1.

In this case the Court is asked to give a ruling on a reference made by the Oberlandesgericht (Higher Regional Court) Düsseldorf under Article 177 of the EC Treaty. The question concerns the interpretation of Article 6 of the First Council Directive on company law of 9 March 1968 ( 1 ) (hereinafter ‘the First Directive’).

2.

Article 6 of the First Directive provides:

‘Member States shall provide for appropriate penalties in case of:

3.

Article 2(1)(f) of the First Directive provides:

‘Member States shall take the measures required to ensure compulsory disclosure by companies of at least the following documents and particulars:

...

4.

By application of 14 June 1991 made to the Amtsgericht — Registergericht (Local Registry Court), — the Verband deutscher Daihatsu-Händler eV (hereinafter referred to as ‘the Verband'), an association of Daihatsu dealers in Germany, sought communication of the balance sheets of Daihatsu Deutschland GmbH (hereinafter referred to as ’Daihatsu Deutschland') ( 3 ) for 1989 and 1990. The court dismissed the application, stating that the balance sheets had not been produced and that there ‘was no legal means of compelling Daihatsu Deutschland to disclose them, in particular because the Amtsgericht had no competence to take such measures ex officio and because the applicant lacked locus standi to apply for such measures to be taken.

5.

Having appealed unsuccessfully against that decision, the Verband filed a further appeal, which is still pending before the court, for an order from the competent Registry Court requiring Daihatsu Deutschland to file its annual accounts not produced since 1989 in accordance with Paragraph 325(1) of the Handelsgesetzbuch (German Commercial Code — ’the HGB'). It further sought commencement of administrative proceedings for removal of the company from the register, under the second sentence of Paragraph 2(1) of the Löschungsgesetz (Law on removal of companies from the register).

6.

In its order for reference, the Oberlandesgericht Düsseldorf states that the German legal system precludes the granting of the Verband's application: Paragraph 2(1) of the Löschungsgesetz cannot be invoked to have Daihatsu Deutschland ( 4 ) wound up and the HGB does not acknowledge a trade association's right to require the competent national authorities to force Daihatsu Deutschland to disclose its balance sheets. More specifically, Paragraph 335 of the HGB prescribes a penalty of up to DM 10000 for failure by a company to publish its annual balance sheet but this penalty is not available to the Registry Court acting of its own motion but only on the application of a member, a creditor, the central works council or the works council of the company itself. The appellant is thus not among those entitled to make such an application.

7.

It is on this point that the referring court has questions of interpretation of Community law on which it seeks guidance from the Court. The Oberlandesgericht Düsseldorf takes the view that the German legislature has failed in its obligation to transpose the First Directive into national law in so far as it has not provided for appropriate penalties, within the meaning of Article 6 of the First Directive, to oblige companies to publish their balance sheets and profit and loss accounts. However, the court of reference is unsure whether Article 6 of the First Directive is directly enforceable in national law, allowing the appellant party to rely on it in support of its claims.

8.

Accordingly, the Oberlandesgericht submits the following question to the Court for a preliminary ruling:

‘Does Article 6 of the First Council Directive on company law of 9 March 1968 have direct effect if under German law the (sole) penalty to ensure enforcement of the duty to disclose the annual accounts of a private limited company is the imposition by the Registry Court of an administrative fine of up to DM 10000, but the Registry Court may intervene only on application by a member, a creditor or the central works council or the company's works council, and does such possible direct effect of that provision mean that, in addition to the persons entitled under German law to make an application, any person may apply for an administrative fine to be imposed or that such a right is available at least to a traders’ association which, under its articles of association, must protect the interests of its members who have a contractual relationship with the private limited company which has failed to comply with its duty to disclose its accounts?'

9.

From the point of view of Community law, the legal question facing the national court is twofold. First, it asks whether the German Federal Republic has provided in domestic law for appropriate penalties in order to comply with its obligations under Article 6 of the First Directive. ( 5 ) Secondly, if the first question is answered in the negative and only then, the Court of Justice is asked to determine whether an individual, such as the appellant party in the proceedings before the Oberlandesgericht, may rely directly on Article 6 of the First Directive in order to require the competent national authority to impose a penalty on a company which has not disclosed its balance sheet when, under national rules, that individual is not one of the persons entitled to make such an application.

10.

11.

I consider this line of argument to be wrong in law. The relevant legislation was completed by the entry into force of the Fourth Council Directive on company law, ( 6 ) so that the obligations imposed on Member States by Articles 2 and 6 of the First Directive have become fully applicable. Contrary to the assertion of the German Federal Republic, the legislative gap left by Article 2 of the First Directive has been filled by the Fourth Directive. The preamble to the Fourth Directive refers to the provisions at issue in the First Directive; it states specifically that the purpose of Directive 78/660 is to coordinate national provisions concerning the presentation and content of annual accounts and their publication ‘in respect of certain companies with limited liability’ having regard to the fact that ‘the necessity for and the urgency of such coordination have been recognized and confirmed by Article 2(l)(f)  ( 7 ) of Directive 68/151/EEC’. ( 8 ) Article 47 of the Fourth Directive further states that ‘the annual accounts, duly approved, and the annual report, together with the opinion submitted by the person responsible for auditing the accounts, shall be published as laid down by the laws of each Member State in accordance with Article 3 of Directive 68/151/EEC.’

12.

It follows that it is the Fourth Council Directive which is the directive on whose entry into force the coming into effect of the obligation to publish balance sheets and profit and loss accounts depends. Through the introduction, by the Fourth Directive, of a provision ‘...on coordination of the content of balance sheets and profit and loss accounts’... ( 9 ) into the Community legal system, Article 2(1 )(f) of the First Directive has become fully applicable, even in relation to German limited liability companies. Consequendy, the German Federal Republic is now required to provide for appropriate penalties in the case of failure to comply with the obligation, laid down in Article 6 of the First Directive, to disclose the balance sheet and profit and loss account.

13.

14.

This argument is, in my view, wrong. I would point out that Article 54(3)(g) of the Treaty, on the basis of which the First and Fourth Directives were adopted, mentions the aim of ‘the protection of the interests both of members and others’ in general terms, without distinguishing any special category of others. Others' therefore includes, by definition — apart from creditors, who are already covered by German legislation — other categories of entitled persons.

Likewise, the preamble to the First Directive states that ‘the basic documents of the company should be disclosed in order that third parties may be able to ascertain their contents and other information concerning the company’. It follows from that wording that the obligation to disclose is intended to inform persons who do not have adequate knowledge of the company's situation or of its plans specifically to enable them to assess whether they should enter into or maintain legal relations with that company. In other words, the said rules are intended to ensure the greatest possible transparency in company activities, which is why they provide for the disclosure erga omnes of certain information from which all may draw conclusions as to the legal and economic standing of companies.

15.

It is therefore contrary both to the letter and to the spirit of those provisions to restrict the circle of persons who may benefit from that transparency; the Community legislature has taken account, rightly in my view, of the fact that an exhaustive list of entided persons is a priori impossible because of the very complexity of the contractual and commercial relations which can be formed between companies and other legal or natural persons. That is, moreover, why, according to what I take to be the correct interpretation of Article 6 of the First Directive, the circle of those entided to apply for penalties to be imposed where there is failure to disclose should logically be the same as the particularly wide circle of persons whose interests in transparency both Article 54(3)(g) of the Treaty and the First Directive are intended to safeguard.

16.

I see the facts of the main proceedings as constituting a typical example illustrating the need for as wide a definition as possible of the circle of those having a legitimate interest in having companies comply with their obligation to disclose. It is logical and legitimate for the sales agents of a company to be interested in its economic position, as their commercial situation is closely connected with that of the company. It seems to me, moreover, that such persons fall within the category of Others' whose interests Article 54(3)(g) of the Treaty and Articles 2 and 6 of the First Directive seek to safeguard.

17.

German law does not safeguard the right of such persons to be informed of the economic position of the company for which they are sales agents because there is no procedure enabling them to oblige that company to publish its annual accounts. I therefore consider that the German Federal Republic has failed to comply with the obligations imposed upon it by the aforementioned articles of the First Directive.

18.

I would add further comments on the nature and function of penalties in Community law. It is noteworthy that, even if the specific aim — as prescribed by Article 6 — of providing for ‘appropriate penalties’ against companies failing to comply with the rules on disclosing their annual accounts had not been included in the First Directive, Article 5 of the Treaty would give rise to an equivalent obligation for Member States, as would the binding nature of Community legislation in general. In particular, it is settled case-law that ‘the Member States are required by virtue of Article 5 of the EEC Treaty to penalize any persons who infringe Community law in the same way as they penalize those who infringe national law’. ( 10 )

19.

Since Article 2 of the Directive also requires Member States to take ‘the measures required’ to ensure compulsory disclosure by companies of annual accounts, such a requirement, in my view, includes an obligation to introduce a penalty mechanism. The application of a rule of law is direcdy linked to the existence of a State enforcement regime which either preventively or coercively guarantees observances of that rule. The fact that the Community legislature has not been content to require Member States to take the necessary measures but also calls for the provision of appropriate penalties is an indication of the importance it attaches to such penalties in the particular matter of the disclosure of annual accounts.

20.

Case-law sheds further light on the criteria to be applied in determining the appropriateness of a penalty. I would cite by way of illustration the judgment in Case 68/88 Commission v Greece, ( 11 ) paragraph 24 of which reads as follows:

‘For that purpose, whilst the choice of penalties remains within their discretion, they must ensure in particular that infringements of Community law are penalized under conditions, both procedural and substantive, which are analogous to those applicable to infringements of national law of a similar nature and importance and which, in any event, make the penalty effective, proportionate and dissuasive’ (my italics).

21.

As the facts of the main proceedings show, the penalty prescribed by Paragraph 335 of the HGB is far from effective in that it has not prevented Daihatsu Deutschland from keeping its annual accounts secret and it has not succeeded in making the right to transparency referred to above, as enshrined in Community law, available to the Verband. In my view, this alone is sufficient to demonstrate that the said German provision has not laid down a penalty meeting the requirement of Article 6 of the First Directive.

22.

23.

Otherwise, the second part of my reply is relevant, namely that concerning the question whether Article 6 of the First Directive directly confers on persons other than those covered by Paragraph 335 of the HGB the right to apply for the imposition of penalties on companies which have failed to disclose their balance sheets or at least to require such companies to be compelled to disclose them.

24.

The Court has consistently held ( 14 ) that, in order to have direct effect in the legal systems of the Member States to which they are addressed, the provisions of a directive must be unconditional and sufficiendy precise. The German Government and the French Government — the latter having intervened only at the hearing, without filing any written observations — maintain that the provisions at issue of the Directive do not have the required characteristics and consequently do not by themselves confer upon persons not mentioned in the German legislation now in force the right to apply for penalties to be imposed on companies which have failed to comply with the requirement to disclose their annual accounts. Article 6 of the First Directive simply requires the Member States to enact ‘appropriate penalties’ whilst allowing them a broad discretion as to the nature, gravity and scope of those penalties. Consequently, where the national legislature has provided for a financial penalty of a fixed amount with only a restricted number of persons being entitled to apply for its imposition, Article 6 of the First Directive cannot be invoked in order to extend this circle of persons. The financial penalty prescribed by Paragraph 335 of the HGB is available only to certain entided persons, without any implication that the German legislature considered that penalty as being the most appropriate where other persons might have an interest in compliance by limited liability companies with their obligation to disclose. Thus, according to the German and French Governments, to enlarge the circle of entided persons through Article 6 of the First Directive would be tantamount to allowing the Court to substitute its own assessment for that of the national legislature as to whether a penalty is ‘appropriate’, which would not accord with the nature and purpose either of the provisions at issue or, more generally, Community directives.

25.

Precisely the opposite argument is advanced by the Spanish Government in its written observations, which it also expanded verbally before the Court. It maintains that the unconditional character of the provisions of Article 6 of the First Directive derives from the fact that, in order to achieve the objective contained in those provisions, it is not even necessary to take other implementation measures. Furthermore, so this intervener argues, the terms used in Community legislature are sufficiently clear. The Spanish Government points out that the Court has consistendy held that the freedom of choicem reserved to the national legislature to determine the measures required to attain the ultimate objective of a provision in a directive does not affect the direct and unconditional nature of that directive. ( 15 ) In other words, according to the Spanish Government, irrespective of whether or not the penalties provided for in a specific case are ‘appropriate’ for fulfilling the purposes of the First Directive, the obligation for Member States to provide for penalties where companies have failed to disclose their annual accounts remains in itself clear and unconditional and consequently has a direct effect in the German legal system.

26.

I am inclined to follow the view taken by the German Government. More specifically, I consider that the discretionary power of the Federal Republic of Germany to decide the penalties to be imposed against limited liability companies which have not complied with their obligation to disclose their accounts would be greatly restricted, even to the point of removal, were the provision at issue to be regarded as having a direct effect.

27.

Even if it were conceded, however, that the provision of the First Directive in issue is clear and unconditional, the fact would remain that to acknowledge, direcdy on the basis of the Community provision, a general right for any third party to apply for the imposition of a penalty against companieswhich had not complied with the obligation to disclose their annual accounts would be contrary to other consistent case-law of the Court, ( 16 ) which rejects the direct horizontal effect of directives and does not acknowledge the right of an individual to invoke them. ( 17 ) This view is supported by both the German and French Governments, but it is not shared by the Spanish Government, which takes the view that the question of horizontal effect does not arise in these proceedings. In particular, it observes that, contrary to what was expressly stated in the order for reference of the Oberlandesgericht Düsseldorf, the main proceedings are not of a purely private nature. According to the Spanish Government, the proceedings involve, on the one hand, the applicant dealer association and, on the other hand, a German State authority so that the legal relations in question are governed by public law. It further observes that the relevant legal remedy was sought from the Registry Court and not vis-à-vis another individual, in this instance Daihatsu Deutschland, and that the aim is not imposition of the obligation to disclose but to require the competent German authority to take appropriate measures against a company which has failed to publish its accounts. Article 6 of the First Directive accordingly does not directly place an obligation to disclose on certain categories of company. There could be a direct horizontal effect only where a directive imposed on individuals a specific course of conduct in the context of legal proceedings between two private individuals. ( 18 ) On the other hand, in the case of ‘triangular’ legal relations — as in the main proceedings — that is to say where a private individual applies to an official authority on account of the behaviour of another private individual, the Spanish Government takes the view that the proceedings lose their bilateral or private law nature so that there can be no question of horizontal effect.

28.

I do not find this approach acceptable. I consider it important to recall the reasons why the Court has consistently refused to confer any horizontal effect on directives. In paragraphs 16 and 17 of its judgment in El Corte Inglés ( 19 ) it stated as follows:

‘As for the case-law on when directives may be relied upon against State entities, it is based on the binding nature of directives, which applies only with regard to the Member States to which they are addressed, and seeks to prevent a State from taking advantage of its own failure to comply with Community law The effect of extending that case law to the sphere of relations between individuals would be to recognize a power in the Community to enact obligations for individuals with immediate effect, whereas it has competence to do so only where it is empowered to adopt regulations or decisions...’.

29.

Ultimately, the Spanish Government's argument would mean that the First Directive itself imposed obligations on companies, irrespective of what national legislation provided. Such an outcome would be contrary both to the general principles of case-law ( 20 ) and to the present institutional balance of Community law. ( 21 ) A directive may in no case directly prescribe the way in which a private individual must act without the interposition of national rules adopted for this purpose. ( 22 )

30.

Nor must we be led astray by the fact that the application for imposition of a penalty is not directed against the company which has failed to disclose its accounts but against the competent public authority which is asked to penalize that company. The main aim of the applicant is to set in motion the State machinery so as to oblige Daihatsu Deutschland to disclose its annual accounts. The fact that in order to make the company fulfil that obligation the applicant has to have recourse to State coercion is a direct result of the general principle, applying in all modern legal systems, that an individual is not allowed to take the law into his own hands, since the State has the monopoly of enforcement. The involvement of the State authorities — which are alone in a position to impose a coercive penalty — does not therefore affect the proceedings between the Verband and Daihatsu Deutschland and does not make them ‘triangular’, contrary to what the Spanish Government argues.

31.

Moreover, the main purpose of the First Directive is, as I have already observed, to guarantee the disclosure of certain company documents. If it did recognize any right at all for the private individuals invoking it, such a right would be granted in the interests of bringing about disclosure and not in the interests of imposing penalties against those infringing the disclosure rules. ( 23 ) The penalty should not constitute the end of a rule of law in itself; far from being autonomous, its purpose is to ensure compliance with an obligation as to conduct.

32.

Consequently, since the obligation to adopt a course of conduct (disclosure of annual accounts) laid down by the First Directive relates to individuals and cannot have direct effect in a national legal system, the provision in that same directive concerning the penalties to be imposed in the case of infringement of that obligation cannot ipso facto have any direct effect because otherwise a specific obligation would directly be imposed on private individuals without recourse to national law.

33.

Finally, at the hearing, the Spanish Government referred to the Opinion of Advocate General Mischo delivered on 28 November 1989 in the Busseni case, ( 24 ) and in particular to the passage in which the Advocate General refers to the Fratelli Costanzo case, ( 25 ) in order to support his conclusion that a distinction should be drawn between the application of a directive with adverse consequences for individuals and the horizontal effect of the directive. In other words, the fact that satisfaction of a right conferred on an individual by the direct vertical effect of the directive also has adverse consequences for other individuals does not mean that the directive was applied directly to such individuals. Transposing that argument to the present case, the Spanish Government considers that if the right of the Verband to make the competent German authority take the necessary steps to compel Daihatsu Deutschland to disclose its annual accounts were acknowledged, such coercion would simply constitute an ‘indirect adverse effect’ of the direct vertical effect of the Directive and not a direct application of the Directive to the detriment of that company.

34.

I do not think it is right to draw a parallel between the Fratelli Costanzo case and this case. In that case, which concerned a procedure for the award of a public works contract, the relevant national measure was contrary to the relevant provisions laid down by a Community directive. The Court held that, since the awarding authority was in breach of the Community rules, an individual could invoke those rules before a national court in order to challenge the award of the contract. Therefore, in that case the individual had brought an action exclusively against a public authority within the framework of a purely public-law dispute in order to obtain recognition of a right conferred by Community law with the aim of having a public contract awarded to him. The right relied upon did not necessarily go hand in hand with another individual's obligation, even if the fulfilment of the right, namely the award of the contract, affected in some way the competitor to whom the contract in question would have been awarded if the procedure prescribed by the directive had not been properly applied. Such an adverse consequence for a competitor or comperitors is indirect and arises from the satisfaction of a right conferred by the directive: it does not constitute a direct obligation on competing third parties and in the final analysis it can be attributed not to the directive but to the effects of the unlawful behaviour of the national authorities. Moreover, such repercussions on third parties of theapplication of a right conferred on an individual by a rule of public law — such as, for example, a right derived from the direct vertical effect of directives — are a common phenomenon which is the direct result of the complexity and interdependence of the legal relations, in other words, a specifically legal phenomenon. The question of direct horizontal effect arises when these consequences are not simply indirect effects of the working of the law but consist of obligations directly imposed on individuals which are attributable to the application of the directive alone. Such, I believe, is the case here. Whatever right the Verband might be recognized as having, it would necessarily correspond to, and expire with, a correlative obligation imposed on an individual, namely Daihatsu Deutschlands obligation to disclose its annual accounts; such an obligation would be directly attributable to the Directive and not to the conduct of the German State authorities in order to meet a subjective right under public law of the Daihatsu dealer association.

35.

I therefore propose that the Court give the following reply to the national court's question:

A penalty for the imposition of which only a member, creditor or the central works council or the company works council may apply does not constitute an appropriate penalty, within the meaning of Article 6 of Council Directive 68/151/EEC, in the event of failure by a company to disclose its balance sheet; however, in the absence of any other national provision which, interpreted in the light of Community law, would afford proper transposition of the Directive, Article 6 of the Directive may not be relied upon to confer, upon persons other than those expressly referred to in the relevant provision of national law, the right to bring proceedings to secure imposition of the penalty provided for by national law.