61997C0114

A - Introduction

1 These proceedings brought against the Kingdom of Spain for failure to fulfil its obligations under the Treaty concern Law No 23/1992 of 30 July 1992 (1) and Royal Decree No 2364/1994 of 9 December 1994 approving the Private Security Regulation. The Law requires undertakings providing private security services to be `constituted in Spain'. (2) The directors and managers must reside in that Member State. In addition, security staff must possess Spanish nationality. The Commission views each of those conditions as a form of discrimination prohibited under the fundamental freedoms, namely freedom of establishment, the freedom to provide services and freedom of movement for workers. The Spanish Government does not dispute that there is discriminatory treatment but is of the opinion that it can rely on the grounds of justification provided for by the Treaty.

2 The Commission claims that the Court should:

1. Declare that, by maintaining in force Articles 7, 8 and 10 of Law No 23/1992 of 30 July 1992, in so far as those provisions make the grant of authorisation to carry on private security activities in the case of `security companies' subject to the requirement of being constituted in Spain, the requirement that their directors and managers should reside in Spain and the requirement that the `security staff' should possess Spanish nationality, the Kingdom of Spain has failed to fulfil its obligations under the EC Treaty, in particular Articles 48, 52 and 59;

2. Order the Kingdom of Spain to pay the costs.

3 The Kingdom of Spain contends that the Court should:

1. Dismiss the action;

2. Order the Commission to pay the costs.

B - Facts

I. The uncontested facts

4 Law No 23/1992 (hereinafter `the Law') in conjunction with Royal Decree No 2364/1994 (hereinafter `the Decree') defines the purpose of, and requirements applicable to, private security services. Article 5(1) of the Law defines the services to be provided by security firms, which cover the following activities:

- surveillance and protection of goods, premises and events of various kinds, (3)

- protection of specific persons, (4)

- depositing, safekeeping, checking and sorting of coins and banknotes, securities and valuables, as well as the transport and distribution thereof, (5)

- installation and maintenance of surveillance and alarm systems, (6)

- operation of central control offices for the reception, checking and transmission of alarm signals and their communication to the security forces (Fuerzas y Cuerpos de Seguridad), as well as provision of response services in so far as these do not fall within the sphere of responsibility of the security forces, (7)

- planning and assistance in connection with the security services covered by the Law. (8)

5 Under Article 7 of the Law, only undertakings which have an authorisation from the Ministry of the Interior, in the form of an entry in a register, are entitled to provide private security services. Article 7(1)(b) states that one condition for the entry of an undertaking which employs security staff is that it should be constituted in Spain. (9)

6 Article 8 of the Law requires the directors and managers of undertakings providing private security services to reside in Spain.

7 Under Article 10(1) of the Law, `security staff' require prior authorisation from the Ministry of the Interior. Article 10(3)(a) makes such authorisation subject to the possession of Spanish nationality. `Security staff' for the purposes of the Law means: watchmen, persons in charge of security, bodyguards, private field guards and private detectives. Field guards (10) and private detectives (11) may also pursue their activities in a self-employed capacity.

8 Some of the activities of a security company, such as those described in Article 5(1)(e) and (g), do not require the involvement of `security staff'. To perform their other tasks, the companies employ both `security staff' within the meaning of the Law and administrative staff. The nationality requirement does not apply to the latter.

II. The Commission's view

9 The Commission prefaces its observations by pointing out that its action is not aimed at liberalising the activities of private security firms. It opposes only the discrimination on grounds of nationality contained in the Spanish legislation, which cannot be justified by the objectives of the latter.

1. Freedom of establishment

10 The Commission argues that the residence requirement applicable to directors and managers of the security companies amounts to a nationality requirement and is therefore incompatible with Article 52 of the Treaty. It relies in this connection on the Factortame judgment. (12) It claims that the `nationality requirement applicable to the undertakings' (13) itself amounts to a partial negation of freedom of establishment since an undertaking is prevented from exercising its activity through a branch or agency. The nationality requirement applicable to self-employed field guards and private detectives is likewise contrary to Article 52 of the Treaty.

2. Freedom to provide services

11 The Commission argues that the activities pursued by the undertakings and their staff are services within the meaning of Article 60 of the Treaty. The requirement to have an establishment in Spain in order to exercise those activities is in itself a negation of the freedom to provide services. The `nationality requirement applicable to undertakings' (14) and the residence condition applicable to their executive staff preclude any provision of services by persons not established in Spain.

3. Freedom of movement for workers

12 According to the Commission, the majority of the staff employed by the security companies are workers. The nationality requirement to which `authorisation' by the Ministry of the Interior is made subject has the effect of completely excluding nationals of other Member States from employment in the private security sector. That is a restriction of freedom of movement for workers.

4. The grounds of justification

(a) Articles 55 and 66 of the Treaty

13 Article 55 and Article 66 of the Treaty together provide that activities which are connected, even occasionally, with the exercise of official authority are not subject to the provisions of the respective chapter of the Treaty (right of establishment or provision of services). By reference to the Court's case-law, (15) the Commission takes the view that it cannot be assumed that all security services are connected with the exercise of official authority. The protection of goods and private individuals serves a private interest and cannot be regarded as the exercise of sovereign powers. The nature of the services offered by the security companies has no official character. At best, those services make a subordinate contribution to public security. Since the security companies operate only in the framework of private-law relations, any claim that they have a general responsibility for the maintenance of public security must be disputed, even if they contribute to a certain extent to crime prevention. Crime prevention is not a prerogative of the authorities. Even occasional assistance given to the security forces should not necessarily be regarded as the exercise of official authority.

(b) Article 56 of the Treaty

14 With regard to Article 56 of the Treaty, the Commission argues that discriminatory treatment is justified only if it is directed against a genuine threat serious enough to affect a fundamental social interest. The Member State must show that such a threat exists. The exercise of the activity of a private detective or field guard cannot, in itself, be regarded as such a threat. The same applies to discrimination against legal persons. Even if a threat exists, a Member State may not prohibit access to a whole sector of economic activity. Such a measure is in any case disproportionate. It is up to the Member State to show that such a measure is proportionate to any threat which might arise. The grounds put forward by the Spanish Government do not satisfy that requirement.

(c) Article 48(3) and (4) of the Treaty

15 In connection with freedom of movement for workers, the Commission takes the view that the Spanish Government cannot successfully rely either on Article 48(3) of the EC Treaty or on Article 48(4) of the EC Treaty. The staff of private security companies are technically not public officials and are not entrusted with the exercise of official authority for the protection of State interests. Otherwise, the Commission refers to its arguments on the applicability of Articles 55 and 56 of the Treaty.

III. The Spanish Government's view

16 The Spanish Government does not deny that freedom of establishment, the freedom to provide services and freedom of movement for workers are restricted, but is of the opinion that it can successfully rely on the grounds of justification provided for by the Treaty. In view of their objective, which consists in the maintenance of public security, the activities of private security companies involve the exercise of official authority.

17 Under Article 13 of the Law, security companies have authority to protect isolated residential developments or industrial estates in which persons and vehicles move around freely, and to require persons in public places to produce identification. Likewise, when protecting valuables in transit, the activity of the undertakings in question extends to the public highway. The duty of private security companies to provide certain auxiliary services for public officials in the performance of particular supervisory functions shows that their activity can impinge on the rights and freedoms of citizens. Security companies can therefore be expected to demonstrate a certain solidarity vis-à-vis the State. According to the Spanish Government, the State reserves to itself control of the means of maintaining law and order by issuing authorisations and licences.

18 With regard to the grounds of public security and public policy, the Spanish Government is of the opinion that it is the task of the Commission to prove that there are less drastic means than those chosen by the Spanish State. As is clear from the nature of the functions which the security firms exercise, public security and public policy may, in some circumstances, be threatened by the security firms themselves and therefore they must be strictly controlled. However, according to the Spanish Government, that is only possible to the extent necessary if the undertakings and natural persons concerned are established in the Member State in which they pursue their activities. Likewise, without a permanent establishment, rapid and direct contact with customers is not possible. Article 55 must be interpreted in the light of Article 56 of the EC Treaty.

19 Finally, the Spanish Government relies on overriding reasons relating to the public interest. In connection with the regulation of private security firms there are reasons which demand particular caution, such as: (16)

- the need to guarantee adequately the security of persons and property,

- the need to make clear what rights citizens may have to set up or use private security firms as well as the underlying reasons on which the public security service is based,

- the need to prevent crime and to help maintain public security,

- the need to prevent unwarranted assumption of authority, lack of standards for the approval of products, inadequate training of security guards, irregularities in the exercise of their functions and the commission of numerous infringements, and the absence of minimum requirements,

- the need to ensure that the protection of security does not become the occasion for assaults, acts of violence, abuses of rights or interference with the legal or property interests of other persons.

20 Moreover, according to the Spanish Government, the protection of those who use the services and -- in a more general sense -- of consumers and the social system must be ensured. All of that would be impossible if the fundamental freedoms provided for in the Treaty were applied without prior harmonisation in this sphere. Finally, it is for each Member State to determine the requirements arising from its public policy.

21 With regard to freedom of movement for workers, the Spanish Government believes that it can rely successfully on the derogation in Article 48(3) of the EC Treaty because security personnel wear uniforms, are authorised to bear arms and are vested with special privileges which could affect the rights and freedoms of citizens.

C - Opinion

I. Legal persons

1. Freedom of establishment

22 Since the end of the transitional period, the prohibition of discrimination on grounds of nationality has been a directly effective constituent of freedom of establishment. (17) Under Article 52 in conjunction with Article 58 of the Treaty, it applies to natural and legal persons. The requirement that a security undertaking should be constituted in Spain (18) prevents a security undertaking established in another Member State from pursuing its activity in the form of a legally dependent branch or agency. That requirement is therefore contrary to Article 52 of the EC Treaty.

23 The question arises as to whether the activities of security firms fall within the scope of the exception defined by Article 55 of the EC Treaty, that is, whether the provisions of the Treaty relating to freedom of establishment and to Article 66 do not apply to them. Under the first paragraph of Article 55 of the Treaty, that chapter does not apply to activities which are connected, even occasionally, with the exercise of official authority. In examining that criterion, account must be taken, on the one hand, of the fact that the exception cannot be given a scope which would exceed the objective for which it was inserted (19) and, on the other hand, of the fact that it is limited to those activities `which, taken on their own, constitute a direct and specific connection with the exercise of official authority.' (20)

24 It is true that, in the absence of any Community directives providing for harmonisation in the field of private security, reliance on Article 55 must be appraised separately in respect of each Member State. However, such appraisal must take account of `the Community character of the limits' set by Article 55 to the exceptions `in order to prevent the effectiveness of the Treaty in this area from being undermined by unilateral provisions adopted by the Member States.' (21)

25 The object of establishing and operating a security undertaking is to assume functions of surveillance and protection on the basis of private-law relations. The assets to be guarded (real property and valuables) will to a great extent be privately owned. The guarding of movable property in particular may also take place on public thoroughfares and in public places, as the Spanish Government has pointed out. Likewise, security contracts awarded in connection with sporting, cultural, political or similar events may entail the exercise of functions in public facilities. However, ultimately none of those factors nor the ownership of the assets to be guarded, is relevant in determining the nature of security firms' object. What matters is that they act on private initiative pursuant to contractual relations and in so acting are not vested with official authority.

26 For example, establishing the identity of persons entering a building does not require the delegation of official authority. Security firms must not, therefore, be regarded as persons exercising such authority. The Spanish legislation regulating private security firms draws a clear distinction between the functions to be assumed by security firms (22) and those reserved for the public security forces. When Article 5(1)(f) of the Law states, for example, that certain transmission services may be performed `in so far as they do not fall within the sphere of responsibility of the security forces', (23) that is proof of the clear separation of functions. Even accidental overlap in the carrying out of comparable functions (transmission of alarm signals) must be avoided.

27 Even assuming that security firms take on auxiliary functions for the security forces, that cannot hide the fact that the main functions are reserved for the security forces. In that connection, the distinction between main and auxiliary functions must be understood, not as a quantitative criterion, but as a qualitative one. The Law's description of the tasks of private security firms supports the conclusion that it is precisely the exercise of official authority that is reserved for the security forces. For example, when, in the course of performing their surveillance duties, private security firms notice suspicious occurrences or persons acting suspiciously, any questioning or even arrests may be carried out only by the security forces, (24) which clearly shows the difference of degree between their respective powers.

28 It can therefore be concluded that private security firms are not `directly and specifically' involved in the exercise of official authority. Consequently, the exception provided for in Article 55 of the EC Treaty does not apply in this context.

29 In examining whether the Spanish Government is entitled to rely on Article 56 of the EC Treaty, which allows special treatment for foreign nationals `on grounds of public policy, public security or public health', account must be taken of the fact that that provision also authorises Member States to apply to Community citizens, on the said grounds, provisions providing for special treatment for foreign nationals exercising an activity in a self-employed capacity. In so far as it applies to natural persons, it is analogous to Article 48(3) of the EC Treaty. In that respect, the structure and purpose of the provision are not such as to justify making the `nationality of an undertaking' a condition of its freedom to pursue an activity.

30 In so far as a Member State considers it necessary to regulate a sector of the economy for overriding reasons relating to the general interest, it may do so by means of non-discriminatory measures, provided that such measures are suitable for securing the attainment of the objective which they pursue and do not go beyond what is necessary in order to attain it. (25) Thus, making the exercise of an activity by an undertaking subject to authorisation (26) appears to be a valid means of protecting the general interest. Authorisation as such, and supervision of the undertakings, as required by the Spanish legislation, are not complained of by the Commission and are therefore not the subject-matter of these proceedings. It is therefore sufficient to point out at this stage that the overriding reasons of general interest asserted by the Spanish Government can be taken into account in connection with the authorisation and supervision of the undertakings. However, it is not possible to justify prescribing the `nationality of the company' as one of the conditions of authorisation.

2. Freedom to provide services

31 The finding of unjustified discrimination applies with regard to the provision on freedom of establishment. However, it applies a fortiori in relation to the provisions on freedom to provide services. That is because the requirement of a permanent establishment in the territory of a Member State as a condition for an undertaking to pursue its activity must be regarded as the very negation of the freedom to provide services. (27) The `nationality requirement' in respect of security firms goes even beyond that. Moreover, a Member State may not make the provision of services in its territory `subject to compliance with all the conditions required for establishment and thereby deprive of all practical effectiveness the provisions whose object is to guarantee the freedom to provide services'. (28) The exceptions (Article 55 of the EC Treaty) and grounds of justification for any discrimination (Article 56 of the EC Treaty) which are applicable in relation to freedom of establishment also apply, pursuant to Article 66, to freedom to provide services. Their content, however, does not go beyond their scope which is applicable in relation to freedom of establishment. The `nationality requirement' for undertakings must therefore be characterised as contrary to Community law.

II. Natural persons

1. Freedom of establishment

(a) Residence of directors and managers

32 The question arises as to whether the residence requirement for directors and managers of security firms is to be regarded as indirect discrimination on grounds of nationality and thus as contrary to the principles of freedom of establishment.

33 It must be assumed that the great majority of the nationals of a Member State are resident and domiciled in that State, whereas the nationals of other Member States are established primarily in those States. Consequently, such a residence requirement definitely amounts to discrimination on grounds of nationality. (29) The nationals of other Member States must first transfer their residence to that State in order to comply with the requirements of its legislation.

34 The Spanish Government considers that the condition is justified, on the one hand, because of the need for strict controls and, on the other, because of the direct contact with the customers which may be necessary.

35 To that it must be replied that the authorisation and supervision of undertakings can be carried out without the directors and managers having to take up residence in the territory of the Member State. Authorisation and supervision constitute a rather abstract process in relation to a company, one which is not affected by the place of residence of the company's executive personnel. In the context of freedom of establishment in particular, Article 54(3)(f) of the EC Treaty, which is a provision concerning the abolition of restrictions, demonstrates the point that the entry of executive personnel into managerial or supervisory posts in secondary establishments is to be encouraged. (30)

36 Finally, the way in which contact with customers is established and organised is, ultimately, a matter for the security firms on the one hand and the potential customers on the other. The fact that business relations are shaped on the basis of private law does not entitle a Member State to impose, by a sovereign act, a residence requirement on a particular group of executive personnel. The residence requirement must therefore be regarded as unjustified discrimination and thus as contrary to the principles of freedom of establishment.

(b) Nationality of field guards and private detectives

37 The nationality requirement imposed on workers defined as `security personnel' constitutes, in the case of field guards and private detectives (the Law expressly includes also those acting in a self-employed capacity), direct discrimination on grounds of nationality. Such discrimination could be justified only under Article 55 or 56 of the EC Treaty. In so far as neither field guards nor private detectives are entrusted with the exercise of official authority, reliance on Article 55 of the EC Treaty is precluded. However, under Article 56 of the EC Treaty, only limitations based on risks posed by the person concerned may be imposed on self-employed persons on grounds of public policy, public security or public health. For example, measures implementing the derogation under Article 3(1) of Directive 64/221 (31) must be based exclusively on the personal conduct of the individual concerned. Consequently, general considerations relating to crime prevention are not sufficient justification for barring access to an entire occupation by means of a nationality requirement. Such a requirement must therefore be regarded as contrary to Community law.

38 The same must also be true with regard to freedom to provide services. 2. Freedom of movement for workers

39 As far as employed persons are concerned, in principle no other conclusion can be reached. By laying down a nationality requirement in respect of security personnel, nationals of other Member States are barred from entering that occupation. Such a condition of entry appears to be discrimination between workers of the Member States as regards employment, which is prohibited under Article 48(2) of the EC Treaty, if it cannot be justified under Article 48(3) or (4).

40 Article 48(3) allows limitations of freedom of movement for workers on grounds of public policy, public security or public health. As already indicated in the examination of Article 56 of the EC Treaty, only grounds connected with the person concerned can justify invoking that derogation. Thus, restrictions may not be imposed on the right of a national of any Member State to enter the territory of another Member State, to stay there and to move freely within it unless his presence or conduct `constitutes a genuine and sufficiently serious threat to public policy.' (32) A blanket and absolute exclusion from an occupation, as constituted by a nationality requirement, is not permissible.

41 There can be no objection to an official authorisation or examination of the suitability of a person for the exercise of a particular activity, provided that it is carried out without discrimination. In principle, therefore, `ministerial authorisation', as prescribed by the Law, is unproblematic from the point of view of Community law. For that purpose, it would be reasonable and possible to verify that the individual applicant satisfied certain conditions, such as possessing the right to vote and hold public office.

42 Finally, Article 48(4) excludes `employment in the public service' from the scope of freedom of movement for workers provided for under Article 48. As a derogation from the rule, that exception must be construed in such a way (33) as to `limit its scope to what is strictly necessary for safeguarding the interests which that provision allows the Member States to protect'. The content and limits of the exception must be determined on the basis of Community law. The Court has consistently held that employment in the public service is to be understood as limited to such posts as `involve direct or indirect participation in the exercise of powers conferred by public law and duties designed to safeguard the general interests of the State or of other public authorities.' (34)

43 Although the services provided by the private security firms certainly also contribute to the maintenance of public security, which undoubtedly counts as one of the general interests of the State, I have already pointed out, in the examination of the provisions on freedom of establishment, that the security firms are not, in principle, vested with sovereign powers. Moreover, the activities performed by the workers employed by those firms may not go beyond the purpose for which the employing firm was established. Consequently, it is not possible to rely on Article 48(4) in order to justify discrimination on grounds of nationality. (35)

44 The forms of order sought by the Commission should therefore be granted.

Costs

In accordance with the first paragraph of Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since, in accordance with the solution proposed above, the defendant would be the unsuccessful party, it should be ordered to pay the costs.

D - Conclusion

45 In the light of the foregoing I propose that the Court:

. Declare that, in so far as Articles 7, 8 and 10 of Law No 23/1992 of 30 July 1992 make the grant of authorisation to carry on private security activities in the case of `security companies' subject to the requirement of being constituted in Spain, the requirement that their directors and managers should reside in Spain and the requirement that the `security staff' should possess Spanish nationality, the Kingdom of Spain has failed to fulfil its obligations under the EC Treaty, in particular Articles 48, 52 and 59.

(1) - Boletín Oficial del Estado of 4 August 1992.

(2) - Article 7(1)(b) reads: `... las empresas de seguridad ... deberán tener la nacionalidad española.'

(3) - See Article 5(1)(a).

(4) - See Article 5(1)(b).

(5) - See Article 5(1)(c) and (d).

(6) - See Article 5(1)(e).

(7) - See Article 5(1)(f).

(8) - See Article 5(1)(g).

(9) - See footnote 2 above.

(10) - See Article 18(b) of the Law.

(11) - See Article 19 of the Law.

(12) - Case C-221/89 [1991] ECR I-3905.

(13) - See footnote 2 above.

(14) - See footnote 2 above.

(15) - See judgments in Case 2/74 Reyners [1974] ECR 631 and Case C-42/92 Thijssen [1993] ECR I-4047.

(16) - The text of the Spanish Government's defence reads:

`(a) Garantizar adecuadamente la seguridad de personas y bienes.

(b) Articular las facultades que puedan tener los ciudadanos de crear o utilizar los servicios privados de seguridad, con las razones profundas sobre las que se asienta el servicio público de seguridad.

(c) Prevención del delito y contribución al mantenimiento de la seguridad pública.

(d) Evitar el intrusismo, la falta de normas de homologación de productos, deficiente formación de los vigilantes, irregularidades en su funcionamiento y comisión de numerosas infracciones, así como la ausencia sobrevenida de requisitos esenciales.

(e) Garantizar que la defensa de la seguridad no sea ocasión de agresiones, coacciones, desconocimiento de derechos o invasión de las esferas jurídicas y patrimoniales de otras personas.'

(17) - See the judgment in Case 2/74, cited in footnote 15, at paragraphs 30 and 32.

(18) - See footnote 2 above.

(19) - See the Reyners case, cited in footnote 15, at paragraph 43.

(20) - See the Reyners case, cited in footnote 15, at paragraph 45.

(21) - See judgment in Case 147/86 Commission v Greece [1988] ECR 1637, at paragraph 8.

(22) - See Article 5 of the Law.

(23) - The original text reads: `... cuya realización no sea de la competencia de dichas Fuerzas y Cuerpos'.

(24) - See, for example, Article 71(1)(d) or Article 76(2) of the Decree.

(25) - See the judgment in Case C-55/94 Gebhard [1995] ECR I-4165, at paragraph 37.

(26) - See the judgments in Case 205/84 Commission v Germany [1986] ECR 3755, at paragraph 42 et seq., and Case C-101/94 Commission v Italy [1996] ECR I-2691, at paragraphs 9 to 11.

(27) - Judgment in Commission v Germany, cited in footnote 26, at paragraph 52, and judgment in Commission v Italy, cited in footnote 26, at paragraph 31.

(28) - Judgment in Case C-43/93 Vander Elst [1994] ECR I-3803, at paragraph 17.

(29) - See Factortame judgment, cited in footnote 12, at paragraph 32.

(30) - Article 54(3)(f) reads: `The Council and the Commission shall carry out the duties devolving upon them ... by effecting the progressive abolition of restrictions on freedom of establishment in every branch of activity under consideration, both as regards the conditions for setting up agencies, branches or subsidiaries in the territory of a Member State and as regards the conditions governing the entry of personnel belonging to the main establishment into managerial or supervisory posts in such agencies, branches or subsidiaries' (emphasis added).

(31) - Council Directive 64/221 of 25 February 1964 on the co-ordination of special measures concerning the movement and residence of foreign nationals which are justified on grounds of public policy, public security or public health (OJ No 56 of 4 April 1964, p. 850); in its judgment in Case 41/74 van Duyn [1974] ECR 1337, at paragraph 15 of the grounds and paragraph 2 of the operative part, the Court declared Article 3(1) of Directive 64/221 to be directly applicable.

(32) - Judgments in Case 36/75 Rutili [1975] ECR 1219, at paragraph 28, and Case 30/77 Bouchereau [1977] ECR 1999, at paragraph 35.

(33) - Judgment in Case 225/85 Commission v Italy [1987] ECR 2625, at paragraph 7.

(34) - See the judgments in Case 149/79, first judgment in that case, Commission v Belgium [1980] ECR 3881, at paragraph 10, and Case C-290/94 Commission v Greece [1996] ECR I-3285, at paragraph 2.

(35) - See the judgment in Commission v Greece, cited in footnote 34, at paragraph 36.