Ospelt and Another (Case C-452/01) Before the Court of Justice of the European Communities ECJ

Transcription

1 Ospelt and Another (Case C-452/01) Before the Court of Justice of the European Communities ECJ Presiding, RodrÍguez Iglesias P.; Puissochet ( Rapporteur), Wathelet, Schintgen and Timmermans PP.C.; Gulmann, Edward, La Pergola, Jann, Skouris, Macken, Colneric, von Bahr, Cunha Rodrigues and Rosas JJ.; Leendert Geelhoed, Advocate General September 23, 2003 Agriculture; Discrimination; EEA; Free movement of capital; Land purchase H1 Capital--acquisition of immovable property--prior authorisation procedure-- legal person from EEA State purchasing agricultural land in Member State-- applicable rules-- Arts 73b to 73g (now Arts 56 to 60) EC-- Arts 40 of and Annex XII EEA--ECJ jurisdiction--uniform interpretation of EC and EEA rules--prior authorisation procedure amounting to restriction on free movement of capital-- national court to determine whether EEA nationals discriminated against-- justification--public interest objective of sustaining and developing viable agriculture on basis of social and land planning considerations--objectives consistent with CAP--proportionality--requirement that land purchaser cultivate land himself and be resident there going beyond necessary--restricting acquisition by those lacking resources to purchase and by legal persons--less restrictive requirements adequate. H2 Reference from Austria by the Verwaltungsgerichtshof (Supreme Administrative Court) under Art.234 EC. H3 O, a Liechtenstein national, owned land in the Land of Vorarlberg, Austria. Most of the plots making up that property were agricultural plots which had been leased to farmers. In 1998, the entire property was notarially authenticated with the purpose of transferring it to SWF (the Foundation), which was established in Liechtenstein and whose first beneficiary was O. The notarial act sought to prevent any division caused through inheritance of the family property. The

2 Foundation stated that its intention was to continue leasing the agricultural plots to the same farmers as before. An application was made to the competent authority of the Land of Vorarlberg for the prior authorisation required under Para.4(1) of the Vorarlberg Land Transfer Law (VGVG). It was refused on the ground that the conditions for acquisition of land by foreigners had not been fulfilled. O and the Foundation appealed. The appeal authority also refused to grant the prior authorisation sought. It noted that Para.5(1)(a) of the VGVG required that the acquirer himself cultivated *1126 the plot as part of an agricultural establishment and also had his place of residence there or, where that was not the case, that the transfer was not contrary to the preservation and creation of an economically healthy, medium and small-scale agricultural estate. It then found that neither the Foundation nor O pursued an agricultural activity or intended to do so in the future and that the transaction was contrary to the publicinterest aims of the VGVG in relation to preserving and creating viable medium and small-scale agricultural holdings. O and the Foundation applied for judicial review. The referring court sought a preliminary ruling as to whether rules such as those laid down by the VGVG which made transactions relating to agricultural and forestry plots subject to administrative controls could, in the event that Arts 6, 73b to 73d, 73f and 73g (now Arts 12 and 56 to 60) EC did not preclude their application to such transactions as between nationals of Member States, also be accepted in respect of transactions between nationals of Member States and those of a third country under those Articles. Held: Applicability of rules on free movement of capital H4 Although Art.222 (now Art.295) EC did not call into question the Member States' right to establish a system for the acquisition of immovable property which laid down measures specific to transactions relating to agricultural and forestry plots, such a system remained subject to the fundamental rules of Community law, including those of non-discrimination, freedom of establishment and free movement of capital. In particular, the scope of the national measures governing the acquisition of immovable property should be assessed in the light of those provisions of the Treaty which related to the movement of capital. [24] Fearon (182/83): [1984] E.C.R. 3677; [1985] 2 C.M.L.R. 228; Konle (C-302/97): [1999] E.C.R. I-3099; [2000] 2 C.M.L.R. 963; Reisch and Others (C 515, & /99):[2002] E.C.R. I-2157; [2004] 1 C.M.L.R. 44, followed. Applicability of EEA Agreement and ECJ jurisdiction H5 Article 40 of and Annex XII EEA were applicable to the dispute in the main proceedings which related to a transaction between nationals of States party to that Agreement. The Court might give an interpretation of them where a reference was made by a court of a Member State with regard to the scope within that State of an agreement which formed an integral part of the Community legal system. [27]-[28] Andersson and Wåkerås-Andersson (C-321/97): [1999] E.C.R. I-3551; [2000] 2 C.M.L.R. 191; Salzmann (C-300/01): [2004] E.C.R. I-4899; [2004] 1 C.M.L.R. 29, followed. Uniform interpretation of EC and EEA rules

3 H6 The rules laid down in Art.40 and Annex XII EEA prohibiting restrictions on the movement of capital and discrimination, so far as concerned relations between the States party to the EEA Agreement, irrespective of whether they were members of the Community or members of EFTA, were identical to those under Community *1127 law with regard to relations between the Member States. National measures governing the acquisition of agricultural and forestry plots were therefore no more exempt from the abovementioned rules than under Community law. Furthermore, one of the principal aims of the EEA Agreement was to provide for the fullest possible realisation of the free movement of goods, persons, services and capital within the whole European Economic Area, so that the internal market established within the European Union was extended to the EFTA States. Several provisions of the Agreement were intended to ensure as uniform an interpretation as possible thereof throughout the EEA. It was for the Court to ensure that the rules of the EEA Agreement which were identical in substance to those of the Treaty were interpreted uniformly within the Member States. It would run counter to that objective as to uniformity of application of the rules relating to free movement of capital within the EEA for a State party to that Agreement to be able, after its accession to the European Union, to maintain legislation which restricted that freedom vis-à-vis another State party to that Agreement by basing itself on Art.73c (now Art.57) EC. Thus, since the date on which the EEA Agreement entered into force in respect of Liechtenstein, and in the sectors covered thereby, Member States might no longer invoke Art.73c visà-vis Liechtenstein. [29]-[31] Opinion 1/92: [1992] E.C.R. I-2821; [1992] 2 C.M.L.R. 217, followed. Justification of restriction on free movement of capital H7 Measures such as those in issue in the main proceedings which entailed, by their very purpose, a restriction on the free movement of capital might nevertheless be permitted provided that, first, they pursued in a nondiscriminatory way an objective in the public interest and, secondly, they were appropriate for ensuring that the aim pursued was achieved and did not go beyond what was necessary for that purpose. Furthermore, where the granting of prior authorisation was concerned, such measures should be based on objective criteria which were known in advance and which allowed all persons affected by a restrictive measure of that type to have a legal remedy available to them. [34] Konle (C-302/97): [1999] E.C.R. I-3099; [2000] 2 C.M.L.R. 963; Salzmann (C- 300/01):[2004] E.C.R. I-4899; [2004] 1 C.M.L.R. 29; Analir and Others (C- 205/99): [2001] E.C.R. I-1271, followed. Condition as to non-discrimination H8 (a) Under the VGVG, the rules on the acquisition of land by foreigners did not apply, where such was clearly required by the law of the European Union, to persons and companies carrying out investments in immovable property and other transactions involving the free movement of capital. However, those provisions referred explicitly neither to the EEA Agreement nor to the exercise of the free movement of capital by persons resident in States party to that Agreement. They thus appeared to restrict treatment as nationals only to residents of Member States. It was for the referring court to determine whether

4 that legislation, in the light of the other provisions of the VGVG, might be interpreted in a manner compatible with Art.40 EEA. [35]-[36] Reisch and Others (C 515, & /99): [2002] E.C.R. I-2157; [2004] 1 C.M.L.R. 44, followed *1128. H9 (b) As regards the requirement as to residence laid down in the VGVG, it was established within the framework of legislation concerning the ownership of agricultural land which was intended to achieve the specific objectives of preserving agricultural communities and viable farms. It did not make any distinction between its own nationals and nationals of other Member States of the Community or of States party to the EEA Agreement. It was therefore not, a priori, discriminatory in nature. [37] Fearon (182/83): [1984] E.C.R. 3677; [1985] 2 C.M.L.R. 228, followed. Public interest H10 The VGVG pursued public-interest objectives which were such as to justify restrictions on the free movement of capital. Preserving agricultural communities, maintaining a distribution of land ownership which allowed the development of viable farms and sympathetic management of green spaces and the countryside as well as encouraging a reasonable use of the available land by resisting pressure on land, and preventing natural disasters were social objectives which were consistent with the objectives of the common agricultural policy (Art.39(1)(b) (now Art.33(1)(b)) EC and its proper implementation ( Art.33(2)(a) EC). [38]-[40] Proportionality of requirement of prior authorisation H11 (a) A system of prior authorisation might, in certain circumstances, be necessary and proportionate to the aims pursued, if the same objectives could not be attained by less restrictive measures, in particular by a system of declarations. That was the case where national authorities sought to control the development of agricultural land ownership by laying down objectives such as those in the VGVG. The objective of sustaining and developing viable agriculture on the basis of social and land planning considerations entailed keeping land intended for agriculture in such use and continuing to make use of it under appropriate conditions. In that context, prior supervision by the competent authorities did not merely reflect a need for information but was intended to ensure that the transfer of agricultural land would not lead to their ceasing to be used as intended or to a use which might be incompatible with their long-term agricultural use. Any supervision by national authorities which was subsequent to transfer of such land would not provide the same guarantee. It could not prevent a transfer which ran counter to that function of continued agricultural use, and would thus not be appropriate to the objective. Furthermore, action taken a posteriori, such as measures to annul the transfer, sanctions or evictions, could only be decided by the courts and would lead to delays inconsistent with the requirements of continuity of use and sound land management. Legal certainty, which was of fundamental importance for any system of land transfer, would thus be undermined. [41]-[45] Sanz de Lera and Others (C 163 & 165 & 250/94):[1995] E.C.R. I-4821; [1996] 1 C.M.L.R. 631; Konle (C-302/97):[1999] E.C.R. I-3099; [2000] 2 C.M.L.R. 963;

5 Commission v France (C-483/99):[2002] E.C.R. I-4781; [2002] 2 C.M.L.R. 49, followed *1129. Reisch and Others (C 515, & /99):[2002] E.C.R. I-2157; [2004] 1 C.M.L.R. 44, distinguished. H12 (b) None the less, the rules and the substantive conditions laid down by the prior authorisation mechanism chosen should not go beyond what was necessary in order to achieve the objective pursued. The requirement in Para.5(1)(a) of the VGVG that the acquirer himself should cultivate the plot as part of an agricultural establishment and have his place of residence there went beyond what was necessary to achieve the public-interest objectives pursued and was, to that extent, incompatible with the free movement of capital. Where the land concerned by a transfer was, at the moment of sale, farmed by a tenant farmer rather than the landowner, such a condition precluded a transfer to a new owner who would additionally not farm the property and who would not be resident on the land but who had undertaken to continue to have the land farmed by the same tenant. By reserving the possibility of acquiring and farming property to farmers who had the resources to own the land concerned, that condition thus reduced the possibility of leasing the land to farmers who did not have such resources. It had the further effect of precluding legal persons, including those whose object was farming, from acquiring farmland. It therefore constituted an obstacle to planned transactions which did not in themselves affect the agricultural use and the continued farming of the land by farmers or legal persons such as farming associations. Other measures which were less restrictive of the free movement of capital could contribute towards achievement of the same objective of maintaining a viable farming community. The transfer of agricultural land to a legal person could, for instance, be made subject to particular obligations, such as that it be let on a long lease. Mechanisms could also be put in place giving a right of first refusal to tenants which would make it possible, where the latter did not acquire the property, for title to be acquired by nonfarming owners who would undertake to keep the land in agricultural use. [46]- [52] Commission v France (C-483/99): [2002] E.C.R. I-4781; [2002] 2 C.M.L.R. 49, followed. H13 (c) However, Para.5(1)(a) of the VGVG provided that acquisition might be permitted, even where the condition of owner-cultivation and residence was not met, when such acquisition was not contrary to the preservation and creation of an economically healthy, medium and small-scale agricultural estate. If, in view of that provision, the national authorities were to interpret the VGVG as meaning that prior authorisation might be granted, depending on the circumstances, to persons who were not farmers resident on the land concerned but who could give the necessary assurances that the land would be kept in agricultural use, the VGVG would not fetter the free movement of capital beyond what was necessary in order to achieve its objectives. [53] H14 Cases referred to in the judgement: 1. Andersson and Wåkerås-Andersson v Sweden (C-321/97), June 15, 1999:

6 [1999] E.C.R. I-3551; [2000] 2 C.M.L.R Asociacion Profesional de Empresas Navieras de Lineas Regulares (ANALIR) and Others (C-205/99), February 20, 2001: [2001] E.C.R. I-1271 * Commission of the European Communities v France, Re Golden Shares (C- 483/99), June 4, 2002: [2002] E.C.R. I-4781; [2002] 2 C.M.L.R Draft Treaty on a European Economic Area (No.2) (Opinion 1/92), April 10, 1992: [1992] E.C.R. I-2821; [1992] 2 C.M.L.R Konle v Austria (C-302/97), June 1, 1999: [1999] E.C.R. I-3099; [2000] 2 C.M.L.R Reisch and Others v Burgermeister der Landeshauptstadt Salzburg (C 515, & /99), March 5, 2002: [2002] E.C.R. I-2157; [2004] 1 C.M.L.R Robert Fearon & Co Limited v Irish Land Commission (182/83), November 6, 1984: [1984] E.C.R. 3677; [1985] 2 C.M.L.R Salzmann (C-300/01), May 15, 2003: [2004] E.C.R. I-4899; [2004] 1 C.M.L.R Sanz de Lera and Others (C 163 & 165 & 250/94), December 14, 1995: [1995] E.C.R. I-4821; [1996] 1 C.M.L.R Trummer and Mayer's Application to Register Land (C-222/97), March 16, 1999: [1999] E.C.R. I-1661; [2000] 3 C.M.L.R H15 Further cases referred to by the Advocate General: Before the European Courts: 11. Casati, Re ( 203/80), November 11, 1981: [1981] E.C.R. 2595; [1982] 1 C.M.L.R Commission of the European Communities v France (C-345/99 & C-40/00), June 14, 2001: [2001] E.C.R. I Commission of the European Communities v United Kingdom, Re Ultra Heat Treated Milk (124/81), February 8, 1983: [1983] E.C.R. 203; [1983] 2 C.M.L.R Denkavit Futtermittel v Finanzamt Warendorf (139/77), June 13, 1978: [1978] E.C.R. 1317; [1971] 1 C.M.L.R Gebhard v Consiglio dell'ordine degli Avvocati e Procuratori di Milano (C- 55/94), November 30, 1995: [1995] E.C.R. I-4165; [1996] 1 C.M.L.R Giloy v Hauptzollamt Frankfurt am Main-Ost (C-130/95), July 17, 1997: [1997] E.C.R. I Jokela and Pitkäranta ( C 9 & 118/97), October 22, 1998: [1998] E.C.R. I Land Nordrhein-Westfalen v Pokrzeptowicz-Meyer (C-162/00), January 29, 2002: [2002] E.C.R. I-1049; [2002] 2 C.M.L.R Luisi and Carbone v Ministero del Tesoro (286/82 & 26/83), January 31, 1984: [1984] E.C.R. 377; [1985] 3 C.M.L.R Metropol Treuhand v Finanzlandesdirektion für Steiermark and Stadler v Finanzlandesdirektion für Vorarlberg ( C-409/99), January 8, 2002: [2002] E.C.R. I Ministerio Fiscal v Bordessa and Others (C 358 & 416/93), February 23,

7 1995: [1995] E.C.R. I-361; [1996] 2 C.M.L.R Opel Austria GmbH v Council of Ministers of the European Communities (T- 115/94), January 22, 1997: [1997] E.C.R. II-39; [1997] 1 C.M.L.R. 733 Before the EFTA courts: 23. State Debt Management Agency v Íslandsbanki-FBA (E-1/00), July 14, 2000: [2000] EFTA Court Rep. 8 *1131 H16 Representation C Hopp, Rechtsanwalt, for Margarethe Ospelt and Schlössle Weissenberg Familienstiftung. H Dossi, and, in the oral proceedings only, P Kustor and H Kraft, acting as Agents, for the Austrian Government. A Entner-Koch, acting as Agent, for the Government of the Principality of Liechtenstein. I Holten, acting as Agent, for the Norwegian Government. G Braun and M Patakia, acting as Agents, for the Commission of the European Communities. E Wright and D Sif Tynes, acting as Agents, for the EFTA Surveillance Authority. OPINION AG1 [FN1]In this case the Verwaltungsgerichtshof has referred for a preliminary ruling two questions concerning the interpretation of Arts 12 and 56 et seq. of the EC Treaty. In particular, the questions relate to a provision of national law which subjects the transfer of agricultural and forestry plots to restrictions imposed by the administrative authorities in the interest of preserving a small-scale agricultural structure. FN1 Opinion of AG Geelhoed, delivered on April 10, AG2 The questions referred give the Court an opportunity to refine its case law on the conditions on the acquisition of real property which are laid down in national legislation. In this case law, and in particular in Konle [FN2] and Reisch and Others, [FN3] the Court set the bounds within which a Member State may lay down such conditions. In that respect the Court took as a basis the Treaty provisions relating to free movement of capital as laid down in Arts 56 to 60 EC. Both judgments concerned national measures adopted in the interests of regional planning. A different public interest in the field of agriculture is at issue in this case. FN2 Konle v Republik Österreich ( C-302/97): [1999] E.C.R. I-3099; [2000] 2 C.M.L.R FN3 Hans Reisch and Others (C 515 & /99) v Bürgermeister der Landeshauptstadt Salzburg and Grundverkehrsbeauftragter des Landes

8 Salzburg and Anton Lassacher and Others (C & 526/99) v Grundverkehrsbeauftragter des Landes Salzburg and Grundverkehrslandeskommission des Landes Salzburg [2002] E.C.R. I-2157; [2004] 1 C.M.L.R. 44. AG3 Another particular element is also relevant in this case. The appellants in the main proceedings are from the Principality of Liechtenstein. The question which now arises is whether nationals of a country which is party to the Agreement on the European Economic Area [FN4] (hereinafter: the EEA Agreement) but is not a Member State of the European Union may derive rights from this agreement in a case in which the EC Treaty provides for an exception to the free movement of capital in respect of movement of capital to or from third countries. FN4 [1994] O.J. L1/1. II-- Legal framework A-- European law AG4 Article 56(1) EC provides as follows: Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third countries shall be prohibited. AG5 *1132 Article 57(1) EC provides: The provisions of Art.56 shall be without prejudice to the application to third countries of any restrictions which exist on December 31, 1993 under national or Community law adopted in respect of the movement of capital to or from third countries involving direct investment-- including in real estate--establishment, the provision of financial services or the admission of securities to capital markets. AG6 Article 40 of the Agreement on the European Economic Area provides as follows: Within the framework of the provisions of this Agreement, there shall be no restrictions between the Contracting Parties on the movement of capital belonging to persons resident in EC Member States or EFTA States and no discrimination based on the nationality or on the place of residence of the parties or on the place where such capital is invested. Annex XII contains the provisions necessary to implement this Article. AG7 The abovementioned Annex XII declares applicable Council Directive 88/361 of June 24, 1988 for the implementation of Art.67 of the Treaty. [FN5] It is evident from the nomenclature of capital movements in Annex I to this agreement that capital movements cover transactions by which persons not resident invest in real property in the territory of a Member State. FN5 [1988] O.J. L178/5. AG8 Finally, I cite Art.6 of the EEA Agreement: Without prejudice to future developments of case law, the provisions of this Agreement, in so far as they are

9 identical in substance to corresponding rules of the Treaty establishing the European Economic Community and the Treaty establishing the European Coal and Steel Community and to acts adopted in application of these two Treaties, shall, in their implementation and application, be interpreted in conformity with the relevant rulings of the Court of Justice of the European Communities. B-- National law AG9 Under Para.VII of the Austrian Bundes-Verfassungsgesetznovelle 1974, [FN6] the laws of the Länder are subject to rules whereby transactions in agricultural and forestry plots are subject to restrictions imposed by the administrative authorities in the public interest of preserving, strengthening or creating a viable farming community. The Grundverkehrsgesetz of the Land of Vorarlberg of September 23, 1993 [FN7] (hereinafter: the VGVG) applies in respect of the present case. FN6 BGBl. No 444. FN7 At the time the order for reference was made the VGVG was in force in the version of the Novellen Vorarlberger LGBl. 1995/11, 1996/9 and 1997/85 and of Kundmachung Vorarlberger LGBl. 1997/21. AG10 Paragraph 1(1) of the VGVG provides: Dealing in the following shall be subject to the provisions of this Law: (a) agricultural and forestry plots, (b) building plots, (c) plots to which foreigners acquire title. AG11 Under Paragraph 1(3), the purpose of the VGVG is to: (a) preserve agricultural and forestry plots of family farming establishments in the interest of improving their structural circumstances in accordance with the natural factors prevailing in the Land, (...) (c) preserve the broadest possible, socially sustainable dispersion of land ownership in accordance with the size of the Land *1133, and (d) subject to restrictions the acquisition of land by foreigners who do not enjoy the same treatment as Austrians by virtue of the law of the European Union. AG12 Paragraph 3 of the VGVG provides, in so far as it is relevant: Where such equal treatment is clearly required by the law of the European Union, the rules on the acquisition of land by foreigners shall not, subject to subpara. (2), apply to (...) (e) persons and companies carrying out direct investments, investments in immovable property and other transactions involving the movement of capital. AG13 Paragraph 4(1) of the VGVG provides: The transfer of agricultural or forestry plots shall require authorisation from the land transfer authority where it relates to one of the following rights: (a) ownership, (b) (...) rights which permit the erection of building structures on the land of third parties,

10 (c) the right of use or right of usufruct, (d) the right of lien over agricultural establishments, (...). AG14 Paragraph 5 of the VGVG provides as follows: (1) Acquisition of title may be authorised only (a) --in the case of agricultural plots--where it is consistent with the preservation of an effective farming community and the acquirer himself cultivates the plot as part of an agricultural establishment and also has his permanent place of residence in the establishment or, where that is not possible, it is not contrary to the preservation and creation of an economically healthy, medium and smallscale agricultural estate, (b) --in the case of forestry plots--where it is not contrary to the interest of forestry in particular and to the general economic interest, (...). (2) The conditions laid down in subparagraph (1) are not satisfied in particular where (a) the plot would be withdrawn from agricultural or forestry use without sufficient reason, (b) the consideration exceeds considerably the price of the plot customary in the location concerned, (c) it must be concluded that the plot is being acquired solely to form or extend a large estate or hunting areas; (d) it must be concluded that cultivation by the acquirer himself is not secured in the long term or the acquirer does not have the specialist knowledge necessary to cultivate the plot himself; *1134 (e) the favourable land ownership arrangement arrived at in the course of agricultural proceedings would be destroyed again without compelling reason. (...) AG15 Paragraph 11 of the VGVG contains exceptions to the authorisation requirement in respect of a number of types of land acquisition, in particular between family members and in the event of succession or testamentary gift. AG16 Under Para.25 of the VGVG, a deed of transfer is to become invalid with retrospective effect if authorisation is refused. III-- Facts AG17 The first appellant in the main proceedings, Margarete Ospelt (hereinafter: the first appellant), is the registered owner of immovable property with a surface area of 43,532m2, situated in Austria. She possesses nationality of the Principality of Liechtenstein. AG18 The immovable property covers a large number of plot numbers, the majority of which are designated open-space agricultural land in the land development plan of the Municipality of Zwischenwasser. The plots in question adjoin one another. The agricultural plots are at present leased to two agricultural establishments. AG19 By deed of April 9, 1998, the Schlössle Weissenberg Familienstiftung seated in the Principality of Liechtenstein was established. This foundation is the

11 second appellant in the main proceedings. Its sole trustee authorised to sign and first beneficiary is the first appellant. By a deed of transfer of April 16, 1998, authenticated before an official notary in Feldkirch (Austria) on April 16, 1998, the immovable property in question was transferred to the second appellant. The lease was continued in that respect. AG20 In order to assess properly the factual context of this case, I will also briefly examine below the structure of the Land of Vorarlberg and in particular certain characteristic features of the agriculture engaged in this state of the Republic of Austria. In doing so I will use the information which the Austrian Government has provided in these proceedings. AG21 In general agriculture in Austria is organised on a small scale, particularly in the mountainous Land of Vorarlberg. Vorarlberg has a total surface area of 260,144 hectares. 47 per cent of this surface area is used as agricultural land, of which per cent lies in mountain areas within the meaning of Art.18 of Regulation 1257/99 [FN8] and 3.55 per cent is in areas affected by serious handicaps within the meaning of Art.20 of this regulation. Therefore, a total of per cent of the agricultural land is in less-favoured areas under Art.17 of the regulation. FN8 Council Regulation 1257/1999 of May 17, 1999 on support for rural development from the European Agricultural Guidance and Guarantee Fund (EAGGF) and amending and repealing certain Regulations: [1999] O.J. L160/80. See also point 107 below. AG22 The area lends itself to milk production on account of the regional conditions. Other forms of production, such as cattle breeding, are virtually impossible. In Vorarlberg milk production is organised on three levels (3 Stufen Wirtschaft). This means that in autumn, winter and spring the farmers work in the valley. In the summer they move their livestock to the pastures in the lower and upper mountain reaches. This method preserves the landscape and the countryside. *1135 IV-- Procedure AG23 On April 22, 1998 the appellants sought authorisation for a land transfer within the meaning of Para.4 of the VGVG. By the decision of October 19, 1998 the competent authority, the Unabhängiger Verwaltungssenat of the Land of Voralberg, refused authorisation. The reason stated for the refusal was that the requirements laid down in Para.5(1)(a) and Para.5(2)(a) and (d) of the VGVG had not been satisfied. AG24 In its statement of grounds the Unabhängiger Verwaltungssenat examines further the facts and the legislation at issue. It notes that the overwhelming majority of the plots at issue are designated agricultural land and thus approval from the land transfer authority is required pursuant to Para.4(1)(a) of the VGVG. The intention of the VGVG is that such land should be cultivated and acquired by farmers as part of an agricultural establishment. According to the established case law of the Verfassungsgerichtshof (Federal Constitutional Court), it is in the

12 public interest, which the VGVG seeks to protect, that plots of agricultural land acquired in connection with land transfers be cultivated by the acquirers themselves. The Schlössle Weissenberg Familienstiftung does not operate as a farmer, nor has it any intention of engaging in agriculture. The acquisition of plots used for agricultural purposes with the intention of leasing them on is contrary to the public interest, protected by the VGVG, in preserving an effective farming community and preserving and creating economically healthy, medium and small-scale agricultural holdings. The requirement that authorisation be refused if the land is not cultivated by the acquirer himself in connection with an agricultural establishment also applies where the plot was not already cultivated by the previous owner himself. AG25 The appellants first lodged an appeal against this decision with the Austrian Verfassungsgerichtshof (Constitutional Court). It declined to consider the appeal by decision of September 26, 2000 and subsequently remitted it to the Verwaltungsgerichtshof (Higher Administrative Court) pursuant to Para.144(3) of the Bundes-Verfassungsgesetz (Constitution). In the supplemented appeal it is argued inter alia that refusal of authorisation from the land transfer authority is contrary to the provisions of the EEA Agreement on the free movement of capital. AG26 The Verwaltungsgerichtshof subsequently submitted the following questions to the Court of Justice for a preliminary ruling by an order of October 19, 2001, received at the registry of the Court on November 21, 2001: 1. Are Art.12 EC and Art.56 EC et seq. to be interpreted as meaning that rules whereby transactions in agricultural and forestry plots are subject to restrictions imposed by the administrative authorities in the public interest of preserving, strengthening or creating a viable farming community are also permitted in relation to Member States of the EEA as third countries under Art.56(1) EC having regard to the fundamental freedoms guaranteed by an applicable law of the European Union, in particular the free movement of capital? 2. In the event that the first question is answered in the affirmative: Are Art.12 EC and Art.56 EC et seq. to be interpreted as meaning that the fact that the appellant must, in the case of transfers of agricultural and forestry *1136 plots, undergo an authorisation procedure even before the property right is entered in the land register, pursuant to the (Vorarlberg) Gesetz Über den Verkehr mit GrundstÜcken (Land Transfer Law-- VGVG 1993) published in Vorarlberg LGBl. No 61/1993, entails an infringement of Community law and of one of the appellant's fundamental freedoms guaranteed by the law of the European Union, which is also applicable to Member States of the EEA as third countries under Art.56(1) EC? AG27 Written observations were submitted to the Court by the first appellant, the Governments of Austria, Liechtenstein and Norway, the EFTA Surveillance Authority and the Commission. A hearing was held in this case on January 7, V-- The first question A-- General observations

13 AG28 By the first question the national court essentially asks the Court to clarify the extent to which the free movement of capital, which is guaranteed between the Member States by Art.56 EC et seq., is applicable to movements of capital between a Member State of the European Union and a country which is party to the Agreement on the European Economic Area but is not a Member State of the European Union. In particular, the following questions must be dealt with in succession: -- Article 56 EC and the movement of capital to and from third countries. In that respect I will also consider the meaning of Art.56 EC in connection with the completion of economic and monetary union. This raises the question whether residents of third countries derive rights from Art.56 EC. -- In the event that this question is answered in the affirmative, I will consider the interpretation of the standstill clause contained in Art.57(1) EC. Whether or not this case concerns a restriction on the movement of capital which already existed on December 31, 1993 is also relevant in this regard. It is also necessary to consider whether the fact that the Principality of Liechtenstein is a party to the EEA Agreement has any bearing on its classification as a third country within the meaning of Art.57 EC. -- The third question concerns the rights which stem from Art.40 of the EEA Agreement, in particular in respect of nationals of EEA countries which are not Member States. Do such persons derive rights from Art.40 of the EEA Agreement which they may invoke before a court of law? Does the existence of such rights have consequences for a Member States which maintains a provision on the basis of the standstill clause contained in Art.57(1) EC? In other words, must Art.57(1) be disapplied in such circumstances? AG29 This brings me to a preliminary observation. The Court examines the acquisition of real property primarily in the light of the free movement of capital, as is clear from Konle and Reisch and Others. [FN9] In Konle the Court refers also to the possible relevance of freedom of establishment but does not examine this matter further. In *1137 my opinion in Reisch and Others [FN10] I argued that national legislation which seeks to prevent secondary residences should be examined in the light of freedom to provide services. In my view, the capital transaction constituted primarily the consideration for a service that had been supplied. FN9 Both cited above. FN10 See, in particular, AG67 et seq. of that opinion. AG30 In this case, however, the circumstances of the main proceedings give no grounds for also including in the assessment other fundamental freedoms under the EC Treaty. Whatever the purpose of the VGVG, the transaction in question relates primarily to investment in real property and not to cross-border establishment or provision of services. Therefore, an examination in the light of the other freedoms would be hypothetical in respect of the main proceedings. It is

14 obvious that the other provisions of Community law referred to above cannot apply, either directly or indirectly, to the circumstances of the case. [FN11] Therefore, I will not consider the possible infringement of other fundamental freedoms under the EC Treaty. This applies also to the observations which the first appellant submitted to the Court in this regard. FN11 See the case law of the Court concerning the obligation to give a preliminary ruling on questions submitted, for example Giloy v Hauptzollamt Frankfurt am Main-Ost (C-130/95): [1997] E.C.R. I B-- Article 56 EC AG31 Article 56(1) EC, which contains the principal rule on the free movement of capital, has two essential characteristics. Firstly, the provision has direct effect. Secondly, it has erga omnes effect. It draws no distinction between the internal movement of capital within the European Union and the movement of capital to and from third countries. AG32 In Sanz de Lera and Others [FN12] the Court placed the following interpretation on first essential characteristic of Art.56 EC: Art.73b(1) of the Treaty (now Art.56 EC) lays down a clear and unconditional prohibition for which no implementing measure is needed. The expression within the framework of the provisions set out in this Chapter in Art.73b relates to the whole chapter in which it appears. The provision must therefore be interpreted in that context. FN12 Sanz de Lera and Others (C 163, 165 & 250/94): [1995] E.C.R. I-4821; [1996] 1 C.M.L.R AG33 As regards the second essential characteristic, Art.56 has erga omnes effect in that unlike the other fundament freedoms of movement under the EC Treaty it also relates to movement to and from third countries. The applicability of Art.56 EC to movement to and from third countries is unique. The free movement of capital essentially establishes a necessary condition for the other three freedoms under the Treaty relating to persons, goods and services. These other freedoms lose in importance if the movement of capital--and also the movement of payments--is not free. AG34 The free movement of capital not only constitutes a condition for the establishment of the internal market but also give expression to the principle of an open market economy with free competition which is referred to in Arts 4 and 105 EC. This open market economy is not restricted by the physical borders of the territory of the European Union. AG35 However, this still does not mean that the free movement of capital, which has direct effect, has the same effect within the European Union and externally. There *1138 is a difference in the extent of this freedom. Within the European Union this freedom is virtually complete. Externally there are exceptions. Articles 57, 59 and 60 EC provide for possible restrictions on the free movement of capital which may be applied only to the movement of capital to and from third countries. In addition to the standstill clause contained in Art.57(1) EC, which is

15 at issue in this case, the questions also concern the powers of the Council and the Member States to restrict the freedom granted in the Treaty under certain well-defined circumstances. AG36 These differences are linked to the context in which the free movement of capital must be placed. In that respect I should note that the Maastricht Treaty established the free movement of capital having direct effect which is set out in Art.56 EC. The entry into force of Art.56 (and the following articles) was set at January 1, and thus after the entry into force of the Maastricht Treaty itself --, that is to say the date on which the second stage of economic and monetary union began. The date referred to in Art.57(1) must also be viewed in this context. The free movement of capital must be regarded as a constituent element of economic and monetary union. AG37 Now that economic and monetary union has been completed, restrictions under public law on capital transactions within the Eurozone are no longer conceivable. Monetary policy is set by the European Central Bank and this presupposes complete unity in terms of the movement of money and capital. Where monetary policy is centralised there can be no longer be any distinction between cross-border transactions and transactions effected within the national sphere of a Member State. In terms of powers, this means that within a completed monetary union the Member States have renounced their monetary sovereignty. Therefore, they are also no longer able to invoke the power to apply protective measures where balance of payment difficulties arise. Article 119(4) and Art.120(4) stipulate this expressly. AG38 As regards the relationship between monetary union and the Member States which have not--yet--become part thereof, those Member States do still have the power to invoke Arts 119 and 120 EC where balance of payment difficulties arise. Under these articles, either they can be authorised to take protective measures or take protective measures independently where a sudden crisis in the balance of payments occurs. However, these Member States are required to coordinate their exchange-rate policy. This requirement is laid down in Art.124 EC and developed in the so-called EMS II. [FN13] This co-ordination requirement is necessary because the monetary union and the abovementioned Member States share a common capital market. FN13 The Second European Monetary System outlined in the Resolution of the European Council on the establishment of an exchange-rate mechanism in the third stage of economic and monetary union of June 16, 1997: [1997] O.J. C236/5. AG39 None of these requirements apply to the movement of capital to and from the EFTA countries. I should point out that as regards monetary policy the EEA Agreement provides for only a very limited form of cooperation relating to the exchange of information ( Art.46 of the EEA Agreement). AG40 I take the view that these differences in the level of monetary integration have a bearing on the interpretation of Art.56 EC and Art.40 of the EEA Agreement. In brief, although Art.56 draws no distinction between the movement

16 of capital within the European Union and the movement of capital to and from third countries *1139 outside, that does not mean that the prohibition on restrictions has the same effect on both situations. Exceptions to the prohibition based on monetary considerations may be applied only to the external movement of capital. The exceptions laid down in Art.40 et seq. of the EEA Agreement are covered by this. These exceptions--see in particular Art.43 of the EEA Agreement--are broader than the exceptions under the EC Treaty. AG41 This brings me to the external movement of capital itself. The movement of capital has also been liberalised worldwide, albeit not completely. To bring about this worldwide liberalisation a number of instruments of international law have been adopted within the framework of inter alia the Organisation for Economic Cooperation and Development (OECD), the World Trade Organisation (WTO), and the International Monetary Fund (IMF). AG42 With regard to the relationship between Art.56 EC and these instruments of international law it should be noted that Art.56 contains an unqualified freedom having direct effect and thus also an unconditional prohibition on the Member States restricting that freedom, [FN14] subject to certain exceptions set out explicitly in the EC Treaty. The instruments which have been adopted within the framework of the OECD, the WTO and the IMF do not have such far-reaching effect. In the context of the OECD a code has been adopted which seeks to liberalise capital movements. [FN15] The code contains binding, nondiscriminatory rules. Article 10 of the code allows the Member States-- inter alia in connection with the European Union--to liberalise further the movement of capital amongst themselves. As regards the WTO, I refer to the Annex on Financial Services attached the GATS Agreement which allows the States to take restrictive measures to ensure the integrity and stability of the financial system. [FN16] In that context the IMF Agreement seeks primarily to remove obstacles to international payments. However, the agreement does allow countries to take measures necessary to survey international movements of capital. [FN17] FN14 See Sanz de Lera and Others, cited above, at [41]. FN15 OECD Code of Liberalisation of Capital Movements. The present version updated on January 1, 2003 is to be found on the OECD website. FN16 Appendix 2 to the General Agreement on Trade in Services. FN17 Article VI, Section 3, of the IMF Agreement. AG43 The agreements concluded in connection with the various international organisations with a view to liberalising the movement of capital are indeed relevant to the interpretation of the exceptions to the free movement of capital to and from third countries laid down in Art.57 et seq. EC. These exceptions cannot be applied so broadly that they give rise to inconsistency with the obligations under international law of the European Community and its Member States.

17 AG44 It is also in this light that I consider the relevance of the EEA agreement to the present case. Reliance by a Member State on the exception provided for in Art.57(1) EC may not result in nationals of a State party to the EEA Agreement being unable to exercise, or unable to exercise in full, their rights stemming from that agreement. It is therefore necessary to establish which rights may be derived from the relevant provisions of the EEA Agreement. I will examine this matter in Section D below. AG45 I will now consider the extent to which nationals of third countries may rely on Art.56 EC. Article 56 EC grants them that right. Under this provision, the *1140 movement of capital itself may not be subject to restrictions. The Treaty creates no subjective right which is limited to nationals of the Member States. In this sense Art.56 differs from, for example, Art.18 EC, which grants the citizens of the European Union the right to move and reside freely within the territory of the Member States, or Art.39 EC, which relates to the workers of the Member States. [FN18] The same type of restriction applies ratione personae to the freedom to provide services and freedom of establishment. FN18 Article 39(2) EC provides as follows: Such freedom of movement shall entail the abolition of any discrimination based on nationality between workers of the Member States as regards (...). AG46 Consequently, the free movement of capital applies to all capital transactions within the European Union and to the European Union from third countries and vice versa. Nor does the territoriality principle, as laid down in Art.299 EC, restrict the applicability of EC law. Where a legal transaction is effected in the territory of the European Union, Community law can apply irrespective of the place of residence or nationality of the person entitled. AG47 To sum up, nationals of third countries and legal persons established in third countries may invoke the free movement of capital by virtue of the EC Treaty. If, in a specific case, Community law provides for an exception in relation to them, it is necessary to consider the extent to which that exception restricts a right which they enjoy in accordance with an obligation on the European Community under international law. C-- Article 57(1) EC AG48 In Sanz de Lera and Others [FN19] the Court holds as follows in respect of Art.57(1) EC: The exception provided for in Art.73c(1) of the Treaty (now Art.57(1) EC) concerning the application to non-member countries of the restrictions existing on December 31, 1993 under national law or Community law regarding the capital movements listed in it to or from non-member countries is precisely worded, with the result that no latitude is granted to the Member States or the Community legislature regarding either the date of applicability of the restrictions or the categories of capital movements which may be subject to restrictions. (...) It follows that that exception cannot preclude Art.73b(1) of the Treaty from conferring on individuals rights which they can rely on before the courts. In my view, Sanz de Lera and Others forms the starting point for

18 consideration of certain particular elements of Art.57 EC. FN19 Cited above, at [44]. AG49 Article 57(1) is a standstill clause in nature. Where national legislation restricting the free movement of capital existed in a Member State on December 31, 1993, that Member State is under no obligation to adapt that national legislation in order to thus to promote liberalisation of the movement of capital. Such an obligation can arise only from measures which the Council adopts pursuant to Art.57(2) EC. On the other hand, a Member State is not permitted to adopt new legislation restricting the free movement of capital to and from third countries after the abovementioned date. AG50 This brings me to the relevance of the EEA Agreement in this context. In these proceedings the EFTA Surveillance Authority has contended that as a consequence of the entry into force of the EEA Agreement the States party to that *1141 agreement cannot be regarded as third countries within the meaning of Art.57(1) EC. I consider that this view is incorrect. As Sanz de Lera and Others confirmed, it is a precisely worded exception which grants no latitude. Moreover, according to the Court's established case law, exceptions to the fundamental freedoms enshrined in the EC Treaty must be interpreted strictly. AG51 Any State which is not a Member State of the European Union is a third country. The EEA Agreement does not alter this fact in any way. Even though nationals of States party to the EEA agreement derive rights from that agreement which are similar or even identical to the rights which citizens of the European Union derive from the EC Treaty, the fact remains that those countries are not Member States of the European Union. In that respect the EEA Agreement is no different from other association agreements which the European Community has concluded with non-member states, such as the countries of Central and Eastern Europe. Nationals of these countries can also derive from these agreements rights which they may exercise in the Member States of the European Union. AG52 As I emphasised at point 49 above, the Member States are under no obligation at all to adapt restrictions on the movement of capital where the national legislation already existed on December 31, Furthermore, in Konle the Court stated that national legislation adopted after December 31, 1993 can also be covered by the standstill clause. This is not automatically excluded from the standstill clause by the fact that it entered into force at a later date. Where national legislation is adopted after December 31, 1993 and such legislation is similar, in substantive terms, to the legislation prior to December 31, 1993, it also constitutes existing legislation. The measure must be, in substance, identical to the previous legislation. It can also reduce or eliminate an obstacle to the exercise of Community rights and freedoms in the earlier legislation. On the other hand, new legislation based on an approach which differs from that of the previous law and establishes new procedures cannot be treated as legislation existing at the time of accession. [FN20] FN20 Konle, cited above, at [53].