OPINION OF MR ADVOCATE GENERAL DARMON

DELIVERED ON 4 OCTOBER 1984 ( 1 )

Mr President,

Members of the Court,

1. 

The relevant facts which underlie this reference for a preliminary ruling made by the Supreme Court, Dublin, are as follows.

Robert Fearon and Company Limited (hereinafter referred to as “Fearon”), a company registered under Irish law, is the owner of a farm in County Cavan, Ireland. The company consists of five shareholders who are British nationals. Four of them reside in England. The fifth, who is also an Irish national, resides in Ireland but at a distance of more than three miles from the farm.

The place of residence of the shareholders is, in this case, of crucial importance. According to Section 32 (3) of the Land Act 1933 as amended by Section 35 of the Land Act 1965 it is provided that the Irish Land Commission, a public body with powers of compulsory acquisition, cannot exercise those powers as against proprietors who have resided for a year either on the land or within three miles of it. Where the proprietor is a body corporate, each of the shareholders must meet that residence requirement during the same period.

Since none of Fearon's shareholders met the residence requirement, the Irish Land Commission decided to make a compulsory acquisition order against the company and it was in the course of an appeal against that decision that the Supreme Court, Dublin, referred the following question to the Court of Justice for a preliminary ruling:

“Where a statute of a Member State contains a condition requiring that a person (other than a body corporate) who owns land should have resided on it for a certain period, if the owner of the land is a body corporate, is Article 58 to be interpreted as prohibiting a condition requiring that each of the persons entitled to a beneficial interest in the body corporate should have resided on the land during a similar period?”

2. 

Observations were submitted to the Court not only by the appellant and the respondent in the main proceedings, that is, Fearon and the Irish Land Commission, but also by Ireland and the Commission.

The latter, at the end of its written observations, argues briefly that Article 222 of the Treaty would “on its own ... be sufficient to justify a negative answer to the question posed by the court of renvoi”.

That article provides that “this Treaty shall in no way prejudice the rules in Member States governing the system of property ownership”. In the Commission's view therefore, the question should be answered in the negative because “the system of compulsory purchase by the Land Commission and the various conditions which surround that are part of the system of property ownership in Ireland”.

I cannot agree with the Commission's view on that point. Its interpretation of Article 222 is incompatible with the terms of Article 54 (3) (e), which provides, with regard to the right of establishment,

that “the Council and the Commission shall carry out the duties devolving upon them under the preceding provisions, in particular:

...

(e)

By enabling a national of one Member State to acquire and use land and buildings situated in the territory of another Member State ...”.

The Commission's interpretation is also contradicted by various acts of the Council and in particular by the “Programme Général pour la Suppression des Restrictions à la Liberté d'Établissement” [General Programme for the Abolition of Restrictions on the Freedom of Establishment] of 18 December 1961 which expressly mentions the possibility of “acquiring, enjoying or alienating rights and property, both movable and immovable” and Annex V of which deals with agriculture. Title III, A, j, of that text states that restrictions which “solely as regards aliens ... provide for less favourable rules in the case of nationalization, compulsory purchase or requisition” must be removed.

As Mr Advocate General Capotorti, appropriately quoted at the hearing by the appellant in the main proceedings, has said:

“As for the Community Treaties, I am of the opinion that the rule expressed in Article 222 of the EEC Treaty, which provides that the Treaty ‘shall in no way prejudice the rules in Member States governing the system of property ownership’ makes it impossible to hold that in Community law private property is more clearly protected or on the contrary subject to a restrictive conception; the truth is that — apart from the limits expressly imposed by some provisions of the Treaties and particularly by the Treaty establishing the EAEC — the article cited confirms that it was not the intention of the Treaties to impose upon Member States or to introduce into the Community legal order any new conception of property or system of rules appertaining thereto”. ( 2 )

Since Article 222 cannot therefore be interpreted as excluding the rules in Member States governing the system of property ownership from the field of application of the general principles of Community law, it is necessary to consider whether, as Fearon contends, those principles are not respected by the aforementioned Irish legislation.

3. 

According to Fearon, that legislation is discriminatory, contrary to the principle of proportionality and a source of legal uncertainty. In addition, according to Fearon, the discussion before this Court should not be limited to the interpretation of Article 58 of the Treaty and the Supreme Court, instead of holding that Section 35 of the Land Act 1965 was not incompatible with Articles 40 and 52 of the Treaty, should have referred to this Court the questions raised before it by Fearon concerning those two articles.

4. 

With regard to the complaint of discrimination, Fearon contends that Article 58 requires the Member States to grant the right of establishment, conferred on natural persons by Article 52, to companies, as defined by the second paragraph of Article 58.

According to Fearon, although Section 35 of the Land Act 1965 does not embody any express discrimination, it is in fact discriminatory in two respects:

 

on the ground of nationality, because the parliamentary debates which preceded its enactment demonstrated the wish of the Irish Parliament to place Irish nationals in a privileged position; and

 

more generally, and to the detriment of companies, because it is more difficult than it is in the case of natural persons, and sometimes even impossible, for each of their shareholders to meet the residence requirement which would enable a successful objection to be made against a compulsory acquisition.

The first paragraph of Article 58 provides that:

“Companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community shall, for the purposes of this Chapter, be treated in the same way as natural persons who are nationals of Member States.”

Two observations should therefore be made:

1.

It may be asked, and the Commission of the European Communities, Ireland and the Irish Land Commission do in fact ask, whether Article 58 can be usefully relied upon in this case. Fearon is not a company constituted in another Member State which wishes to establish itself in Ireland. It is an Irish company already established in Ireland.

2.

Article 58, which is the last article of Chapter II dealing with the right of establishment, by implication but necessarily refers back to the preceding articles and in particular to Article 52 and this is confirmed moreover by the second paragraph of the latter article.

That paragraph is worded as follows:

“Freedom of establishment shall include the right to take up and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms within the meaning of the second paragraph of Article 58, under the conditions laid down for its own nationals by the law of the country where such establishment is effected, subject to the provisions of the Chapter relating to capital.”

As the Commission rightly maintains, the problem is therefore as follows: In the light of the provisions of the Treaty relating to establishment, may a residence requirement be applied to British nationals who have exercised their right of establishment in Ireland under Article 52 as shareholders in an Irish company?

That question should be answered in the affirmative.

Article 52 requires that all nationals of a Member State seeking to exercise their right of establishment in another Member State be treated in the same way as nationals of the latter State. However, the residence requirement, which enables the risk of compulsory acquisition to be avoided, is required both in the case of natural persons and in the case of the holders of shares in a body corporate, without any distinction as to nationality. There is thus no discrimination in that respect in the text of the Land Act. Nor has any discriminatory practice been proved. Consequently, foreign shareholders cannot rely on reverse discrimination as a means of avoiding that requirement.

Nor is there any discrimination lato sensu against bodies corporate.

There is no doubt that it is more-difficult for a body corporate than it is for a natural person to meet the residence requirement- because that requirement must be met by all the members of the body corporate. However, that difficulty, which undoubtedly grows with the number of shareholders, is attributable to the nature of a body corporate and not to any discrimination against companies.

The contrary solution, which would dispense bodies corporate from the residence requirement demanded of their shareholders would have two disadvantages :

 

It would enable natural persons, by constituting a company, fraudulently to avoid the risks inherent in non-residence, and

 

it would constitute discrimination, contrary to the provisions of Article 58 of the Treaty, against natural persons and in favour of companies.

5. 

The complaints based on a breach of the principles of proportionality and legal certainty also appear to have little merit. Those principles cannot be interpreted as prohibiting the national legislature from laying down, on a basis which does not involve discrimination on grounds of nationality, rules for compulsory acquisition such as those introduced by Section 35 of the Land Act 1965.

6. 

There remains the reference to Article 40.

That article is concerned with the Common Agricultural Policy. It contains no rule and has given rise to no measure which may be validly relied upon by the appellant in the main proceedings who in fact admits “the absence of an express provision of Community law” dealing with the subject.

7. 

In conclusion therefore I suggest that the Court should rule that:

 

Where a statute of a Member State contains a condition that a natural person who owns land must have resided on it, or at least within a certain distance from it, for a certain period in order to be able to avoid the compulsory acquisition thereof, neither Article 58 nor any other provision of the Treaty prohibits, if the proprietor of the land is a body corporate, a requirement that each of the members of that company should fulfil that condition.


( 1 ) Translated from the French.

( 2 ) Opinion in Case 44/79 Hauer v Land Rheinland-Platz [1979] ECR 3759 to 3760.