Case C-476/10

projektart Errichtungsgesellschaft mbH and Others

(Reference for a preliminary ruling from the

Unabhängiger Verwaltungssenat des Landes Vorarlberg)

(First subparagraph of Article 104(3) of the Rules of Procedure − Free movement of capital – Article 40 of the EEA Agreement and Annex XII thereto − Purchase by nationals of the Principality of Liechtenstein of a secondary residence in the Land of Vorarlberg (Austria) – Procedure of prior authorisation − Admissibility)

Summary of the Order

International agreements – Agreement on the European Economic Area – Free movement of capital – Restrictions

(Article 40 of the EEA Agreement and Annex XII thereto; Council Directive 88/361, Art 6(4))

Article 40 of the Agreement on the European Economic Area (EEA), of 2 May 1992, must be interpreted as precluding national legislation which, on the basis of Article 6(4) of Directive 88/361 for the implementation of Article 67 (repealed by the Treaty of Amsterdam) of the Treaty, prohibits a national of the Principality of Liechtenstein from purchasing a secondary residence situated in a Member State of the European Union, and, therefore, a national authority must disregard that national legislation.

Since 1 May 1995, the date of the entry into force of the EEA Agreement in respect of the Principality of Liechtenstein, and in the areas covered by that agreement, Member States may claim and rely on legislation restricting the freedom of movement of capital in respect of the Principality of Liechtenstein only if, pursuant to European Union law, that legislation can be applied in respect of other Member States of the European Union.

(see paras 39, 51, operative part)

ORDER OF THE COURT (Eighth Chamber)

24 June 2011 (*)

(First subparagraph of Article 104(3) of the Rules of Procedure − Free movement of capital – Article 40 of and Annex XII to the EEA Agreement − Purchase by nationals of the Principality of Liechtenstein of a secondary residence in the Province of Vorarlberg (Austria) – Procedure of prior authorisation − Admissibility)

In Case C‑476/10,

REFERENCE for a preliminary ruling under Article 267 TFEU from the Unabhängiger Verwaltungssenat des Landes Vorarlberg (Austria), made by decision of 22 September 2010, received at the Court on 1 October 2010, in the proceedings brought by

projektart Errichtungsgesellschaft mbH,

Eva Maria Pepic

and

Herbert Hilbe,

THE COURT (Eighth Chamber),

composed of K. Schiemann, President of the Chamber, L. Bay Larsen and A. Prechal (Rapporteur), Judges,

Advocate General: J. Kokott,

Registrar: A. Calot Escobar,

the Court, proposing to give its decision by reasoned order in accordance with the first subparagraph of Article 104(3) of its Rules of Procedure,

after hearing the Advocate General,

makes the following

Order

1        This reference for a preliminary ruling concerns the interpretation of Article 40 of the Agreement on the European Economic Area of 2 May 1992 (OJ 1994 L 1, p. 3, ‘the EEA Agreement’).

2        The reference has been made in the course of proceedings between (i) projektart Errichtungsgesellschaft mbH (‘projektart’), Ms Pepic and Mr Hilbe and (ii) the Grundverkehrslandeskommission des Landes Vorarlberg (Austria) (the Commission for Land Transfers of the Province of Vorarlberg) concerning the latter's refusal to grant Ms Pepic and Mr Hilbe authorisation to purchase an apartment from projektart, on the ground that the conditions imposed on foreigners in respect of the purchase of a secondary residence by the legislation of the Province of Vorarlberg were not fulfilled.

 Legal context

 The EEA Agreement

3        Article 40 of the EEA Agreement provides:

‘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.’

4        Annex XII to the EEA Agreement, entitled ‘Free movement of capital’, refers to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty [article repealed by the Treaty of Amsterdam] (OJ 1988 L 178, p. 5).

5        Under Annex XII:

‘…

The provisions of Directive [88/361] shall, for the purpose of the present Agreement, be read with the following adaptations:

…

(e)      during transition periods, EFTA States shall not treat new and existing investments by companies or nationals of EC Member States or other EFTA States less favourably than under the legislation existing at the date of signature of the Agreement, without prejudice to the right of EFTA States to introduce legislation which is in conformity with the Agreement and in particular provisions concerning the purchase of secondary residences which correspond in their effect to legislation that has been upheld within the Community in accordance with Article 6(4) of the Directive;

…’

 Directive 88/361

6        Under Article 1(1) of Directive 88/361, capital movements are classified in accordance with the nomenclature in Annex I thereto.

7        It is apparent from that annex that the concept of movement of capital covers, inter alia, investments in real estate on the territory of a Member State by non-residents.

8        Article 6(4) of Directive 88/361 provides that:

‘Existing national legislation regulating purchases of secondary residences may be upheld until the Council [of the European Union] adopts further provisions in this area in accordance with Article 69 of the [EEC] Treaty [now Article 69 of the EC treaty, itself repealed by the Treaty of Amsterdam]. This provision does not affect the applicability of other provisions of Community law.’

 National legislation

9        Paragraph 2(7) of the Province of Voralberg’s Law on Land Transfer (Grundverkehrsgesetz, LGBl. 42/2004), in the version resulting from the LGBl. 19/2009 (the ‘GVG’), provides:

‘Purchases for the purpose of the construction or use of holiday properties …, or for transfer to third parties for those purposes, are classified as purchases for holiday purposes.’

10      Paragraph 3 of the GVG provides:

‘(1)      To the extent that such is provided for under European Union law, and subject to subparagraph 2, the rules on land purchase by foreign nationals shall not apply to:

(a)      persons exercising the freedom of movement for workers;

(b)      persons and companies exercising the freedom of establishment;

(c)      persons and companies exercising the freedom to provide services;

(d)      persons exercising the right to reside;

(e)      persons and companies exercising the free movement of capital, in so far as they are resident in the territory of a Member State of the European Union or otherwise within the area of application of the EEA Agreement.

(2)      With regard to purchases for holiday purposes, free movement of capital under the EEA Agreement shall not give rise to any exception to the rules concerning land transfer.

(3)      If it appears from international commitments that certain persons are to be treated as Austrian nationals, the rules relating to the purchase of immovable property applicable to foreign nationals do not apply.

…’

11      Paragraph 7(1) of the GVG reads as follows:

‘Authorisation from the land transfer authorities is necessary for the purchase of the following rights by foreign nationals:

(a)      property rights over land or buildings within the meaning of Paragraph 435 ABGB (Allgemeines Bürgerliches Gesetzbuch, General Civil Code);

…’

12      Paragraph 8 of the GVG reads as follows:

‘(1)      The acquisition of title may only be authorised where:

...

(b)      the political interests of the State are not affected, and

(c)      there is a cultural, economic or social interest in the acquisition of the title by a foreign national.

(2)      Paragraph 8(1) is not applicable where precluded by international commitments.’

 The dispute in the main proceedings and the questions referred for a preliminary ruling

13      Ms Pepic and Mr Hilbe, nationals of the Principality of Liechtenstein and resident in that State, intend to purchase from projektart an apartment which is part of a housing construction project in Lochau, in the Province of Vorarlberg.

14      The interested parties have the intention of first using that apartment as a secondary residence and then making it their principal place of residence following their retirement in approximately 10 years time.

15      On 23 March 2010, the Grundverkehrslandeskommission des Landes Vorarlberg refused to grant Ms Pepic and Mr Hilbe the authorisation required pursuant to Paragraph 7(1) of the GVG for the purchase of that apartment.

16      Ms Pepic, Mr Hilbe and projektart contested that decision before the Unabhängiger Verwaltungssenat des Landes Vorarlberg (Independent Administrative Tribunal of the Province of Vorarlberg).

17      The referring court notes that Paragraph 3(2) of the GVG applies in the present case since it concerns the purchase by foreign nationals of a holiday home. Consequently, according to that court, such a purchase is subject to prior authorisation pursuant to Paragraph 7(1)(a) of the GVG.

18      The case in the main proceedings therefore essentially turns on the question whether Paragraph 3(2) of the GVG, which is based on Article 6(4) of Directive 88/361, is compatible with the EEA Agreement.

19      In that respect, the question is whether it is still necessary to apply Article 6(4) of Directive 88/361, a provision aimed at the implementation of Article 67 of the EEC Treaty, to the purchase, by a national of an EFTA State party to the EEA Agreement, in this instance the Principality of Liechtenstein, of a secondary residence situated in a Member State of the European Union.

20      The referring court considers, firstly, that, although, as regards the situation within the European Union, the subsequently adopted Article 73 B(1) of the EC Treaty (now Article 56(1) EC) substantively derogated from Article 67 of the EEC Treaty, by contrast, as regards the European Economic Area (‘the EEA’), Directive 88/361 has not been formally repealed and, moreover, has not undergone any substantive amendment, so that it continues to be part of the EEA Agreement. It follows that, in respect of the EEA, the legal situation continues to be governed by Article 67 of the EEC Treaty.

21      Secondly, that court recalls that, at paragraph 31 of the judgment in Case C‑452/01 Ospelt and Schlössle Weissenberg [2003] ECR I‑9743, the Court held that, since 1 May 1995, the date of the entry into force of the EEA Agreement in respect of the Principality of Liechtenstein, and in the areas covered by that agreement, Member States can no longer rely on Article 73 C of the EC Treaty (now Article 57 EC) in respect of that EFTA State.

22      However, since that judgment concerned only the transfer of agricultural land, the question whether that case-law concerns only that subject area or whether, on the contrary, it is comprehensive in scope has not been decisively answered.

23      In those circumstances, the Unabhängiger Verwaltungssenat des Landes Vorarlberg decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

‘1.      Is Article 6(4) of Directive 88/361/EEC …, according to which existing national legislation regulating purchases of secondary residences may be upheld, still applicable to the purchase of secondary residences situated in a Member State of the EU by a national of the Principality of Liechtenstein, which forms part of the EEA?

2.      Does national legislation which, on the basis of Article 6(4) of Council Directive 88/361/EEC, prohibits a national of the Principality of Liechtenstein from purchasing a secondary residence situated in a Member State of the European Union conflict with the provisions of the EEA Agreement concerning the free movement of capital, so that a national authority must disregard such national legislation?’

 The questions referred

24      In accordance with the first subparagraph of Article 104(3) of the Rules of Procedure of the Court of Justice of the European Union, where the answer to a question referred for a preliminary ruling may be clearly deduced from existing case-law the Court may, after hearing the Advocate General, give its decision by reasoned order in which reference is made to the relevant case-law.

25      The Court considers that that is so in the present case.

26      By its two questions, which should be considered together, the referring court asks, in essence, whether Article 40 of the EEA Agreement must be interpreted as precluding national legislation such as that in issue in the main proceedings which, on the basis of Article 6(4) of Directive 88/361, prohibits the purchase of a secondary residence situated in Member State of the European Union by a national of the Principality of Liechtenstein, so that a national authority must disregard it.

27      Article 40 of the EEA Agreement provides that the provisions necessary for the application of that article are listed in Annex XII to that agreement. Annex XII states that Directive 88/361 and Annex I to that directive are applicable to the EEA.

28      It is settled case-law that, in the absence of a definition of ‘movement of capital’ in the FEU Treaty, as referred to in Article 63(1) TFEU, the nomenclature which makes up Annex I to Directive 88/361 retains an indicative value, even though that directive was adopted on the basis of Articles 69 and 70(1) of the EEC Treaty (Articles 67 to 73 of the EEC Treaty were replaced by Articles 73B to 73G of the EC Treaty, which themselves became Articles 56 EC to 60 EC), it being understood that, according to the third paragraph of the introduction to that annex, the nomenclature which it contains is not exhaustive as regards the concept of movement of capital (see, inter alia, Case C‑450/09 Schröder [2011] ECR I‑2497, paragraph 25 and the case-law cited).

29      It is apparent from that nomenclature that capital movements include investments in real estate on the national territory of a Member State by non-residents (see, inter alia, Case C‑386/04 Centro di Musicologia Walter Stauffer [2006] ECR I‑8203, paragraph 23).

30      It is not disputed that Ms Pepic and Mr Hilbe, nationals of the Principality of Liechtenstein and resident in that State, wish to invest in real estate in Austria, namely through the purchase of an apartment.

31      Such a cross-border investment constitutes a movement of capital within the meaning of that nomenclature (see, to that effect, Case C‑72/09 Établissements Rimbaud [2010] ECR I‑10659, paragraph 18).

32      Consequently, Article 40 of the EEA Agreement and Annex XII thereto are applicable to a dispute such as that before the referring court, which relates to a transaction between nationals of States which are party to that Agreement. According to settled case-law, the Court may give an interpretation of those provisions where a reference is made by a court of a Member State of the European Union with regard to the scope within that Member State of an agreement which forms an integral part of the EU legal system (see, inter alia, Établissements Rimbaud, paragraph 19 and the case-law cited).

33      One of the principal aims of the EEA Agreement is to provide for the fullest possible realisation of the free movement of goods, persons, services and capital within the whole EEA, so that the internal market established within the European Union is extended to the EFTA States. From that angle, a number of provisions in the EEA Agreement are intended to ensure that the interpretation of that Agreement is as uniform as possible throughout the EEA. It is for the Court, in that context, to ensure that the rules of the EEA Agreement which are identical in substance to those of the FEU Treaty are interpreted uniformly within the Member States (see, inter alia, Établissements Rimbaud, paragraph 20).

34      It is apparent from Article 40 of the EEA Agreement that the rules laid down therein prohibiting restrictions on the movement of capital and discrimination are identical, so far as concerns relations between the States party to the EEA Agreement, irrespective of whether they are members of the European Union or members of EFTA, to the rules under EU law regarding relations between the Member States (see, inter alia, Établissements Rimbaud, paragraph 21).

35      It follows that, although restrictions on the free movement of capital between nationals of States party to the EEA Agreement must be assessed in the light of Article 40 of that Agreement and Annex XII thereto, those provisions have the same legal scope as Article 63 TFEU (see inter alia, Établissements Rimbaud, paragraph 22).

36      Moreover, the Court has already held that it would run counter to the objective of uniformity of application of the rules relating to free movement of capital within the EEA, recalled at paragraph 33 of the present order, for a State such as the Republic of Austria, which is a party to that Agreement, which entered into force on 1 January 1994, to be able, after its accession to the European Union on 1 January 1995, to maintain legislation which restricts that freedom vis-à-vis another State party to that Agreement by basing itself on Article 64 TFEU (see Ospelt and Schlössle Weissenberg, paragraph 30).

37      In that respect, the EFTA States party to the EEA Agreement must, in fact, be distinguished from other States, such as the Swiss Confederation, which have not subscribed to the project of an economically integrated entity with a single market, based on common rules between its members, but chose the route of bilateral arrangements between the European Union and its Member States in specific areas (see case C‑541/08 Fokus Invest [2010] ECR I‑1025, paragraph 27).

38      Accordingly, since 1 May 1995, the date of the entry into force of the EEA Agreement in respect of the Principality of Liechtenstein, and in the areas covered by that agreement, the Member States can no longer rely on Article 64 TFEU in respect of the Principality of Liechtenstein (see Ospelt and Schlössle Weissenberg, paragraph 31).

39      It also follows that, since that same date and in those areas, the Member States can maintain and rely on legislation restricting the freedom of movement of capital in respect of the Principality of Liechtenstein only if, pursuant to European Union law, that legislation can be applied in respect of other Member States of the European Union.

40      This is the case for the national legislation on secondary residences that may be maintained under the Union’s rules of primary law regarding those residences, such as the transitional provisions contained in the Treaties of Accession to the European Union of some Member States.

41      However, it must be held that, in the absence of such rules of primary law that could apply in the present case, national legislation such as that in issue in the main proceedings, if applied to prohibit the purchase of a secondary residence in a Member State by nationals of another Member State, would constitute discrimination on the grounds of nationality which is manifestly contrary to Article 63 TFEU.

42      Moreover, in relations between EU Member States, such legislation cannot be based on Article 6(4) of Directive 88/361.

43      Indeed, as was recalled at paragraph 28 above, the nomenclature of the movements of capital referred to in Annex I to Directive 88/361 retains the same indicative value for the purpose of defining the notion of capital movements.

44      Article 6(4) of Directive 88/361 now has no normative value in the legal order of the European Union since that provision constitutes a transitional provision allowing the maintenance of existing provisions in national law governing the purchase of secondary residences pending the adoption by the Council of other provisions in that field, in accordance with Article 69 of the EEC Treaty.

45      However, since the entry into force of the Treaty of Maastricht, the latter provision has been repealed and the liberalisation of capital movements between Member States had been progressively achieved in that area through provisions of primary Union law.

46      Consequently, in the light of the considerations referred to in paragraph 39 above, Article 6(4) of Directive 88/361 cannot be invoked as justification for national legislation restricting the free of movement of capital, such as that in issue in the main proceedings, in respect of nationals of the Principality of Liechtenstein.

47      It follows that Article 40 of the EEA Agreement must be interpreted as precluding such national legislation.

48      Moreover, it is settled case-law that any national court, hearing a case within its jurisdiction, has, as an organ of a Member State, the obligation pursuant to the principle of cooperation set out in Article 4(3) TEU fully to apply the directly applicable law of the Union and to protect the rights which the latter confers upon individuals, disregarding any provision of national law which may be to the contrary, whether the latter is prior to or subsequent to the legal rule of the Union (see, inter alia, Case C‑409/06 Winner Wetten [2010] ECR I‑8015, paragraph 55 and the case-law cited).

49      In that regard, it must be recalled, as already stated at paragraph 32 above, that the EEA Agreement forms an integral part of the EU legal system.

50      The Court has also repeatedly held that all administrative bodies are subject to the obligation to respect the primacy of Union law, referred to in paragraph 48 above, (see, inter alia, Case C‑341/08 Petersen [2010] ECR I‑47, paragraph 80 and the case-law cited). That obligation applies to an administrative body such as the Grundverkehrslandeskommission des Landes Vorarlberg.

51      It follows from the above that the answer to the questions referred is that Article 40 EEA must be interpreted as precluding national legislation such as that in issue in the main proceedings which, on the basis of Article 6(4) of Directive 88/361, prohibits a national of the Principality of Liechtenstein from purchasing a secondary residence situated in a Member State of the European Union, and, therefore, a national authority must disregard such national legislation

 Costs

52      Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (Eighth Chamber) hereby rules:

Article 40 of the European Economic Area Agreement of 2 May 1992 must be interpreted as precluding national legislation such as that in issue in the main proceedings which, on the basis of Article 6(4) of Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty [repealed by the Treaty of Amsterdam] prohibits a national of the Principality of Liechtenstein from purchasing a secondary residence situated in a Member State of the European Union, and, therefore, a national authority must disregard such national legislation

[Signatures]

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* Language of the case: German.