1.

This request for a preliminary ruling from the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) will allow the Court to rule once again on the question of the relationship between the pre-pack procedure, as developed in the Netherlands, and the derogation provided for in Article 5(1) of Directive 2001/23/EC from the safeguarding of employees’ rights in the event of transfers of undertakings, businesses or parts of undertakings or businesses. ( 2 )

2.

Under Dutch law, the pre-pack is a procedure which is not laid down in legislation or regulations, but is derived from and applied in case-law. It takes place before the declaration of insolvency of the debtor, when the sale of the undertaking, or part of it, included in the debtor’s assets to be liquidated, is prepared. The sale can then take place immediately after the declaration of insolvency. The question in the present case is whether, and under what conditions, that procedure falls within the scope of the abovementioned derogation.

3.

The Court has already dealt with that question in its judgment of 22 June 2017, Federatie Nederlandse Vakvereniging and Others (C‑126/16, EU:C:2017:489; ‘Smallsteps’). However, there has been widespread debate over that judgment in the Netherlands, in both the case-law and doctrine. ( 3 ) Given the legal uncertainty, the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) decided to refer this request for a preliminary ruling to the Court for further clarification, highlighting various aspects that distinguish the pre-pack in the case before it from that which gave rise to the judgment in Smallsteps.

4.

Article 3(1) of Directive 2001/23 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 shall, by reason of such transfer, be transferred to the transferee.’

5.

Article 4(1) of that directive provides that the transfer of the undertaking ‘shall not in itself constitute grounds for dismissal by the transferor or the transferee’, without prejudice to the possibility of dismissal for ‘economic, technical or organisational reasons entailing changes in the workforce’.

6.

Article 5 of Directive 2001/23 provides for a derogation from the system of protection described above and states that:

‘1.   Unless Member States provide otherwise, Articles 3 and 4 shall not apply to any transfer of an undertaking, business or part of an undertaking or business where the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings which have been instituted with a view to the liquidation of the assets of the transferor and are under the supervision of a competent public authority (which may be an insolvency practioner authorised by a competent public authority).

2.   Where Articles 3 and 4 apply to a transfer during insolvency proceedings which have been opened in relation to a transferor (whether or not those proceedings have been instituted with a view to the liquidation of the assets of the transferor) and provided that such proceedings are under the supervision of a competent public authority (which may be an insolvency practioner determined by national law) a Member State may provide that:

…

…

4.   Member States shall take appropriate measures with a view to preventing misuse of insolvency proceedings in such a way as to deprive employees of the rights provided for in this Directive.’

7.

The rules governing workers’ rights in the event of transfers of undertakings under Dutch law and containing the provisions transposing Directive 2001/23 are contained in Articles 7:662 to 7:666 and Article 7:670(8) of the Burgerlijk Wetboek (Civil Code; ‘the BW’).

8.

Under the first sentence of Article 7:663 of the BW, ‘the transfer of an undertaking entails the automatic transfer to the transferee of the employer’s rights and obligations existing at that time, arising from a contract of employment related to that enterprise between the employer and an employee working in that undertaking’.

9.

Article 7:666(a) of the BW, introducing an exception to the abovementioned principle, provides that ‘Articles 7:662 to 7:665 and Article 7:670(8) shall not apply to the transfer of an undertaking where the employer is declared insolvent and the undertaking belongs to the insolvent estate’.

10.

Insolvency proceedings in the Netherlands are governed by the Faillissementswet (the Law on Insolvency; ‘the FW’) and are aimed at liquidating the debtor’s assets. The objective is to divide the debtor’s assets among the joint creditors and to secure the highest possible return for them. In the judgment declaring the insolvency of the debtor, an insolvency administrator and Rechter-commissaris (supervisory judge) are appointed.

11.

As mentioned earlier, the pre-pack is a procedure which is not laid down in legislation or regulations but is derived from the case-law. In the pre-pack procedure, the insolvency of an undertaking is preceded by a preparatory phase during which detailed negotiations take place for the sale of the undertaking (or part of it).

12.

That preparatory phase is opened on the initiative of the insolvent undertaking, which asks the court to appoint a ‘prospective insolvency administrator’ and a ‘prospective supervisory judge’. During that preliminary stage, the prospective insolvency administrator and prospective supervisory judge have no authority or powers of representation of the undertaking or the joint creditors.

13.

Once the contract of sale has been negotiated, the insolvency proceedings are initiated and the court appoints a supervisory judge and an insolvency administrator (usually the same persons as those appointed during the pre-pack procedure). The insolvency administrator executes the contract of sale, as negotiated during the preliminary stage, immediately after the declaration of insolvency, so as to avoid any interruption to the undertaking’s operations.

14.

A bill is currently before the Netherlands Parliament to enact legislation to regulate the pre-pack procedure, with a view to establishing a regulatory framework for this practice and providing legal certainty. ( 4 )

15.

The Heiploeg group (‘the Former Heiploeg Group’) consisted of various undertakings active in the fish wholesale business. In 2011 and 2012, the group accumulated significant losses. In 2013, after the European Commission imposed a heavy fine for infringement of competition rules, the group found itself in serious financial distress.

16.

At that point, the possibility of initiating a pre-pack procedure was considered. Several parties were invited to bid for the group’s assets. Of the three bids received, the one from Parlevliet en Van der Plas Beheer BV was deemed the best. Therefore, it was with this company that negotiations subsequently took place.

17.

On 16 January 2014, at the request of the Former Heiploeg Group, the Rechtbank Noord-Nederland (District Court, Noord-Nederland, Netherlands) appointed two prospective insolvency administrators and one prospective supervisory judge.

18.

The decision appointing them stated that: the aim of the measure was to obtain the highest possible return on behalf of the joint creditors; the appointment of the prospective insolvency administrators offered the possibility of an orderly sale or restructuring following the insolvency; the prospective insolvency administrators and the prospective supervisory judge had no statutory powers or duties; they were appointed to observe, obtain information and be informed, could express their point of view and, where appropriate, offer advice, while the Former Heiploeg Group still had an obligation to cooperate fully with them; if the Rechtbank Noord-Nederland (District Court, Noord-Nederland) decided that the obligations had not been fulfilled, it would draw the necessary conclusions and appoint another insolvency administrator for the subsequent bankruptcy proceedings.

19.

On 27 January 2014, the Former Heiploeg Group applied to the Rechtbank Noord-Nederland (District Court, Noord-Nederland) for a declaration of insolvency. On 28 January 2014, the Rechtbank Noord-Nederland (District Court, Noord-Nederland) granted the application, appointing the two prospective insolvency administrators and the prospective supervisory judge as the organs of the insolvency proceedings.

20.

Overnight on 28 and 29 January 2014, a contract was signed under which companies in the Parlevliet en Van der Plas Beheer BV group (‘the New Heiploeg’) acquired a significant portion of the business of the Former Heilpoeg Group, including its premises.

21.

Of the transferor’s approximately 300 employees, 210 were hired by the transferee, under less favourable employment conditions, even though they were generally doing the same job as they had done previously in the same workplace.

22.

In the main proceedings, the Federatie Nederlandse Vakbeweging (‘the FNV’), a trade union organisation, appealed the judgment by which the Gerechtshof Arnhem-Leeuwarden (Court of Appeal, Arnhem-Leeuwarden, Netherlands) held that, under the national provision transposing Article 5(1) of Directive 2001/23, the New Heiploeg was not required to maintain the same working conditions of its employees that existed before the transfer. In essence, FNV asks the referring court to find that the transfer of the business of the Former Heiploeg Group is subject to the safeguards laid down in Directive 2001/23 and that, according to an interpretation in conformity with the directive of Article 7:662 et seq. of the BW, the employment relationship of all the transferor’s employees is to be continued under the same conditions with the transferee.

23.

Having described the insolvency proceedings and the pre-pack procedure in the Netherlands, ( 5 ) the referring court considers it undisputed that the first condition laid down in Article 5(1) of Directive 2001/23 for the application of the derogation provided for therein – namely, that the Former Heiploeg Group be the subject of insolvency proceedings – has been fulfilled in the present case. The referring court also notes that the insolvency of that group was inevitable. However, the referring court points out that it has yet to determine whether the second and third conditions laid down in that provision have been met in respect of the pre-pack at issue in the present case.

24.

As regards the second condition that there must be proceedings aimed at the liquidation of the assets, the referring court observes that, in the present case, the purpose of the pre-pack was to obtain the highest possible return for the benefit of the joint creditors. The court refers, inter alia, to the decision appointing the two prospective insolvency administrators and the prospective supervisory judge and to the analysis carried out by the two prospective insolvency administrators prior to the declaration of insolvency. ( 6 )

25.

As regards the third condition that the liquidation must be carried out under the supervision of a competent public authority, the referring court states that in the present case, the supervision by a competent public authority provided for in the insolvency proceedings under Dutch law was not affected by the events that took place during the pre-pack procedure prior to the declaration of insolvency. ( 7 )

26.

Notwithstanding the foregoing considerations, taking into account Smallsteps and the elements described in the questions referred for a preliminary ruling, which distinguish the pre-pack procedure in the present case from the one in Smallsteps, the referring court finds there is a reasonable doubt as to whether the abovementioned two criteria have been met in the present case. With regard to Smallsteps, the referring court first observes that, taking into account the expression ‘subject to determination by the referring court’ in paragraph 50 of that judgment, it is for the national court to determine whether the pre-pack at issue is the same as the one in Smallsteps. Second, the request for a preliminary ruling in the Smallsteps case did not fully explain Netherlands insolvency law, nor the objective of the pre-pack and how it is carried out. Third, in the present case, unlike Smallsteps, the negotiations relating to the transfer of the undertaking in question did not take place with an undertaking related to the transferor.

27.

In those circumstances, the Hoge Raad der Nederlanden (Supreme Court of the Netherlands) decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

28.

The request for a preliminary ruling from the referring court concerns the interpretation of Article 5(1) of Directive 2001/23. That provision derogates from the system of employee protection provided for in Articles 3 and 4 of that directive in the case of transfers of undertakings or parts of undertakings. It states that, unless Member States provide otherwise, that system of protection does not apply in the case of transfers of undertakings where three cumulative conditions are met: (i) that the transferor is the subject of insolvency or similar proceedings; (ii) that those proceedings were initiated for the purposes of the liquidation of the transferor’s assets; (iii) that they are under the control of a competent public authority. ( 8 )

29.

The two questions referred for a preliminary ruling by the referring court are intended to clarify whether, in the present case, the second and third conditions are satisfied, taking into account Smallsteps and in view of the characteristics of the pre-pack procedure at issue, as described in the questions, which distinguish that procedure from the one in Smallsteps.

30.

To answer those questions, I consider it appropriate to begin with a systematic analysis of Directive 2001/23 and to examine the case-law relating to Article 5(1) of that directive. On the basis of that analysis, I shall then answer the questions raised by the referring court.

31.

EU rules on the safeguarding of employees’ rights in the event of transfers of undertakings were originally adopted in a 1977 directive ( 9 ) as part of a series of legislative measures aimed at protecting workers’ rights in response to the restructurings that occurred after the economic crisis of the early 1970s. ( 10 ) Directive 77/187 was subsequently amended by Directive 98/50/EC ( 11 ) and eventually replaced by the current Directive 2001/23.

32.

It is clear from its operative part, from the third and fourth recitals and from the reference in the fifth recital to the Community Charter of the Fundamental Social Rights of Workers adopted on 9 December 1989 that the protection of employees is a fundamental objective of Directive 2001/23.

33.

Specifically, the introduction of that legislation was intended to prevent transfers of undertakings from being used as an opportunity to reduce the workforce and dilute the economic and regulatory treatment applied to employees. ( 12 ) The Court has repeatedly held that Directive 2001/23 is intended to safeguard the rights of employees in the event of a change of employer by making it possible for them to continue to work for the new employer on the same terms as those agreed with the transferor. The Court has thus clarified that the purpose of the directive is to ensure, as far as possible, that the contract of employment continues unchanged with the transferee, in order to prevent the workers concerned from being placed in a less favourable position solely as a result of the transfer. ( 13 )

34.

Directive 2001/23 is thus a vehicle for implementing EU social policy, which seeks – by correcting and balancing the market – to achieve social objectives and, in particular, to protect the rights of employees, now also enshrined in the Charter of Fundamental Rights of the European Union, ( 14 ) and to promote ‘the development of human resources with a view to lasting high employment and the combating of exclusion’, as stated in Article 151 TFEU.

35.

From that perspective, the Court has held on several occasions that, since such protection cannot be derogated from and is therefore independent of the will of the parties to the contract of employment, the provisions of Directive 2001/23 must be considered to be mandatory, in that it is not permitted to derogate from them in a way that adversely affects the employees. ( 15 )

36.

In pursuit of the above objectives, Directive 2001/23 provides, first, in the first subparagraph of Article 3(1), 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 are automatically transferred to the transferee by the mere fact of the transfer. ( 16 )

37.

Second, Article 4(1) of the directive protects workers against dismissals by the transferor or the transferee solely because of that transfer. That provision does not, however, stand in the way of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce. In that regard, the Court has clarified that it is clear from the wording of that provision that dismissals which occur in the context of the transfer of an undertaking must be justified by economic, technical or organisational reasons relating to employment which do not intrinsically relate to that transfer. ( 17 )

38.

By way of derogation from those provisions, Article 5(1) of Directive 2001/23 states that the protection scheme referred to in Articles 3 and 4 does not apply to transfers of undertakings carried out in the circumstances specified within that provision, mentioned in point 28 above, unless Member States provide otherwise. ( 18 )

39.

In that regard, the Court has consistently held that in view of the fact that Article 5(1), in so far as it renders, in principle, inapplicable the system of protection of employees in relation to certain transfers of undertakings, and thus negates the main objective underlying that directive, must necessarily be interpreted strictly. ( 19 )

40.

Further, Article 5(2) of Directive 2001/23 adds that, where Articles 3 and 4 of that directive apply to such a transfer of an undertaking, whether or not the insolvency proceedings have been instituted with a view to the liquidation of the assets of the transferor, a Member State may, subject to certain conditions, not apply certain safeguards referred to in Articles 3 and 4 of that directive.

41.

More specifically, under Article 5(2)(b), in such circumstances, a Member State may provide that the transferee, transferor or person or persons exercising the transferor’s functions, on the one hand, and the representatives of the employees on the other hand may agree alterations, in so far as current law or practice permits, to the employees’ terms and conditions of employment designed to safeguard employment opportunities by ensuring the survival of the undertaking, business or part of the undertaking or business.

42.

In that respect, it is noted that Article 5 of Directive 2001/23, in particular paragraphs 1 and 2, gives Member States a wide discretion in defining the scope of the exceptions laid down. ( 20 ) Conferring on Member States such a discretion is not only in line with the case-law preceding the introduction of Article 5(1) of Directive 2001/23, from which that provision originates, ( 21 ) but is consistent with the wide powers conferred generally on Member States when it comes to implementing and applying Directive 2001/23, which is based on the fact that that directive is intended to achieve only partial harmonisation in this area, and it is not aimed at establishing a uniform level of protection throughout the European Union on the basis of common criteria. ( 22 )

43.

It is in this systematic context that the case-law of the Court should be briefly recalled with regard to the derogation provided for in Article 5(1) of Directive 2001/23.

44.

The introduction of that derogation stems from the development of the Court’s case-law. Although Directive 77/187 did not contain specific provisions in that respect, the Court, in a series of judgments during the 1980s and 1990s, recognised the possibility of derogating from the application of the rules on the individual protection of employees if the undertaking involved in the transfer was the subject of insolvency proceedings. ( 23 )

45.

The principles developed in that case-law were then transposed by the European legislature and codified in Article 5(1) of Directive 2001/23.

46.

The Court interpreted Article 5(1) of Directive 2001/23 for the first time in Smallsteps, cited above, which, as I have said, concerned a transfer of an undertaking following a declaration of insolvency preceded by a pre-pack under Dutch law.

47.

In that judgment, the Court examined whether the pre-pack procedure developed by the case-law in the Netherlands satisfied the three conditions laid down in Article 5(1) of Directive 2001/23, referred to in point 28 above, and could therefore fall within the scope of the derogation provided for in that article.

48.

With regard to the first condition, the Court found that, since, under national law, the pre-pack operation was prepared before the declaration of insolvency but was put into effect after that declaration, that procedure could therefore be covered by the concept of ‘bankruptcy proceedings’ within the meaning of Article 5(1) of Directive 2001/23. ( 24 )

49.

As regards the second condition, the Court held that, in a situation such as that at issue in the main proceedings in that case, the primary objective of the pre-pack operation was the safeguarding of the insolvent undertaking and, accordingly, it could not come within the scope of the derogation provided for in Article 5(1) of Directive 2001/23. The Court added that the mere fact that the ‘pre-pack’ operation may also be aimed at maximising satisfaction of creditors’ collective claims did not make it a procedure instituted with a view to the liquidation of the assets of the transferor within the meaning of Article 5(1) of Directive 2001/23. ( 25 )

50.

As to the third condition, the Court, in the same judgment, ruled out the existence of supervision by a competent public authority over the pre-pack procedure, noting that that procedure was managed by the undertaking’s management and that neither the prospective insolvency administrator nor the prospective supervisory judge appointed by the Rechtbank Midden-Nederland (District Court, Central Netherlands, Netherlands) had formal powers. The Court held that such an approach could defeat almost entirely the purpose of the supervision of the insolvency procedure by the competent public authority. ( 26 )

51.

The approach taken by the Court in Smallsteps was confirmed in subsequent case-law.

52.

In Plessers, the Court – having reiterated the need for a strict interpretation of Article 5(1) of Directive 2001/23 – held that Belgian proceedings for judicial restructuring, used to maintain all or part of the undertaking or its activity, had not been instituted with a view to the liquidation of the asset within the meaning of that provision. In the same judgment, the Court also ruled out the possibility that the procedure had been carried out under the supervision of a competent public authority, since the supervision exercised by the legal representative, responsible for organising the transfer and carrying it out in the name and on behalf of the debtor, has a more restricted scope than the supervision exercised by the corresponding organ in the context of insolvency proceedings. ( 27 )

53.

Similarly, in TMD Friction, the Court held that the transfer of certain continuing business activities by the insolvency administrator in the context of insolvency proceedings under German law, having as its objective ‘not the liquidation of the assets of the transferor, but the continuation of its business activities followed by the transfer of those activities’, do not constitute ‘proceedings instituted with a view to the liquidation of the assets of the transferor, for the purposes of Article 5(1) of that directive’. ( 28 )

54.

It is on the basis of the foregoing analysis that the questions referred by the referring court must be answered, while clarifying the scope of the second and third conditions necessary for the application of the derogation provided for in Article 5(1) of Directive 2001/23, with specific reference to the ‘pre-pack’ mechanism developed under Dutch law.

55.

By its first question, the referring court asks whether Article 5(1) of Directive 2001/23 must be interpreted as meaning that the second condition necessary under that provision for the application of the derogation provided for therein, namely that the transferor is the subject of bankruptcy proceedings or any analogous insolvency proceedings ‘instituted with a view to the liquidation of the assets of the transferor’, must be regarded as satisfied in the case of a transfer of an undertaking carried out in the context of a pre-pack procedure, followed by the bankruptcy of the transferor, in the light of the specific features described in points (i) to (vi) of the question.

56.

The referring court points out that the pre-pack is part of bankruptcy proceedings, which under Dutch law are aimed at the liquidation of the debtor’s assets, and that, in that respect, the insolvency administrator must assess whether the pre-pack is the best method of securing the highest possible return for the joint creditors. It also observes that, in the present case, the pre-pack had to pursue the interest of the joint creditors as if the bankruptcy had already been declared, and that the objective of the measure was to obtain the highest possible return for the creditors. The fact that the pre-pack was designed in such a way as to involve the prospective insolvency administrators and the prospective supervisory judge in the period prior to the bankruptcy was essential for achieving the objective pursued – namely, to obtain the highest possible return for the creditors.

57.

First, I would point out that under Article 5(1) of Directive 2001/23, the derogation provided for therein from the rights conferred on employees by Articles 3 and 4 of that directive applies in the event that the bankruptcy proceedings or any analogous insolvency proceedings that the transferor is the subject of are ‘instituted with a view to the liquidation of the assets of the transferor’.

58.

In its settled case-law, the Court distinguishes between bankruptcy proceedings or any analogous insolvency proceedings ‘instituted with a view to the liquidation of the assets of the transferor’, which fall within the scope of that derogation, and procedures aimed at ensuring the continuation of the undertaking in question, which are excluded from that derogation. ( 29 )

59.

To distinguish between the two types of procedure, the Court has clarified that procedures aimed at ensuring the continuation of the undertaking are those designed to preserve the operational character of the undertaking or of its viable units. ( 30 ) Such procedures are designed or applied specifically in order to preserve the operational character of the undertaking (or of its viable units) in such a way as to make it possible to retain the value which stems from the uninterrupted continuation of its operations. ( 31 ) On the other hand, procedures for the liquidation of assets are concerned solely with maximising the payment of the creditors’ collective claims. ( 32 )

60.

However, it should be noted that, despite that distinction in case-law, there need not be a conflict in insolvency proceedings between the objective of preserving the operational character of the undertaking and that of maximising satisfaction of creditors’ collective claims. This is highlighted by the Court itself when it evokes the possibility of there being some overlap of those two objectives. ( 33 ) It is quite possible, therefore, that a given procedure could pursue both objectives and that, in the context of that procedure, the attainment of one of them is instrumental to achieving the other.

61.

Indeed, preserving the operational character of the insolvent undertaking, or at least its viable units, may potentially result in a higher price during the liquidation by means of the transfer of that undertaking or those units than would be the case with the sale of individual assets. There is no doubt that the value of an undertaking which is still normally operational is, in general, much higher than the value of its assets taken separately and the value which that undertaking would have if its serious financial distress was declared. ( 34 ) Moreover, ensuring business continuity also prevents the dispersion of goodwill – an ‘asset’ with its own economic value – which is among the assets that form the joint security of the creditors. Preserving the operational character of the undertaking may therefore maximise satisfaction of creditors’ claims, as well as having employment and social benefits.

62.

The Court has also made clear that, in the event of an overlap between the two types of objective, the primary objective of a procedure aimed at ensuring the continuation of the undertaking is, in any event, the safeguarding of the undertaking concerned, and that the mere fact that that procedure may also be aimed at maximising satisfaction of creditors’ collective claims does not make it a procedure falling within the concept specific to EU law of a ‘procedure instituted with a view to the liquidation of the assets of the transferor’ within the meaning of Article 5(1) of Directive 2001/23. ( 35 )

63.

The pre-pack procedure, followed by bankruptcy, as developed in the case-law of the Netherlands and outlined by the referring court, is one example of a procedure that pursues both objectives.

64.

In this type of procedure, the sale of the insolvent undertaking (or its units that are still viable) takes place in the context of the liquidation of the insolvent transferor and is aimed at maximising the return that the joint creditors will receive from that liquidation. However, the sale takes place at the end of the pre-pack procedure, which is designed and applied with the objective of and in ways aimed at ensuring, as far as possible, the continuation of the undertaking’s business.

65.

Although, as the referring court has pointed out, the pre-pack is certainly part of the bankruptcy proceedings, the aim of which undoubtedly is to maximise the return for creditors, with its ultimate purpose being, as noted in point (v) of the first question referred for a preliminary ruling, to enable, in the subsequent bankruptcy proceedings, a liquidation arrangement whereby (part of) the undertaking belonging to the assets of the transferor is sold as a going concern so as to obtain the highest possible return for the joint creditors, the fact remains that the pre-pack is intended primarily to ensure the continuation of the undertaking or of its viable units, precisely because that continuation is a prerequisite for maximising the return for all of the creditors. That maximisation is as a result of the continuation of the undertaking. Consequently, the primary objective of the pre-pack procedure is the continuation of the undertaking, which helps to secure the highest possible return for the creditors.

66.

In that respect, I observe that the Court, in paragraph 49 of Smallsteps, pointed out that a ‘pre-pack’ procedure ‘is aimed at preparing the transfer of the undertaking down to its every last detail in order to enable a swift relaunch of the undertaking’s viable units once the insolvency has been declared and in order to avoid the disruption that would result from an abrupt cessation of the undertaking’s activities on the day of the declaration of insolvency, so as to safeguard the value of the undertaking and the employment posts’. It is precisely in view of this characterisation of the pre-pack procedure that the Court held in Smallsteps that a procedure such as the one at issue in the main proceedings in that case did not satisfy the second condition of Article 5(1) of Directive 2001/23.

67.

However, it should be noted that that characterisation of the pre-pack procedure by the Court in paragraph 49 of Smallsteps is not called into question by the referring court, by the Netherlands Government or by any other intervener before the Court.

68.

In the present case, it is apparent from the file and from the parties’ observations that the pre-pack operation at issue in the main proceedings, like the one examined in Smallsteps – and despite the differing interpretation of the referring court – was intended to prepare in detail, before bankruptcy, the sale of the undertaking as a going concern, in order to preserve its value, with a view to maximising the return for creditors and to protect jobs. ( 36 ) Furthermore, the objective of allowing the continuation of the undertaking was actually achieved, given that the New Heiploeg purchased and used the premises of the Former Heiploeg Group, kept its clients and re-employed its staff, who generally continued to do the same job as before, in the same workplace. That operation matches the characterisation given by the Court in paragraph 49 of Smallsteps and referred to in point 66 above.

69.

The arguments put forward by the referring court in the first question do not, in my view, call into question that characterisation of the pre-pack operation, or in the present case, attribute to the operation a purpose that – in the light of the principles set out in points 58 to 62 above – would bring it within the scope of the derogation provided for in Article 5(1) of Directive 2001/23.

70.

The fact that the transferor is effectively insolvent (point (i) of the first question referred for a preliminary ruling) is, in my view, irrelevant, since that fact does not affect the purpose of the procedure. In that respect, it is observed that the failure of the transferor is also a premiss shared with Article 5(2) of the directive, which clearly allows the existence of insolvency proceedings – justified by the failure of the undertaking – even where the purpose is not liquidation. ( 37 )

71.

The same can be said for the pursuit of the interests of the creditors (the subject of the arguments set out in points (ii), (iv), (v) and (vi) of the first question referred by the Hoge Raad der Nederlanden (Supreme Court of the Netherlands)). As observed in points 60 to 62 above, the fact that a procedure pursues that purpose does not prevent it, in the event of overlapping objectives, from being characterised as a procedure aimed at the continuation of the undertaking, if that procedure pursues that objective first – or in other words, if that objective is the primary objective of that procedure. ( 38 )

72.

In my view, the fact that the transfer takes place only after the declaration of bankruptcy (point (iii) of the first question referred for a preliminary ruling), and that, unlike the Smallsteps case, the negotiations for the transfer of the Former Heiploeg did not take place with a related undertaking, likewise have no real bearing on the aim of the procedure. I consider this last aspect to be entirely neutral with regard to the purpose of the insolvency proceedings, which may well be to preserve business continuity, even where the transferee is not part of the same group as the transferor. ( 39 )

73.

To conclude, in the light of all the foregoing considerations, and in line with the approach adopted by the Court in Smallsteps and in the subsequent case-law, based on a strict interpretation of Article 5(1) of Directive 2001/23, I consider that the pre-pack procedure under Dutch law, as described by the referring court, constitutes a procedure that does not satisfy the second condition laid down in that provision and is therefore excluded from the scope of the derogation provided for therein.

74.

However, several other important points need to be made.

75.

In the first place, there is no doubt that pre-bankruptcy procedures such as the pre-pack procedure, in so far as they are aimed at preventing and avoiding – or at least reducing – a loss in value and job losses resulting from the total cessation of the undertaking’s activity as a result of its bankruptcy, play an important role in society and are therefore to be encouraged. ( 40 ) It is necessary, therefore, to avoid an overly rigid approach which would render such procedures ineffective in practice. With this in mind, it is necessary to address the question of the possible dissuasive effect on the use of a procedure such as the pre-pack, which in some cases may result from an interpretation of the provision in question that, in the event of the transfer of an insolvent undertaking or of certain units of that undertaking, requires the transferee to keep on the entire workforce of the insolvent undertaking.

76.

Indeed, the risk – highlighted in the observations made by several interveners before the Court and in the doctrine of the Netherlands – is that, in certain situations, the application of the provision in question in the present case may actually run counter to the general objective of protecting employees pursued by the directive itself, as explained in point 32 et seq. above. In effect, if – for economic, technical or organisational reasons – the reemployment of the entire workforce by the transferee of the undertaking in difficulty (or some of its units) is a decisive factor preventing the continuation of the undertaking’s business, making such reemployment a mandatory requirement would be counterproductive for the interests of those employees. In other words, if the undertaking is destined to fail and the possibility of its (at least partial) continuation objectively presupposes a reduction in the workforce or a change in the working conditions of the undertaking’s employees, it is better to reemploy only part of the workforce and on less favourable conditions, rather than having a complete bankruptcy of the undertaking leading to a total loss of employment. ( 41 )

77.

In this respect, however, it is important to bear in mind that the scheme of Directive 2001/23 contains various elements that ensure sufficient flexibility to address this issue.

78.

On the one hand, it should be noted that, although pursuant to Article 4(1) of Directive 2001/23, the transfer of an undertaking cannot in itself constitute grounds for dismissal by the transferor or the transferee, it is nevertheless expressly stated in the second sentence of that article that this does not stand in the way of ‘dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce’. The EU legislature has thus taken into account the needs of the transferee of the undertaking linked to any surplus employees, while placing an obligation on the transferee to demonstrate that dismissals which occur in the context of the transfer – which must, of course, take place in compliance with all the guarantees laid down by the relevant provisions of EU or national law ( 42 ) – are for economic, technical or organisational reasons. ( 43 )

79.

I would also add that, although the mere wish to reduce the costs of recovery for an undertaking or to avert or limit financial problems therefore cannot be acceptable as a ground for dismissal within the meaning of Article 4(1) of Directive 2001/23, ( 44 ) and although the fact that an undertaking is declared to be in critical difficulties cannot in every case and systematically constitute an economic, technical or organisational reason within the meaning of that provision, ( 45 ) it cannot be ruled out, in my opinion, that substantiated reasons linked to the need to ensure the survival of the undertaking, business or part thereof can be characterised as technical, economic or organisational reasons within the meaning of that provision.

80.

On the other hand, it is expressly stated in Article 5(2)(b) of Directive 2001/23 that where Articles 3 and 4 of that directive apply to a transfer during insolvency proceedings which have been opened in relation to a transferor (whether or not those proceedings have been instituted with a view to the liquidation of the assets of the transferor), Member States may provide that the transferee, transferor or person or persons exercising the transferor’s functions, on the one hand, and the representatives of the employees on the other hand may agree alterations, in so far as current law or practice permits, to the employees’ terms and conditions of employment designed to safeguard employment opportunities by ensuring the survival of the undertaking, business or part of the undertaking or business.

81.

It follows that, in the context of the wide margin of discretion left to the Member States in defining the scope of the exceptions provided for in Article 5 of Directive 2001/23 referred to in point 42 above, a Member State is free, within the limits laid down in that article, to regulate by legislative means a practice such as the pre-pack, determining, in compliance with that provision which expressly provides for the involvement of the representatives of the employees, the consequences on employment resulting from the use of that practice. In the present case, the Kingdom of the Netherlands has not (yet) used the discretion conferred on it by those provisions. ( 46 )

82.

I would also like to point out that, to my mind, a derogating scheme such as the one provided for in Article 5(2) of Directive 2001/23 must necessarily have a basis in legislation, since it is not sufficient that such a scheme should originate from a practice derived from case-law.

83.

In the first place, this is due to the types of issue under discussion. These are fundamental social rights of workers, the contemplation of which – partly with a view to reconciling potentially conflicting interests – must be entrusted to organs that are democratically legitimised. In addition, that conclusion responds to an objective need for legal certainty, which requires rules to be clear and precise, in order to ensure the accessibility of the legal basis and the predictability of legal situations and relationships falling within the scope of EU law. ( 47 ) Lastly, a legislative act seems necessary given the nature of the discretion conferred on Member States: this is a power of derogation – which may be exercised with a view to the compression of employee protections – from a general framework provided by EU legislation. ( 48 )

84.

In the second place, it is worth dwelling briefly on the expression ‘subject to determination by the referring court’ in paragraph 50 of Smallsteps, which was highlighted by the referring court and which has been interpreted very differently in the Netherlands, giving rise to legal uncertainty. From that expression, the referring court, as well as several courts ruling on the merits and elements of doctrine in the Netherlands, concludes that the court must, in any event, assess whether the case before it concerns a pre-pack such as the one at issue in Smallsteps or another type of pre-pack, to which that judgment would not apply. ( 49 )

85.

On that subject, it should be recalled that, according to the settled case-law of the Court, the system of cooperation established by Article 267 TFEU is based on a clear division of responsibilities between the national courts and the Court of Justice. In proceedings instituted under that provision, the courts of the Member States are responsible for reconstructing the facts and interpreting the national rules. However, the Court does have jurisdiction to provide the national court with all the guidance as to the interpretation of EU law and guidance based on the documents relating to the main proceedings and on the written and oral observations which have been submitted to it, in order to enable the national court to give judgment. ( 50 )

86.

It is from that point of view that the expression in paragraph 50 of Smallsteps must be interpreted, as must other expressions used in that judgment. ( 51 )

87.

Nevertheless, it must be said that in paragraph 49 of that judgment, the Court – as observed in points 66 and 67 above – described the characteristics of the pre-pack procedure derived from Dutch case-law, in the light of which it concluded that such procedures do not come within the scope of the second condition laid down in Article 5(1) of Directive 2001/23. In my view, it follows that the determination by the referring court that the Court mentions in paragraph 50 of Smallsteps does not relate to the possibility for the referring court to establish, on a case-by-case basis, whether the purpose of the pre-pack is liquidation within the meaning of Article 5(1) of Directive 2001/23. Rather, that expression refers to the determination by the referring court that the procedure at issue in the case before it coincides with the one described in paragraph 49 of Smallsteps, ( 52 ) which, in the context of a reference for a preliminary ruling, as noted in point 85 above, only the national court is able to do since it makes all the findings of fact.

88.

Moreover, I believe that an interpretation of Article 5(1) of Directive 2001/23, in which the national court is empowered, in the context of a dispute, to determine on a case-by-case basis whether or not the purpose of the pre-pack procedure is liquidation would lead to an unacceptable degree of legal uncertainty, thereby rendering the pre-pack procedure impracticable. However, I believe it is necessary to provide the relevant operators with a framework that will enable them to assess on a case-by-case basis, ex ante, on the basis of clear and certain criteria, the consequences and costs of using such a procedure.

89.

It follows from all the foregoing considerations that, in my view, the answer to the first question referred for a preliminary ruling must be that Article 5(1) of Directive 2001/23 must be interpreted in the sense that the second condition laid down in that provision for derogating from the safeguarding of employees’ rights under Articles 3 and 4 of that directive is not satisfied by a pre-pack operation, followed by bankruptcy, in which the transfer of the undertaking or its viable units is prepared in minute detail prior to the declaration of insolvency in order to enable a swift relaunch of the undertaking or its viable units once the insolvency has been declared and in order to avoid the disruption that would result from an abrupt cessation of the undertaking’s activities on the day of the declaration of insolvency, so as to safeguard the value of the undertaking and the employment posts. The fact that the pre-pack is also aimed at maximising the proceeds of the transfer for all the creditors of the undertaking in question and that the insolvency of the transferor is inevitable is irrelevant in that respect. That interpretation is without prejudice to the possibility, in compliance with all the guarantees laid down by the relevant provisions, of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce within the meaning of Article 4(1) of Directive 2001/23. In addition, the Member States remain free to enact pre-pack regulations in accordance with the conditions laid down in Article 5(2) of that directive.

90.

By its second question, the referring court asks whether Article 5(1) of Directive 2001/23 must be interpreted as meaning that the third condition necessary under that provision for the application of the derogation provided for therein – namely that the bankruptcy proceedings or any analogous insolvency proceedings take place ‘under the supervision of a competent public authority’ – is fulfilled if the transfer of the undertaking or part of the undertaking is prepared in a pre-pack prior to the declaration of bankruptcy and is carried out only after the declaration of bankruptcy, in the light of the specific elements set out in points (i) to (vi) of the question.

91.

Considering my proposed answer to the first question referred for a preliminary ruling, from which it can be inferred that, in my view, the pre-pack procedure does not fulfil the second condition laid down in Article 5(1) of Directive 2001/23, I believe there is no need to answer the second question. It is therefore merely ad abundantiam that I make the following observations.

92.

First, I note that, even in the present case, the points made by the Court in paragraphs 53, 54 and 55, first sentence, of Smallsteps seem to apply: namely, the absence of formal powers under the law on the part of the prospective insolvency administrator and the prospective supervisory judge – as also pointed out by the referring court in point (i) of the second question – and the fact that in practice, it is the undertaking’s management which conducts the negotiations and adopts the decisions concerning the sale. ( 53 )

93.

As to the circumstances inferred by the referring court in points (ii) and (vi) of the second question, relating to the interests by which the prospective insolvency administrator must be guided in the preliminary phase, and the objectivity and independence that the prospective insolvency administrator and supervisory judge are required to have, the fact remains that those organs do not have statutory powers. In that respect, I note that, for the third condition to be satisfied, it is not so important to identify the interests that those organs must pursue or the requirements that they must have, as to identify the actual powers at their disposal.

94.

As regards the circumstance inferred in point (iii) of the second question – namely that ‘the duties of the prospective insolvency administrator and the prospective Rechter-commissaris do not differ from those of the insolvency administrator and the Rechter-commissaris in a bankruptcy’ – that seems to have no bearing on the absence of statutory powers in respect of the organs appointed during the stage prior to the declaration of bankruptcy.

95.

As for the power of the Rechtbank (District Court) to appoint persons other than the prospective insolvency administrator and the prospective supervisory judge in the context of the subsequent bankruptcy proceedings – a circumstance inferred by the referring court in point (v) of the second question – it is sufficient, in my view, to note that it does not concern the effectiveness of the powers of the prospective insolvency administrator and the prospective supervisory judge, but is a circumstance that could potentially arise after the declaration of bankruptcy.

96.

On the basis of all the foregoing, I propose the following answers to the questions referred for a preliminary ruling by the Hoge Raad der Nederlanden (Supreme Court of the Netherlands):

Article 5(1) of Council Directive 2001/23/EC of 12 March 2001 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 undertakings or businesses must be interpreted as meaning that the second condition laid down in that provision for derogating from the safeguarding of employees’ rights under Articles 3 and 4 of that directive is not satisfied by a pre-pack operation, followed by bankruptcy, in which the transfer of the undertaking or its viable units is prepared in minute detail prior to the declaration of insolvency in order to enable a swift relaunch of the undertaking or its viable units once the insolvency has been declared and in order to avoid the disruption that would result from an abrupt cessation of the undertaking’s activities on the day of the declaration of insolvency, so as to safeguard the value of the undertaking and the employment posts. The fact that the pre-pack operation is also aimed at maximising the proceeds of the transfer for all the creditors of the undertaking in question and that the insolvency of the transferor is inevitable is irrelevant in that respect. That interpretation is without prejudice to the possibility, in compliance with all the guarantees laid down by the relevant provisions, of dismissals that may take place for economic, technical or organisational reasons entailing changes in the workforce within the meaning of Article 4(1) of Directive 2001/23. In addition, the Member States remain free to enact pre-pack regulations in accordance with the conditions laid down in Article 5(2) of that directive.