employed by a credit institution as a ‘public official’ or ‘person responsible for a public service’ is connected primarily with the juridical nature of that institution, it is clear that the directive does not in this respect contain any prohibition such as those referred to by the national court.

Whether the employee of a bank is a public official may also depend upon the nature of the work which he performs and the duties which he is required to carry out. The directive in question does not prevent Member States from requiring employees of banks, even if they are private banks, to perform duties exhibiting the characteristics of a public service.

In fact the directive concerns primarily the taking up of banking activities. For that purpose, it takes into consideration the need for administrative authorization and lays down requirements to which the grant of such authorization may be subject. However, it makes no reference to the possibility of classifying employees of banks as public officials or as persons responsible for a public service or imposing on them special restrictions or obligations.

Secondly, the directive refers to the business of credit institutions after authorization has been granted and lays down in particular a rule that they must be supervised and controlled in order to protect savers, and here again it is impossible to detect any factor relating to the problem referred to in the third question. The Commission proposes that the Court should answer the third question as follows:

‘The directive in question does not prevent the Member States from conferring on anyone carrying on a business concerned with credit, and thus on the employees and officials of a credit institution, a special status such as that of a public official or a person responsible for a public service, in the light of the public nature of the activities carried out.’

T. F. O'Higgins

Judge-Rapporteur

1 Language of the Case: Italian.