Judgment;Summary — ECLI:EU:C:2020:463
Date: 2020-06-11
Language of the case: Latvian
Court formation: Sixth Chamber
Subject matter: Right of establishment;Free movement of capital;Anti-discrimination;Non-discrimination on grounds of nationality
Procedure: Reference for a preliminary ruling
Origin: Latvia

Anonymised version 
Translation C-206/19 — 1 
In Case C-206/19 
REQUEST FOR A PRELIMINARY RULING 
Date lodged: 
5 March 2019 
Referring court: 
Administratīvā rajona tiesa (Latvia) 
Date of the decision to refer: 
28 February 2019  
Applicant: 
SIA ‘KOB’ 
Defendant: 
Madonas novada pašvaldības Administratīvo aktu strīdu komisija 
  
ADMINISTRATĪVĀ RAJONA TIESA 
RĪGAS TIESU NAMS (District Administrative Court, Riga Section) 
DECISION 
Riga 28 February 2019 
The Administratīvā rajona tiesa […] 
[composition of the referring court] […] 
After examining, in the written procedure, the action brought by SIA ‘KOB’ 
seeking a declaration as to the illegality of Decision No 5/2018 […] of the 
Madonas novada pašvaldības Administratīvo aktu strīdu komisija (Commission 
for the resolution of administrative disputes of the municipality of Madona) of 
6 April 2018,  
EN 
REQUEST FOR A PRELIMINARY RULING OF 28.2.2019. — CASE C-206/19 
 
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has found as follows: 
Facts 
[1] The applicant, SIA ‘KOB’, is a commercial company registered in the 
Republic of Latvia, which is engaged in the commercial activity of growing 
cereals (except rice), leguminous crops and oil seeds. The sole member of the 
Board of Directors of the applicant company who is authorised to represent the 
company by himself is VP, a national of the Federal Republic of Germany. The 
members of the applicant, which hold the shares in that company, are three 
companies registered in the Republic of Latvia, namely SIA ‘FLAXAN 1’, SIA 
‘RSSK’ and SIA ‘SARE 1’, whose members are citizens of the Federal Republic 
of Germany. The beneficial owners of SIA ‘KOB’ are VP and ZT, nationals of the 
Federal Republic of Germany. 
On 10 January 2018 SIA ‘KOB’ concluded a contract for the purchase of 
immovable property which concerned an area of land of 8.10 hectares. 
Pursuant to the law ‘Par zemes privatizāciju lauku apvidos’ (Law on the 
privatisation of land in rural areas) and the provisions of the Ministru kabineta 
2014.gada 2.decembra noteikumi Nr.748 ‘Noteikumi par darījumiem ar 
lauksaimniecības zemi’ (Cabinet Regulation No 748 of 2 December 2014 
‘Regulations regarding transactions with agricultural land’), the purchaser must –– 
within 30 days of the conclusion of the contract –– submit a declaration to the 
local authority informing that authority of the transaction concerning agricultural 
land and must request approval from that authority in order to gain ownership of 
that land, providing all of the necessary documents. 
After examining the applicant’s request, the Commission for the resolution of 
administrative disputes of the municipality of Madona refused, by decision […] of 
6 April 2018, to transfer ownership of the agricultural land to SIA ‘KOB’. 
That refusal was based on the fact that the applicant had not submitted a certificate 
of registration as a Union citizen and a document demonstrating a knowledge of 
the official language corresponding to at least level B.2, as required under Section 
28.1(2)(f) of the Law on the privatisation of land in rural areas. 
In the light of that refusal, the applicant brought an action before the 
Administratīvā rajona tiesa (District Administrative Court) seeking, first, a 
favourable decision, namely a declaration confirming the transfer of ownership of 
the agricultural land to SIA ‘KOB’, and secondly, a declaration as to the illegality 
of the decision by the Commission for the resolution of administrative disputes of 
the municipality of Madona of 6 April 2018 [...]. 
In its action before that court SIA ‘KOB’ claimed that there is a conflict between 
the provisions of international law, namely Articles 18, 49 and 63 TFEU and 
Article 45 of the Charter of Fundamental Rights of the European Union, and the 
provisions of Latvian national law, namely Section 28.1(2)(f) of the Law on the 
KOB 
 
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privatisation of land in rural areas. According to the applicant that constitutes 
discrimination on the grounds of nationality. 
The defendant […] disputes those assertions, claiming that Article 345 TFEU 
provides that the TEU and the TFEU are in no way to prejudice the rules in 
Member States governing the system of property ownership, meaning that 
Member States are permitted to adopt legislation with regard to the system of 
property ownership within their national legal order, inter alia establishing 
restrictions on the acquisition of ownership of agricultural property in order to 
achieve the legislature’s aim which is concerned with reasons of overriding public 
interest. According to the defendant, the restrictions are proportionate and there is 
no conflict between the provisions of international law and the provisions of 
national law in question. 
Applicable law 
EU Law 
[2] Under Article 18 TFEU, within the scope of application of the Treaties and 
without prejudice to special provisions contained therein, any discrimination on 
grounds of nationality is to be prohibited. 
Article 49 TFEU prohibits restrictions on the freedom of establishment of 
nationals of a Member State in the territory of another Member State. Restrictions 
on the setting-up of agencies, branches or subsidiaries by nationals of any 
Member State established in the territory of any Member State are also prohibited. 
Freedom of establishment is to 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 54, 
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. [Or. 3] 
Article 63(1) TFEU provides that 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 are to be prohibited. 
At the same time, Article 345 TFEU states that the Treaties are in no way to 
prejudice the rules in Member States governing the system of property ownership. 
Latvian law 
[3] Section 28.1(1)(2) of the Law on the privatisation of land in rural areas 
provides that ‘the parties to the transaction, referred to in paragraph 1 of Section 
28 of the present law, may acquire ownership of: agricultural land and land where 
the dominant category of use of that land is for agricultural purposes –– this being 
determined by comparing the area destined for that category of use with the sum 
REQUEST FOR A PRELIMINARY RULING OF 28.2.2019. — CASE C-206/19 
 
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of the other areas that are the subject of the transaction which correspond to other 
categories of land use or with the surface area of the individual plot of land which 
is the subject of the transaction ––as well as the interest in the property held in co-
ownership of such land (‘the agricultural land’), [provided that] they are legal 
persons that satisfy all of the following requirements: 
(b) they certify in writing that such land will, if the land has been the subject of 
direct payments in the previous or current year, be used for agricultural activity 
within one year after its purchase and that such use will be ensured thereafter, or, 
if the land has not been the subject of direct payments in the previous or current 
year, that it will be used for such purposes within three years from the purchase 
date and that such use will be ensured thereafter; 
(d) the beneficial owners of those legal persons can be identified and it can be 
certified that all the beneficial owners are persons as referred to in Section 28, 
Paragraph one, point 1 of this Law; 
(e) the total amount of tax debts of those legal persons does not exceed EUR 150 
either in Latvia or in the State where those persons are established; 
(f) in cases where the member or members who together represent more than half 
of the voting capital in the company, and all persons who are entitled to represent 
the company, are nationals of other European Union Member States or of States 
that are part of the European Economic Area or nationals of the Swiss 
Confederation, those persons have obtained a certificate of registration as a Union 
citizen and a document demonstrating a knowledge of the official language 
corresponding to at least level B.2.’ 
Thus, in order for a legal person, the shareholders and representatives of which are 
citizens of other Member States of the European Union, to acquire ownership of 
agricultural land, it must submit, with regard to those shareholders and 
representatives, a certificate of registration as a Union citizen and a document 
demonstrating a knowledge of the official language corresponding to at least level 
B.2. 
The person entitled to represent SIA ‘KOB’ is VP who is  the member of its Board 
of Directors and a national of the Federal Republic of Germany. Both VP and the 
other shareholders of SIA ‘KOB’, who have more than half of the voting capital in 
the company and who, in the present case, are also nationals of the Federal 
Republic of Germany, are required to submit a certificate of registration as a 
Union citizen and a document demonstrating a knowledge of the official language 
corresponding to at least level B.2. 
The procedure for obtaining a certificate of registration as a Union citizen is set 
out in the Ministru Kabineta 2011.gada 30.augusta noteikumi Nr.675 ‘Kārtība, 
kādā Savienības pilsoņi un viņu ģimenes locekļi ieceļo un uzturas Latvijas 
Republikā’ (Cabinet Regulation No 675 of 30 August 2011 ‘Procedures for the 
entry and residence in the Republic of Latvia of citizens of the European Union 
KOB 
 
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and their family members’). In accordance with Point 25 of that regulation, where 
an EU citizen wishes to reside in the Republic of Latvia for longer than three 
months [Or. 4], as of the first day of entry, he must register with the [Latvijas 
Republikas Iekšlietu Ministrijas Pilsonības un Migrācijas Lietu Pārvalde (The 
Office of Citizenship and Migration Affairs of the Ministry of the Interior of the 
Republic of Latvia)] and obtain a registration certificate. 
Thus, the shareholders of the applicant company who together have more than 
half of the voting capital in SIA ‘KOB’, as well as all persons who are entitled to 
represent that company, could receive a certificate of registration as a Union 
citizen upon showing that they wish to reside in the Republic of Latvia for longer 
than three months.  
In turn, according to Point 17.4 of Ministru kabineta 2009.gada 7.jūlija noteikumi 
Nr.733 ‘Noteikumi par valsts valodas zināšanu apjomu un valsts valodas prasmes 
pārbaudes kārtību profesionālo un amata pienākumu veikšanai, pastāvīgās 
uzturēšanās atļaujas saņemšanai un Eiropas Savienības pastāvīgā iedzīvotāja 
statusa iegūšanai un valsts nodevu par valsts valodas prasmes pārbaudi’ (Cabinet 
Regulation No 733 of 7 July 2009 ‘Regulations regarding the level of knowledge 
of the official language and the procedures for examination of that level of 
knowledge for the performance of professional duties and official duties, receipt 
of the permanent residence permit and obtaining of the status of a long-term 
resident of the European Union and the State fee for examination of the level of 
fluency in the official language’), a knowledge of the official language 
corresponding to level B.2 means that the person is able to discuss everyday 
subjects and professional issues, to clearly phrase and justify his or her opinion, 
reads and understands texts on various subjects, is able to write the documents 
necessary for work (for example, statements, summaries, minutes, reports, 
declarations), as well as expanded texts regarding personal and professional topics 
and the person comprehends and understands naturally paced spoken texts on 
different topics. 
 
Reasons for the uncertainty as to the interpretation of EU law 
[4] The freedom of establishment conferred by Article 49 TFEU on EU nationals 
entails for them access to, and pursuit of, activities as self-employed persons and 
the setting up and management of undertakings, under the same conditions as 
those laid down for its own nationals by the laws of the Member State of 
establishment. According to the settled case-law, Article 49 TFEU is thus 
intended to ensure that all nationals of all Member States who establish 
themselves in another Member State for the purpose of pursuing activities there as 
self-employed persons receive the same treatment as nationals of that State, and it 
prohibits, as a restriction on freedom of establishment, any discrimination on 
grounds of nationality resulting from national legislation (see, inter alia, the 
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judgments in Commission v France, 270/83, EU:C:1986:37, paragraph 14, and 
Commission v Belgium, C-47/08, EU:C:2011:334, paragraph 80). 
Whilst Article 345 TFEU, to which the applicant […] referred in its observations, 
expresses the principle that the Treaties are neutral in relation to the rules in 
Member States governing the system of property ownership, that article does not, 
however, mean that rules governing the system of property ownership current in 
the Member States are not subject to the fundamental rules of the FEU Treaty 
(judgment of 22 October 2013, Essent and Others, C-105/12 to C-107/12, 
EU:C:2013:677, paragraphs 29 and 36 and the case-law cited, and Opinion 2/15 
(Free Trade Agreement with Singapore) of 16 May 2017, EU:C:2017:376, 
paragraph 107). 
Thus, although that provision does not call into question the Member States’ right 
to establish a system for the acquisition of immovable property which lays down 
specific measures applying to transactions concerning agricultural and forestry 
land, such a system remains subject inter alia to the rule of non-discrimination, 
and to the rules relating to freedom of establishment and free movement of capital 
(see judgment of 23 September 2003, Ospelt and Schlössle Weissenberg, 
C-452/01, EU:C:2003:493, paragraph 24 and the case-law cited). [Or. 5] 
On 18 October 2017, the European Commission published an ‘Interpretative 
Communication on the Acquisition of Farmland and European Union Law’ 
(2017/C 350/05). Point 2(a) of that communication provides that the right to 
acquire, use or dispose of agricultural land falls under Article 63 TFEU which 
prohibits all restrictions on the movement of capital between Member States. 
For its part, Point 3(a) of the Commission’s communication refers to the specific 
nature of agricultural land. It is stated in that communication that the Court of 
Justice of the European Union has recognised the specific nature of agricultural 
land and in its rulings on the acquisition of agricultural real estate, it has 
recognised a number of public policy objectives that can in principle justify 
restrictions on investment in agricultural land such as: (i) to preserve a traditional 
form of farming of agricultural land by means of owner-occupancy and ensure 
that agricultural property be occupied and farmed predominantly by the owners, 
preserve a permanent agricultural community, and encourage a reasonable use of 
the available land by resisting pressure on land; (ii) to increase the size of land 
holdings so that they can be exploited on an economic basis, to prevent land 
speculation; (iii) to preserve agricultural communities, maintain a distribution of 
land ownership which allows the development of viable farms and management of 
green spaces and the countryside, encourage a reasonable use of the available land 
by resisting pressure on land, prevent natural disasters, and sustain and develop 
viable agriculture on the basis of social and land planning considerations (which 
entails keeping land intended for agriculture in such use and continuing to make 
use of it under appropriate conditions). 
KOB 
 
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Having regard to the foregoing, the referring court expresses doubts as to whether 
to apply Section 28.1(2)(f) of the Law on the privatisation of land in rural areas, 
which requires legal persons, the shareholders and representatives of which are 
nationals of other Member States of the European Union, to submit a certificate of 
registration as a Union citizen and a document demonstrating a knowledge of the 
official language corresponding to at least level B.2, in order to acquire ownership 
of agricultural land. 
It is therefore […] appropriate to refer a question to the Court of Justice of the 
European Union. Moreover […], the proceedings shall be stayed pending the 
judgment of the Court of Justice of the European Union on the present request for 
a preliminary ruling. 
In accordance with Article 267 TFEU, […] the Administratīvā rajona tiesa 
Orders 
that the following question be referred to the Court of Justice of the European 
Union for a preliminary ruling: 
Does European Union law, in particular Articles 18, 49 and 63 TFEU, preclude 
national legislation which requires legal persons –– in cases where the member or 
members who together represent more than half of the voting capital in the 
company, and all persons who are entitled to represent that company, are nationals 
of other Member States of the European Union –– to submit certificates of 
registration of those members or representatives as Union citizens and a document 
demonstrating that they have a knowledge of the official language corresponding 
to at least level B.2, in order to acquire ownership of agricultural land[?] 
that the proceedings in the administrative case […] be stayed pending a decision 
from the Court of Justice. 
No appeal lies against the present decision. 
[…]