Case C‑177/20

‘Grossmania’ Mezőgazdasági Termelő és Szolgáltató Kft.

v

Vas Megyei Kormányhivatal

(Request for a preliminary ruling from the Győri Közigazgatási és Munkaügyi Bíróság)

Judgment of the Court (Third Chamber), 10 March 2022

(Reference for a preliminary ruling – Principles of EU law – Primacy – Direct effect – Sincere cooperation – Article 4(3) TEU – Article 63 TFEU – Obligations on a Member State as a result of a preliminary ruling – Interpretation of a provision of EU law given by the Court in a preliminary ruling – Obligation to give full effect to EU law – Obligation for a national court to disapply national legislation which is contrary to EU law as interpreted by the Court – Administrative decision which became final in the absence of a challenge before the courts – Principles of equivalence and effectiveness – Liability of the Member State)

Member States – Obligations – Duty of sincere cooperation – Obligations of national courts – National legislation providing for the extinguishment of rights of usufruct and their deletion from the land register – National legislation incompatible with EU law as interpreted by the Court – Obligation to disapply that national legislation – Deletion of the rights of usufruct, which became final in the absence of a challenge before the courts – Obligation to nullify the unlawful consequences of a breach of EU law – Obligation to order the competent authority to reinstate those rights – Reinstatement impossible – Right to compensation

(Art. 4(3) TEU; Arts 63 and 267 TFEU; Charter of Fundamental Rights of the European Union, Art. 17(1))

(see paragraphs 45, 57, 58, 62, 64-68, 75, operative part)

Résumé

‘Grossmania’ Mezőgazdasági Termelő és Szolgáltató Kft. (‘Grossmania’), a company established in Hungary, but whose members are nationals of other Member States, held rights of usufruct over agricultural land in Hungary. On 1 May 2014, its rights were deleted from the land register pursuant to Hungarian legislation providing for the extinguishment by operation of law on that date of the rights of usufruct over agricultural land previously created by contract between persons who were not close members of the same family. In 2018, by its judgment in SEGRO and Horváth, ( 1 ) the Court held that the free movement of capital, within the meaning of Article 63 TFEU, precludes such national legislation. Following that judgment, Grossmania applied to the competent authorities for the reinstatement of its rights of usufruct. However, its application was rejected.

Called upon to assess the legality of that refusal to reinstate those rights, the Győri Közigazgatási és Munkaügyi Bíróság (Administrative and Labour Court, Győr, Hungary) decided to ask the Court for a ruling on the scope of the mandatory effects of preliminary rulings. According to that court, it follows from the Court’s judgment in SEGRO and Horváth that the Hungarian legislation on which Grossmania’s application was rejected contravenes EU law. In contrast to the situations which gave rise to that judgment, Grossmania had not contested before the courts the deletion of its rights of usufruct. The referring court therefore asks whether, in the light of the judgment in SEGRO and Horváth, it may nevertheless disregard the national legislation at issue on the ground that it contravenes EU law and order the competent authorities to reinstate the rights of usufruct which have been deleted.

In its judgment, the Court sets out the obligations of the Member States, in particular of the national courts and tribunals, arising from a preliminary ruling with regard to national legislation that contravenes EU law in the case of a decision which has become final implementing that legislation, and the measures which they must take in order to nullify the unlawful consequences caused by that legislation.

Findings of the Court

First of all, the Court points out that, where its case-law provides a clear answer to a question concerning the interpretation of EU law, the national courts must do everything necessary in order to implement that interpretation. In accordance with the principle of the primacy of EU law, national courts must disapply any national legislation that contravenes a provision of EU law having direct effect, where it is not possible to interpret that legislation in accordance with EU law. That direct effect is attributed in particular to Article 63 TFEU which guarantees the free movement of capital. Therefore, since it follows from the judgment in SEGRO and Horváth that the Hungarian legislation at issue is incompatible with Article 63 TFEU, a referring court hearing an action for annulment of a decision based on that legislation is required to ensure that that article is fully effective by disapplying that national legislation.

Next, the Court states that, in accordance with the principles of effectiveness and sincere cooperation arising from Article 4(3) TEU, particular circumstances may require a national administrative body to review a decision that has become final. In that context, a balance must be struck between the requirement for legal certainty and the requirement for legality under EU law. The latter requirement matters greatly in the present case, given the far-reaching adverse consequences arising from the national legislation at issue and the deletion of the rights of usufruct implementing that legislation. As is also apparent from the judgment in Commission v Hungary (Usufruct over agricultural land), ( 2 ) that legislation constitutes a manifest and serious breach both of the fundamental freedom provided for in Article 63 TFEU and of the right to property guaranteed in Article 17(1) of the Charter of Fundamental Rights of the European Union, since that breach affected more than 5000 nationals of Member States other than Hungary.

Consequently, in so far as the national legislation is, moreover, liable to give rise to confusion as to the need to contest the deletion decisions adopted under that legislation, the requirement for legal certainty cannot justify the fact that, in some circumstances, it is impossible under Hungarian law to contest, in an action brought against the refusal to reinstate rights of usufruct, the deletion of those rights which has since become final. The national court hearing the case should therefore reject that impossibility as being contrary to the principles of effectiveness and sincere cooperation.

Finally, the Court considers that, in the absence of specific rules in EU law on how to nullify the unlawful consequences of an infringement of Article 63 TFEU in the circumstances of the present case, measures intended to ensure compliance with EU law may consist, inter alia, in the reinstatement of unlawfully deleted rights of usufruct in the land register. The referring court must, however, ascertain, in the light of the legal and factual situation existing at the time of ruling, whether it is appropriate to order the competent authority to reinstate those rights or whether objective and legitimate obstacles preclude this, such as the acquisition in good faith by a new owner of the land affected by those rights of usufruct. Where such reinstatement proves impossible, it would be necessary, in order to nullify the unlawful consequences of the infringement of EU law, to award the former holders of the cancelled rights of usufruct appropriate compensation to remedy the economic loss resulting from the cancellation of those rights.

Furthermore, independently of the measures referred to above, the full effectiveness of EU law means that individuals harmed by a breach of that law must, by virtue of the principle of State liability for loss or damage caused by such a breach, also have a right to compensation in accordance with the conditions laid down by the case-law of the Court, which appear to be satisfied in the present case.

( 1 ) Judgment of 6 March 2018, SEGRO and Horváth (C‑52/16 and C‑113/16, EU:C:2018:157).

( 2 ) Judgment of 21 May 2019, Commission v Hungary(Usufruct over agricultural land) (C‑235/17, EU:C:2019:432).