OPINION OF ADVOCATE GENERAL

POIARES MADURO

delivered on 19 February 2004 ( )

Case C-327/02

Lili Georgieva PanayotovaRadostina Markova KalchevaIzabella Malgorzata LisLubica SopovaIzabela Leokadia TopaJolanta Monika Rusiecka

v

Minister voor Vreemdelingenzaken en Integratie

(Reference for a preliminary ruling from the Rechtbank te 's-Gravenhage (Netherlands))

(External relations – Association Agreements of the Community with Bulgaria, Poland and the Slovak Republic – Provisions on establishment – National legislation according to which applications for a full residence permit with a view to establishment are rejected without examination when the applicant does not have a temporary residence permit)

1. The reference for a preliminary ruling in the present case concerns the scope of the provisions on establishment of the Europe Agreements establishing an association between the European Community and the Slovak Republic, the Republic of Poland and the Republic of Bulgaria (‘the Association Agreements’). ( ) The Court is faced with the issue of whether those provisions preclude a Member State from establishing a system according to which applications submitted in its territory for a full residence permit with a view to establishment pursuant to one of those Agreements are rejected without examination if the applicant does not have a valid temporary residence permit which is to be obtained in the alien’s country of origin or of permanent residence.

I – Facts, applicable law and questions referred for a preliminary ruling

2. After entering the Netherlands, two Bulgarian citizens (Lili Georgieva Panayotova and Radostina Markova Kalcheva), three Polish citizens (Izabella Malgorzata Lis, Izabela Leokadia Topa and Jolanta Monika Rusiecka) and one Slovak citizen (Lubica Sopova) (‘the plaintiffs’) applied, at different dates between October 2000 and February 2001, for residence permits with a view to establishing themselves as self-employed prostitutes. In all cases, the Groningen police, acting on behalf of the Minister voor Vreemdelingenzaken en Integratie (Minister for Alien Affairs and Integration, ‘the defendant’), decided not to consider the plaintiffs’ applications pursuant to Article 16a of the Vreemdelingenwet (Law on Aliens) because they did not have temporary residence permits. The objections of the plaintiffs were declared unfounded by orders issued by the defendant. The plaintiffs appealed against the orders before the Rechtbank te ’s-Gravenhage (District Court, The Hague) (Netherlands), the referring court. According to the written observations submitted by the Commission, the plaintiffs were deported from the Netherlands shortly after the rejection of their applications.

3. The automatic rejection of the applications was a consequence of Article 16a(1) of the Vreemdelingenwet 1994, applicable in the main proceedings, according to which an application for a full residence permit will be examined only if the alien has a valid temporary residence permit which he or she has applied for to, and has been granted by, a Netherlands diplomatic or consular representative in the alien’s country of origin or of permanent residence. Paragraphs 3 and 4 of Article 16a respectively exempt, and provide for exemption of, specific categories of aliens from the requirement of prior possession of a temporary residence permit. Detailed rules on the exercise of that power of exemption are set out in Article 52a of the Vreemdelingenbesluit (Aliens Decree). Article 16a(6) of the Vreemdelingenwet 1994 includes a hardship clause, under which the requirement of possession of a valid temporary residence permit may be waived in very special individual cases. Since the plaintiffs did not fall into any of the exceptional categories, their application was rejected without examination.

4. On 1 April 2001 the Vreemdelingenwet 2000 entered into force, repealing the Vreemdelingenwet 1994. The national court considers that the earlier law is applicable to the cases before it, as the original decisions were taken when it was in force. The new law, which in the meantime has been the object of a similar request for a preliminary ruling referred by the Raad van State (Council of State) of the Netherlands in Case C-58/03 Encheva, seems not to have introduced substantive changes with regard to this point. The combined effect of Article 16 of the Vreemdelingenwet 2000 — according to which an application for a full residence permit may be rejected if the alien does not have a temporary residence permit —, Article 3.71 of the Vreemdelingenbesluit 2000 — according to which such an application must be rejected if the alien does not have a temporary residence permit — and the exceptions foreseen in those provisions seems to be identical to that of the 1994 legislation.

5. The national court also notes that no visa was required for the Polish and Slovak nationals at the time of their entry in the Netherlands for a stay of no more than three months. Those plaintiffs were lawfully present in the Netherlands when they applied for full residence permits with a view to establishment. However, under the Netherlands legislation on aliens (Article 8 of the Vreemdelingenwet 1994 in conjunction with Article 46(1)(c) of the Vreemdelingenbesluit 1994), the application for a full residence permit would automatically cause the free period of three months to lapse, as it shows that the alien intends to remain in the Netherlands beyond that period. As regards the Bulgarian nationals, a visa was required at the time for them to enter the Netherlands, so that their presence in the Netherlands was unlawful when they applied for full residence permits with a view to establishment.

6. Before the national court, the plaintiffs claimed that the Netherlands legislation was inconsistent with the provisions on establishment of the relevant Association Agreements, according to the interpretation thereof by the Court of Justice.

7. The relevant provisions of the Association Agreements ( ) are similarly drafted, in spite of minor differences with no bearing on the substance. According to Article 45 of the Agreements with the Republic of Bulgaria and the Slovak Republic and Article 44 of the Agreement with the Republic of Poland, from entry into force of the Agreement each Member State is to grant a treatment no less favourable than that accorded to its own companies and nationals for the establishment of, respectively, Bulgarian, Slovak or Polish companies and nationals, and in the operation of those companies and nationals established in its territory. This is however subject in each of the Agreements to a proviso (Article 59 of the Agreements with the Republic of Bulgaria and the Slovak Republic, and Article 58 of the Agreement with the Republic of Poland) according to which, for the purpose of the Title including the provisions on establishment, nothing in the Agreement is to prevent the Parties from applying their laws and regulations regarding entry and stay, work, labour conditions and establishment of natural persons, and supply of services, provided that, in so doing, they do not apply them in a manner as to nullify or impair the benefits accruing to any Party under the terms of a specific provision of the Agreement. According to a Joint Declaration annexed to the Final Act of each of the Agreements, the sole fact of requiring a visa for natural persons of certain Parties and not for those of others shall not be regarded as nullifying or impairing the benefits under a specific commitment.

8. The provisions on establishment of the Association Agreements have already been interpreted by the Court, in particular in three judgments of 27 September 2001. ( ) They will be analysed in detail below.

9. In those circumstances, the national court referred to the Court the following questions for a preliminary ruling:

‘1. Must the answer given by the Court to question 4 in its judgment of 27 November 2001 in Case C-257/99 Barkoci and Malik be interpreted to mean that it is incompatible with [the relevant provisions of the Association Agreements with the Republics of Bulgaria and Poland and the Slovak Republic] for the competent authority, when assessing an application submitted in the Netherlands for a full residence permit with a view to establishment in accordance with the Association Agreement, to refrain from examining the contents of the application solely on the ground that the applicant does not have a temporary residence permit? Does the fact that the substantive entry requirements are clearly and manifestly satisfied make any difference to the answer to this question?

2. Is it relevant for the purposes of answering the first question, and if so how, whether the person applying for a full residence permit is legally resident in the Netherlands at the time of the application, whether or not on the basis of an entitlement other than a temporary residence permit, such as the “free period” referred to in Article 8 of the Vreemdelingenwet?’

10. Written observations were submitted by the plaintiffs, the Netherlands Government and the Commission. Oral submissions were made at the hearing on behalf of the Netherlands, French and Greek Governments, and of the Commission.

II – Submissions of the parties

11. In their written observations, the plaintiffs argue that the relevant provisions of the Association Agreements together with the judgment in Barkoci and Malik mean that the competent national authority must consider all applications for a full residence permit with a view to establishment, regardless of the possession of a temporary residence permit issued in the country of origin. Whether the substantive entry requirements are clearly and manifestly satisfied should have no bearing on the answer to this question. Concerning the second question, they consider that it should be possible to apply in the Netherlands at any time for a full residence permit with a view to establishment.

12. The Netherlands Government — whose observations were largely shared by the French and Greek Governments at the hearing — recalls that it is undisputed in the main proceedings that the plaintiffs do not fall into any of the categories of aliens exempted under national law from the obligation to have a temporary residence permit in order to apply for a full residence permit with a view to establishment, and that they do not fall under the hardship clause. It also invokes the case-law of the Court on two points. First, the rights to enter and remain which are corollaries of the right of establishment enshrined in the Association Agreements may be limited inasmuch as the immigration rules applied by the competent national authorities do not affect the very substance of those rights, by making their exercise impossible or excessively difficult. Second, the Agreements do not in principle preclude a system of prior control which makes the issue by the competent immigration authorities of an authorisation for permanent residence subject to the condition that the applicant must show that he genuinely intends to take up an activity in a self-employed capacity without at the same time entering into employment or having recourse to public funds, and that he possesses, from the outset, sufficient financial resources and has reasonable chances of success. ( )

13. The Netherlands Government subsequently invokes practical reasons justifying a system of prior control in the country of origin. First, verification in the host country may not lead to precise and reliable conclusions, while it is easier to carry out enquiries in the country of origin, especially in view of the language and the better access to the information needed, such as personal data and records, and the opportunity to check the reliability of documents. Second, admission to the Netherlands before any prior examination is carried out would carry a risk of illegal immigration.

14. According to the Netherlands Government, the system of prior control allows the competent authorities to assess whether the applicant complies with the substantive conditions without rendering impossible or excessively difficult the exercise of the right of establishment. If applications were assessed after the alien had entered the country, their assessment would not be reliable and the legitimate aim of the system would be compromised. Thus, the Government considers that the Association Agreements do not preclude such a system. The fact that the substantive entry requirements are clearly and manifestly satisfied would have no bearing on the answer to the question.

15. The Netherlands Government also points out that Barkoci and Malik was focused on the system of the United Kingdom, which is different from the Netherlands regime. British authorities have a discretionary power to examine applications made by natural persons who have already entered the country without a temporary residence permit but clearly and manifestly satisfy the substantive requirements for establishment. A comparable power does not exist in the Netherlands. The hardship clause included in the legislation is only applicable in particular cases and does not cover those at issue. This clause cannot be interpreted so as to afford the possibilities that exist under the United Kingdom legislation. The automatic rejection of the applications is the intended consequence of the Netherlands legislation when a temporary residence permit is lacking. At the hearing, the Netherlands Government highlighted that under the new legislation and decree adopted in 2000 the situation has not changed with regard to this point.

16. As regards the second question, the Netherlands Government recalls that according to the legislation of that country the period of three months for nationals of countries for which a visa is not required automatically lapses if they apply for a full residence permit, as this shows that they intend to stay beyond that period. In such cases, the presence of the alien in the Netherlands is no longer lawful. A temporary residence permit is needed for the application to be examined.

17. In its written observations, the Commission proposes to consider the case without reference to the activities of prostitution to be pursued by the plaintiffs. The judgment of the Court in Jany ( )established the conditions under which those activities can be seen as economic activities carried out by self-employed persons. It would be for the national court to determine whether those conditions are fulfilled in the present cases, in particular in view of the fact that some of the plaintiffs would be carrying out their activities in sex-clubs. The Commission stresses that the present case is important for all activities that can be carried out by self-employed persons.

18. Concerning persons who are unlawfully resident in the Netherlands, such as two of the plaintiffs (the Bulgarian nationals), the Commission is of the view that Kondova ( )makes it clear that their applications may be rejected on the sole ground that they are unlawfully present in the Netherlands, because they do not have the requisite visa.

19. With regard to the nationals who were able to enter the territory of the Netherlands and remain in it for a period of three months without a visa, such as four of the plaintiffs (the Polish and Slovak nationals), the Commission considers that the possibility of applying for a full residence permit with a view to establishment during that period would contribute to the useful effect (effet utile) of the Association Agreements. In contrast, the automatic rejection of their applications and the obligation imposed on natural persons who clearly satisfy the substantive conditions for establishment to return to their country of origin in order to apply for a temporary residence permit prejudice the useful effect of the Agreements.

20. The Commission recalls that it defended these views in Barkoci and Malik and considers that the Court endorsed them in the operative part of the judgment, according to which the obligation to obtain prior entry clearance in the country of residence has neither the purpose nor the effect of making it impossible or excessively difficult to exercise the right of establishment under the Association Agreements, provided that the host Member State can grant leave to enter to persons lacking entry clearance if their application clearly and manifestly satisfies the substantive requirements that would have been applied for entry clearance in the country of residence. Thus the Commission considers that the system of the Netherlands is not compatible with the Association Agreements. The Commission adds, however, that in its view the Netherlands rules leave room for an interpretation conforming to the Agreements: the hardship clause could be applied in a more flexible manner and allow for the examination of such applications. Abuses would be limited by requiring the applicant to demonstrate that the free period of three months has not elapsed. The Commission also points out that in such circumstances the case-law allows for the examination of the application to be more summary than that carried out in the case of applications submitted in the country of residence.

21. On this point, the French Government argued at the hearing that the distinction between a more summary and a thorough examination is artificial, because a thorough examination will always be needed to assess whether the conditions for establishment are fulfilled. Allowing for any kind of examination of applications submitted in the territory of a MemberState would deprive of effectiveness the system of prior control in the country of origin.

III – Assessment

22. It may be clearer to deal with the questions referred for a preliminary ruling together. The main question is the following: whether the establishment provisions of the Association Agreements preclude a Member State from adopting a measure according to which an application submitted in its territory for a full residence permit with a view to establishment pursuant to the Association Agreements is to be rejected without examining the application solely on the ground that the applicant does not have a temporary residence permit. The answer to the main question may be affected by the issues raised in the two sub-questions, which relate to the relevance of clear and manifest compliance with the substantive entry requirements, and to the consequences of the lawfulness or unlawfulness of the plaintiffs’ presence in the Netherlands at the time of the application.

23. My assessment will be structured as follows: I will first examine the basic elements of the right of establishment enshrined in the Association Agreements, particularly in the light of the previous case-law of the Court (Section A). I will second identify the conditions to be met by measures of the Member States affecting such right of establishment (Section B). I will then apply those findings in reviewing the Netherlands rules at issue in the present case, distinguishing between the situations of aliens unlawfully and lawfully present in a Member State (respectively, Sections C and D).

A – The right of establishment under the Association Agreements

24. According to well-established case-law, an international treaty must be interpreted not solely by reference to the terms in which it is worded but also in the light of its objectives. Article 31 of the Vienna Convention of 23 May 1969 on the Law of Treaties stipulates in that respect that a treaty must be interpreted in good faith in accordance with the ordinary meaning to be given to its terms in their context and in the light of its object and purpose. ( ) The same applies to the Association Agreements. In so far as their context is concerned, the Association Agreements should be interpreted in the light of the political decision to use them as vehicles for accession, particularly after the Copenhagen European Council of 21-22 June 1993 and Agenda 2000. ( ) The Union institutions have used these agreements to assess the degree of convergence of the acceding Member States with the rules of market integration and other elements of the acquiscommunautaire. ( ) The purpose of the Union institutions appears to be that of progressive approximation between the rules of the Association Agreements and those of the EC Treaty. This is also supposed to prepare the respective national markets for the full application of the Community rules on market integration.

25. It is obvious that such a conception works both ways. The Association Agreements also serve to prepare the Union for the accession of the new Member States, their participation in the internal market (even if mediated by transitional rules) and the acquisition of European citizenship by the nationals of those States.

26. It is not surprising, therefore, that the Court has recognised the aim of the Association Agreements as being that of creating an appropriate framework for the gradual integration into the Community of the States that are parties to those agreements, with a view to their possible accession. ( ) The very objective of the Agreements may therefore justify a dynamic interpretation of their provisions that takes into account the evolution of the process of accession of the new Member States to the European Union. In my view, it is mainly the particular nature of these Agreements that explains the interpretation that the Court has given to their provisions.

27. The case-law of the Court has already clarified some of the issues relating to the interpretation of the establishment provisions of the Association Agreements. A number of the findings in Gloszczuk, Kondova and Barkoci and Malik are of a general nature: the establishment provisions of the Association Agreements are directly effective, conferring individual rights that can be invoked before and applied by national courts; ( ) the rights to enter and remain are corollaries of that right of establishment, but they are not absolute; ( ) there is no automatic extension of the case-law on establishment under the EC Treaty to the context of the Association Agreements, in view of differences in purpose and wording between the Treaty and the Agreements. ( ) The proviso of the Association Agreements on the application by the host Member State of its domestic rules regarding entry, stay and establishment of natural persons must be interpreted as meaning that the Member State may apply those rules, but they should be ‘appropriate for achieving the objective in view’ and should not constitute, ‘in regard to that objective, measures which would strike at the very substance of the rights [of establishment granted by the Association Agreements] by making exercise of those rights impossible or excessively difficult.’ ( )

28. With regard to the present case, the first important conclusion to be drawn from the previous decisions is that the right of establishment provided for in the Association Agreements entails a right to enter and reside in the Member States. In this respect, it is significant that the Court did not follow Advocate General Mischo or Advocate General Alber, who had argued that nationals from the States party to the Association Agreements could not derive any right of entry and residence from those Agreements. ( ) Instead, it clearly recognised that the rights of entry and residence are conferred as corollaries of the right of establishment. For the Court, the right ‘to take up and pursue economic activities not coming within the labour market presupposes that that person has a right to enter and remain in the host Member State.’ ( )

29. That the right of establishment enshrined in the Association Agreements entails rights of entry and residence is a simple consequence of its being understood as an individual right granted with direct effect whose effectiveness must be guaranteed. In fact, the latter rights are instrumental in the effective exercise of the former. If the right of establishment were made absolutely dependent upon the various national immigration rules, these could easily be used to undermine and even nullify the right of establishment contained in the Agreements.

30. The other side of this instrumental relationship is that the corollary rights of entry and residence under the Association Agreements exist only to the extent to which they are necessary for the exercise of the right of establishment. Such rights must, in the light of this, be subject to conditions that ensure that they are not used for purposes other than establishment.

31. Neither the European Union nor its Member States have committed themselves to granting a general right of freedom of movement to nationals of the Associated States. This explains and justifies the existence of rules controlling access to the territory of the Member States and the provisions of the Agreements intended to safeguard their effectiveness. As noted above, all the Agreements include a proviso according to which nothing in the Agreement is to prevent the Parties from applying their laws and regulations regarding entry and stay, work, labour conditions and establishment of natural persons, and supply of services, provided that, in so doing, they do not apply them in a manner such as to nullify or impair the benefits accruing to any Party under the terms of a specific provision of the Agreement. According to a Joint Declaration annexed to the Final Act of each of the Agreements, the sole fact of requiring a visa for natural persons of certain Parties and not for those of others is not to be regarded as nullifying or impairing the benefits under a specific commitment. The limits imposed on the movement of nationals of the contracting parties can also be deduced from the provisions on movement of workers in the Agreements. These provisions exclude any right of entry and residence and are exclusively concerned with the non-discriminatory treatment of those workers from the Associated States who are authorised to enter and reside in a Member State under the national immigration rules. ( )

32. The aim of guaranteeing the effectiveness of immigration controls for purposes other than establishment justifies the application of certain procedural requirements to nationals of the Associated States. The right of establishment under the Association Agreements may thus be subject to both substantive ( ) and procedural conditions (visa and other immigration procedures). The latter are however closely linked to the former, as their purpose is to guarantee that the right to enter and reside in a Member State is not used for purposes other than establishment.

33. It is for such reasons that the Court has also made clear, in its previous judgments, that certain systems of prior control would be compatible with the right of establishment under the Association Agreements. However, that compatibility is not unconditional. The Court has stated that a system of prior control ‘such as that established by the Immigration Rules [of the United Kingdom] under which the host Member State makes the granting of leave to enter and remain subject to verification by the competent immigration authorities that the applicant genuinely intends to pursue in that Member State a viable activity as a self-employed person and no other, is in principle compatible with [the Association Agreements].’ ( ) There are two important aspects to note in this finding. First, the acceptance of a particular procedural requirement of the national immigration rules (the system of prior control) is justified to the extent that it is necessary to verify that the applicant fulfils the substantive conditions regarding the right of establishment. ( ) Second, the expression ‘in principle’ indicates that the Court’s acceptance of the legality of such systems of prior control is not absolute: their legality is subject to certain conditions. These two aspects of the Court’s recognition of a system of prior control in Barkoci and Malik may indicate that such a system is not acceptable in certain cases. It may be possible to argue that while certain circumstances may justify the application of such a system of prior control to verify that the substantive requirements regarding establishment are met, in other circumstances that will not be the case. For this interpretation to be possible, it is however necessary to demonstrate that a general system of prior control may coexist with exceptions providing for an assessment of the right of residence with a view to establishment for someone already present in the host Member State, without the exceptions undermining the general system. This is one of the strongest points of contention between the Commission and the MemberStates that have submitted observations. I will return to it below.

34. From the analysis made so far, it is possible to identify in the previous decisions of the Court an attempt to balance two competing concerns: while it is true that the right of establishment should not become an instrument to circumvent national immigration rules and enter the European Union for purposes other than establishment, it is equally true that national immigration rules should not become an instrument to prevent the enjoyment of the right of establishment by nationals of the Associated States.

B – Conditions to be met by restrictions on the right of establishment under the Association Agreements

35. It is in the light of those two concerns that we must define the limits and conditions that national rules on the entry and stay of nationals of Associated States must respect. This will allow us to take a position on the lawfulness of the Netherlands requirement of a temporary residence permit and its application in different sets of circumstances. In my view, national rules that restrict the right of establishment granted by the Association Agreements are subject to three sets of conditions.

36. In the first place, it must be recalled that the recognition of direct effect is inextricably linked to the conferment of rights on individuals that they are supposed to be able to enforce. Inherent in the recognition of direct effect is an idea of effectiveness and judicial protection of the individual rights granted to individuals. The recognition of the direct effect of these provisions of the Association Agreements means, as a result, that the exercise of discretion by Member States in applying their rules on the entry and stay of nationals of Associated States must take place in a manner that is susceptible to review by the courts and does not impair the effectiveness of those rights.

37. In this respect, it is important to note that in a different line of case-law where the Court assessed the permissibility of systems of prior administrative authorisation, it made clear that they cannot legitimise discretionary conduct that is liable to negate the effectiveness of provisions of Community law. ( ) In order to guarantee that this is not the case and that such systems and the exercise of the discretion they involve are not used arbitrarily, the Court requires them to be based on objective and non-discriminatory criteria that are known in advance to those concerned. ( ) Moreover, those affected must have a legal remedy available to them. ( )

38. In my view, similar criteria should be applied in determining the validity of national systems which require nationals of Associated States intending to exercise their right of establishment to obtain in their home State prior authorisation for temporary residence. Such systems must be based on objective criteria known in advance and justified by the need to ascertain that those persons genuinely want to pursue an activity as self-employed persons. They must also provide adequate procedural guarantees and legal remedies to the persons claiming the right of establishment.

39. A further criterion for assessing national measures regarding the entry, stay and residence of natural persons derives from the condition, enshrined in the Agreements, that such measures must not be such as to nullify or impair the benefits accruing to one of the parties to the Agreements. ( ) The Court has interpreted this concept in relation to the rights granted to nationals of the Associated States to mean that the measures must be appropriate to achieve the objective in view and must not affect the very substance of those rights by making their exercise impossible or excessively difficult. ( )

40. It is clear that we are not dealing with a proportionality test. This is a consequence of the fact that, as the Court made clear in the same cases, the right of establishment under the Association Agreements is not to be interpreted in the same manner as the right of establishment under the EC Treaty. The mere similarity or even identity in the wording of the provisions is not sufficient to warrant the same interpretation. The more limited objectives of the Association Agreements and the broader restrictions expressly provided for therein justify a more restrictive approach towards the interpretation of the right of establishment granted to nationals of Associated States. ( ) The test to be applied requires, instead, that the national measures capable of hindering the exercise of the right of establishment provided for in the Association Agreements should not affect the very substance of the right.

41. This impact on the substance of the right is, however, also assessed in the light of the objectives pursued by the national measures. A requirement of appropriateness or adequacy of ends and means can also be deduced from the decisions in Barkoci and Malik, Kondova and Gloszczuk. In Barkoci and Malik, for example, the Court stated that ‘it is necessary in this regard to determine whether the immigration rules applied by the competent national authorities, under which a Czech national is required, prior to his departure to the host Member State, to obtain entry clearance, grant of which is subject to verification of substantive requirements such as those laid down in paragraph 212 of the Immigration Rules, are appropriate for achieving the objective in view or whether they constitute, in regard to that objective, measures which would affect the very substance of the rights granted to Czech nationals by Article 45(3) of the Association Agreement, by making exercise of those rights impossible or excessively difficult.’ ( ) In other words, whether the measures strike at the very substance of the rights also depends on whether they are appropriate for achieving the objective in view.

42. In this regard, it may be important to recall two well-known lines of cases where the Court has applied a similar test based on the degree to which the measures at issue affect the substance of a right.

43. In the cases concerning the limits to the procedural autonomy of the Member States, the Court has stated that, ‘[i]n the absence of Community rules governing a matter, it is for the domestic legal system of each Member State to designate the courts and tribunals having jurisdiction and to lay down the detailed procedural rules governing actions for safeguarding rights which individuals derive from the direct effect of Community law. However, such rules must not be less favourable than those governing similar domestic actions nor render virtually impossible or excessively difficult the exercise of rights conferred by Community law’. ( ) This case-law may be relevant because the rule at issue in the present case is a procedural rule, not a substantive rule. It may also be relevant because it shows that, although the Court has been quite deferential towards the procedural rules of the Member States, it has always examined whether the measures in hand were appropriate for achieving a legitimate objective. The other relevant line of case-law is that on fundamental rights, in particular the fundamental right to property or the freedom to pursue a trade or profession (which is of some relevance for our case), which can be restricted in the general interest, ‘provided that those restrictions in fact correspond to objectives of general interest pursued by the Community and do not constitute, with regard to the aim pursued, a disproportionate and intolerable interference, impairing the very substance of those rights.’ ( )

44. What can be deduced from these cases is that the test of interference with the substance of the right is not simply dependent on an analysis of the impact of the restrictive measure on the right itself. It also depends on the objective pursued by the measure and the appropriateness of the measure to attain it. Although the test does not impose a judgment on the proportionality or even the existence of a less restrictive alternative (necessity) of the measure, it still requires an assessment of the appropriateness or adequacy of means and ends.

45. There is a final set of conditions that should be taken into account when assessing national measures restrictive of the right of establishment granted by the Association Agreements. They arise out of the requirement imposed on Member States to observe general principles of law, including fundamental rights, when acting within the scope of Community law. ( )

46. When applying or derogating from the rules provided for in agreements between the Community and third countries, Member States are acting within the scope of Community law. When nationals of third countries benefit from rights arising out of agreements concluded between their country and the Community, restrictions to those rights arising out of measures of the Member States must also be consistent with the fundamental rights and general principles of law the observance of which the Court ensures. ( ) In these circumstances, the authorities of the Member State concerned and its national courts are also bound to observe — not simply to ‘take into account’ — the fundamental rights applicable in the Community legal order which are, by their very nature, also applicable to third country nationals, such as the right to respect for family life or the right to effective judicial protection. ( )

47. In this respect, it is important to note that the judicial protection of fundamental rights is particularly important with regard to the treatment accorded to third country nationals, since the latter constitute ‘discrete and insular minorities’. ( ) These are often particularly vulnerable groups that are deprived of other means, in particular political means to influence legislation and the political process, for the protection of their rights. Aliens, by the very nature of a political community, cannot benefit from all the rights granted to the citizens of that political community, but it is precisely for the same reason that they deserve added judicial protection where rights granted to them are affected by decisions of the same political community.

48. In the light of the above, I believe it is possible to conclude that domestic rules on the entry and stay of nationals of Associated States who wish to reside in a Member State of the Union for purposes of establishment are acceptable so long as they satisfy the following general conditions: (1) they must be based on objective criteria that can be known in advance by applicants and are susceptible to review by the courts; (2) they must not affect the very substance of the right of establishment (they are acceptable so long as they are appropriate to pursue the objective of controlling immigration for purposes other than establishment and so long as they do not make the exercise of the right of establishment impossible or excessively difficult); and (3) they must be consistent with the fundamental rights and general principles of law to which Member States are subject when acting within the scope of Community law.

49. It is in the light of these general conditions that I will now assess the application of the Netherlands rules in the two sets of circumstances set out by the national court. In this regard, it results from the case-law that it is important to draw a distinction between those persons who are lawfully in the Netherlands at the time of application for permanent residence and those who are unlawfully present in the Netherlands.

C – The situation of nationals of Associated States who are unlawfully present in the host Member State

50. It can in principle be accepted that it is compatible with the Association Agreements to reject without examination applications made in the host Member State by persons whose situation is unlawful. This compatibility derives from the need to guarantee the effectiveness of the domestic rules on the entry, stay and residence of nationals of third countries. To guarantee their effectiveness it is essential to prevent nationals of the Associated States from deriving any advantage from an unlawful situation. Thus, the Court considered in Gloszczuk that it is compatible with the relevant provisions of the Association Agreements for a Member State to reject an application for establishment ‘on the ground that, when that application was made, the applicant was residing illegally within its territory by reason of false representations made to those authorities for the purpose of obtaining initial leave to enter that Member State on a separate basis or of the failure to comply with an express condition attached to that entry and relating to the authorised duration of his stay in that Member State.’ ( ) Thus, in principle, the unlawfulness of the applicant’s presence in the host Member State is a sufficient ground to reject the application.

51. Such would be the situation of the Bulgarian nationals in the present case, who were required to have a visa in order to enter and stay in the Netherlands for a period of up to six months but did not have a visa when they applied for full residence permits with a view to establishment. In principle, such a breach of the immigration rules of the host country puts them in no position to have their applications examined. Indeed, according to a Joint Declaration of the Parties annexed to the Final Act of each of the relevant Association Agreements, which should be taken into account in their interpretation, the sole fact of requiring a visa for natural persons of certain Parties and not for those of others is not to be regarded as nullifying or impairing the benefits under a specific commitment.

52. I have repeated ‘in principle’ in the preceding paragraphs, however, because one could think of cases in which a very restrictive visa policy of a Member State could work as an absolute barrier to entry and residence for the purposes of establishment. In other words, the immigration rules could be so strict that they struck at the very substance of the right of establishment enshrined in the Association Agreements. It should also be made clear that the conditions imposed on a national of an AssociatedState in order lawfully to enter the territory of a MemberState of the Union must not be such as effectively to deny the exercise of his or her right of establishment under the Association Agreements. If the rules determining the entry into the State’s territory were such that they effectively denied access to that State for the purposes of establishment, then the national of an Associated State would have no possibility of ‘lawfully’ exercising his or her right of establishment.

53. Where, for example, there was no or very limited effective judicial review of negative visa decisions taken by the diplomatic representations and consulates of a Member State, one could argue that the only chance that a national of a State with which the Community has concluded an Association Agreement had to invoke the right to establishment would be to enter the host Member State as an unlawful alien. Thus, the distinction that the case-law of the Court draws between the situation of lawful and unlawful aliens should not be seen as absolute, but conditional upon the compatibility with the establishment provisions of the Association Agreements of the national provisions that determine the unlawfulness of the alien’s presence in the territory of a Member State.

54. In its observations, the Commission points out that, apparently, the granting of a temporary residence permit by the Netherlands diplomatic representations and consulates often takes a very long time, ( )de facto preventing the nationals of associated countries from exercising their right of establishment. If that were to be the case without, furthermore, any effective judicial remedy being available, then it might be possible for the Bulgarian nationals to argue that the only way for them effectively to exercise their right of establishment would be by entering the Netherlands unlawfully and then claiming their right before the national courts.

55. However, no arguments have been put forward by the Bulgarian plaintiffs in the main proceedings in support of that hypothesis. It would, in any event, be for the national court to determine whether it is the case.

56. From the reference made by the national court and the observations submitted by the various parties, it appears that the Bulgarian nationals have argued merely that the right of establishment gives them an automatic right of entry and residence. According to the national court, they therefore conclude that a visa (and, consequently, a temporary residence permit) could not be required from someone intending to work as a self-employed person in one of the Member States.

57. It must be recalled however that, as the plaintiff indirectly recognises, a right of entry and residence exists only to the extent to which there is a right of access linked to the exercise of the right of establishment. As stated above, such a right can therefore be subject to the conditions necessary to guarantee that the right of entry is not used for purposes other than establishment. It is this which justifies the existence of special conditions and procedures (such as visas).

58. However, as the Court made clear in Jany and Barkociand Malik, the obligation to ‘obtain entry clearance in his country of residence, grant of which is subject to verification of substantive requirements … has neither the purpose nor the effect of making it impossible or very difficult for Czech nationals to exercise the rights granted to them by Article 45(3) of the Association Agreement.’ ( )

59. Therefore, it is sufficient to note that the Bulgarian nationals have entered the Netherlands unlawfully and, in doing so, have placed themselves in a situation that, subject to the important provisos set out in paragraphs 52 and 53 of this Opinion, prevents them from exercising the right of establishment guaranteed by the Association Agreement between the Community and the Republic of Bulgaria.

60. With the important provisos mentioned above in mind, the automatic rejection of applications made by unlawful immigrants seems to me to be compatible with the relevant provisions of the Association Agreements. In the present case, there is no proof that the Bulgarian nationals had no other way to exercise their right to establishment than as unlawful aliens. Furthermore, they have, at no time, attempted to exercise their right of establishment under the conditions established by the host Member State, nor have they sought to challenge before the courts the lawfulness of those conditions under the Association Agreement.

D – The situation of nationals of Associated States that are lawfully present in the host Member State

61. As stated above, in Barkoci and Malik the Court addressed the compatibility with the Association Agreements of the requirement of a temporary residence permit obtained in the State of origin imposed on a national of an AssociatedState wanting to enter the United Kingdom for purposes of establishment. However, there are important differences between the facts relating the Polish and Slovak nationals in the present case and the facts in Barkoci and Malik.

62. First, in the present case the requirement is imposed on nationals of an Associated State who are already lawfully present in the Netherlands and are merely applying to change their status to become permanent residents in order to establish themselves in a self-employed capacity.

63. Second, the consequences of the imposed requirement are not the same in the two cases. In the case of the United Kingdom Immigration Rules, the application of a national of an Associated State for permanent residence with a view to establishment would still be considered by the administration, even in the absence of a temporary residence permit. He or she would simply be subject to a more summary assessment of the application by the United Kingdom authorities.

64. There is an important acknowledgement in Barkoci and Malik that the United Kingdom Immigration Rules were applied in a flexible manner by the administration: ‘That being so, and without even addressing the question whether Article 59(1) [the proviso] of the Association Agreement allows the competent authorities of the host Member State to refuse admission to its territory for a Czech national who does not hold entry clearance, it will be sufficient to examine whether the application by the United Kingdom authorities of national immigration legislation, including the exercise of the Secretary of State’s discretion to determine whether the condition relating to possession of entry clearance may be set aside in individual instances, appears on the whole to be in accordance with the condition set out at the end of the first sentence of Article 59(1) of the Association Agreement.’ ( ) This clearly shows that the analysis of the Court focused on a system which provides for a discretion that, as the request for a preliminary ruling and the Netherlands Government have made sufficiently clear, does not exist under the Netherlands legislation.

65. Thus, the conclusion of the Court that the relevant provisions in one of the Association Agreements do not preclude the United Kingdom Immigration Rules from requiring prior control, ‘provided that [the competent] authorities exercise their discretion in regard to applications for leave to enter for the purpose of becoming established, submitted pursuant to that Agreement at the point of entry into that State, in such a way that leave to enter can be granted … on a basis other than that of the Immigration Rules, if that person’s application clearly and manifestly satisfies the same substantive requirements as those which would have been applied had he sought entry clearance in [his country of origin]’, ( ) also seems to refer exclusively to the system of the United Kingdom. It does indeed mean that the Association Agreements do not preclude a system of prior control in the country of origin, provided that applications submitted in the host Member State are not rejected automatically, but are actually examined, even if less extensively, ( ) when they clearly and manifestly satisfy the substantive requirements for establishment. And although it might, it does not necessarily mean that the Netherlands system according to which such applications are automatically rejected without examination, and which does not include a discretionary power such as that under the United Kingdom system, is incompatible with the Association Agreements. What it certainly does not mean, however, is that the system is compatible.

66. In point of fact, Barkoci and Malik may be used to support the former conclusion (a contrario) rather than the latter. It could be said that the apparent condition imposed by the Court would mean that an automatic system such as that of the Netherlands would be incompatible with the Agreements. But the particular characteristics of both systems make it advisable to consider the system of the Netherlands afresh and on its own merits. Barkoci and Malik should not be regarded as completely decisive for this case, but as only providing general guidance for it.

67. Some things are clear, however, in view of the case-law.

68. First, the fact that the substantive requirements for obtaining a full residence permit with a view to establishment are clearly and manifestly satisfied does not as such make any difference regarding the main question raised by the national court. In other words, the fact that the Court in Barkoci and Malik concluded that the Association Agreements do not preclude a system such as that laid down by the United Kingdom does not mean that only that system is compatible with the Agreements. One should try to avoid the dangers of sweeping a contrario reasoning. The most one can say with certainty is the following: if the Netherlands system of automatic rejection were held to be incompatible with the Association Agreements, one option that would be compatible with those agreements would be to adopt a system similar to that of the United Kingdom.

69. The Netherlands Government has also argued that according to the legislation in force in that country the free period of three months for nationals of countries for which a visa is not required automatically lapses if they apply for a full residence permit, as this would show that they intend to stay beyond the three-month period. In such a case, the presence of the alien in the Netherlands is no longer lawful, and a temporary residence permit is needed in order for the application to be considered. Thus, their situation would be no different from that of the Bulgarian nationals in breach of the visa requirement and the automatic rejection of their applications would also be justified.

70. From the point of view of the Association Agreements, the rule according to which the very fact of applying for a full residence permit with a view to exercising the right of establishment conferred by the Association Agreements has the effect of rendering unlawful the presence of a national of one of the countries with which the Community has concluded such agreements has the effect of nullifying or impairing that right. If one were to follow the argumentation of the Netherlands Government, it would be sufficient for any Member State to characterise a certain conduct as unlawful for that Member State to be authorised to refuse any application for establishment, even if the conduct itself was an application for establishment. It is the lawfulness of the Netherlands requirement that must first be assessed and not vice versa. In this case, contrary to the situation of the Bulgarian nationals, the nationals of the Associated States were in a lawful situation until they decided to apply for residence with a view to establishment. As a consequence of that application, not only are they unable to exercise the right of establishment through such an application but they are moreover also deprived of their right to a short stay under the Schengen regime. This automatic unlawfulness constitutes an additional sanction that appears to be an unjustified and excessively rigorous penalty for exercising a right from an otherwise lawful position, and it does not correspond to any distinct legitimate aim that is not already safeguarded by the main requirement of a temporary residence permit. This in no way prejudices the issue of whether the requirement of a temporary residence permit obtained in the country of origin is compatible with the Agreements.

71. This issue could also be examined from the perspective of the Schengen acquis. I shall not pursue it here in detail, as the issue can be disposed of in the context of the Association Agreements. This second perspective would raise the question of whether the Court is competent to interpret the relevant provisions of the Schengen acquis in view of the limitation in Article 68 EC. If the provisions of the Association Agreements were not sufficient to dispose of the issue, I would have no qualms about affirming the jurisdiction of the Court to interpret provisions of the Schengen acquis in all cases if their interpretation is essential to determine the scope of rights which come under the general competence of the Court. I would then examine whether the relevant provisions of the Convention implementing the Schengen Agreement ( ) contain norms and principles that preclude a Member State participating in that closer cooperation from establishing that an application for establishment causes the period of three months of the short-stay Schengen regime to lapse.

72. Next we must proceed to analyse the essential requirement of the Netherlands rules under discussion: that no direct application for permanent residence can be made in the Netherlands with a view to establishment even if the applicants are lawfully staying in the Netherlands with a different status and even if they clearly and manifestly satisfy the substantive requirements for establishment. The automatic refusal of any application that is not preceded by prior control in the home State is, according to the Netherlands, essential in order to guarantee the effectiveness of that system of prior control. But is it not excessive to force the applicants to go back to their country of nationality or residence to apply for establishment if they are lawfully present in the Netherlands?

73. I have already set out above the general conditions which I believe national measures restricting the right of establishment under the Association Agreements must satisfy. Although other issues might be of relevance to the case, ( ) the elements brought before the Court focus on the test of the measure’s appropriateness to pursue a legitimate objective and its corresponding impact on the substance of the right. As I mentioned above, I believe that the test set out by the Court in its previous decisions does not require a judgment on the proportionality of the measure. Nor does the measure have to be the least restrictive alternative (necessity test). But nor does this mean that any measure which is likely to further a legitimate objective is acceptable. The measure must be appropriate to pursue such an objective and not be excessive, in the light of that objective, with regard to the cost it imposes on nationals of Associated States intending to exercise their right of establishment. A relationship must exist between the alleged purpose of the measure and the means it establishes to pursue it. In this case, the means used by the Netherlands impose a substantial burden on applicants from Associated States: though they are lawfully present in the Netherlands they are forced to leave and to initiate a new process of application in their country of origin or residence without any consideration of their individual circumstances.

74. In the light of this, and also of the special vigilance that judicial authorities must deploy when faced with the rights of individuals that belong to minorities that have no influence in the national political process, the Netherlands authorities must put forward particularly convincing grounds to justify the system established in their legislation that imposes such burdens on members of those minorities. In fact, very little evidence has been produced by the Netherlands authorities to justify such a system of automatic rejection in the absence of a temporary residence permit. Why would it not be possible for the Netherlands authorities to make even a summary assessment of the substantive circumstances for establishment in a situation such as that in the main proceedings, where the applicants are already lawfully present in the Netherlands? The authorities of the United Kingdom can do so with regard to applicants presenting themselves at the border. In the present case, the Netherlands could even use the visa-free three-month period given to nationals of these Associated States to communicate with its diplomatic representations and consulates in their country of origin or residence in order to obtain all the additional information needed about the applicants. Moreover, it must also be noted that the nature of the economic activity to be exercised in the present case may, in some respects, be better assessed in the Netherlands (particularly with regard to its self-employed character). ( )

75. Instead, in order to justify automatic rejection the Netherlands Government has referred merely to the instrumental relationship between that measure and the system of prior control in the home State. The automatic refusal to consider any application submitted in the Netherlands, in the absence of a temporary residence permit, is presented as necessary to guarantee the effectiveness of a system of prior control that the Court has recognised as permissible. How could such a system retain any useful effect if we allowed nationals of associated countries to enter with one status and then change their status to that of permanent residents? In other words, it would not be possible for the Court to recognise the lawfulness of a system of prior control and then to say it is not applicable in certain circumstances. The exceptions would be used to circumvent the general system.

76. However, in my view, the Netherlands fails in its interpretation of the extent of acceptability of a system of prior control and the alleged incompatibility between such a system and a system also allowing some applications to be submitted in the host Member State.

77. As I have argued above, the Court’s acceptance of a system of prior control in Barkoci and Malik was stated to be ‘in principle’ and linked to the necessity of the system for assessing whether the applicants fulfilled the substantive conditions for establishment. But the Court’s acceptance of a more summary assessment to be made in the host Member State and the United Kingdom’s willingness to make such an assessment also demonstrate that prior control in the home State may not always be necessary. For the Court, there may be cases in which the assessment of the substantive conditions can be made in the host Member State.

78. But how can such a possibility coexist with a system of prior control? Is the Netherlands Government not correct in noting that if the Court really authorises applications in the host State they will be depriving the system of prior control of useful effect? I think not, because the Court has accepted that the nature of the examination to be undertaken in the host Member State is different from that which takes place in the home State. National authorities can make applications submitted in their territory subject to a more summary examination. In other words, the margin of discretion left to national authorities in their assessment is broader. But this should not be seen as giving an unchecked power of appreciation to national authorities. Such discretion must be exercised and reviewed in the light of the specific circumstances surrounding the application (place of submission, time available for processing, activity sought, status of the applicant) and the likelihood of the applicant showing a prima facie case for establishment.

79. In the light of the above, it is my opinion that a system of prior control in the home State can coexist with the possibility of also considering applications submitted in the host State. The effectiveness of the first system is safeguarded by the different nature of the examination to be made by the national authorities in those different circumstances. Consequently, I cannot find any legitimate purpose for a system such as that under the Netherlands rules which refuses to assess any application that is not preceded by a temporary residence permit to be obtained in the country of origin or residence. The Netherlands has not demonstrated why a system that imposes such a high burden on applicants for establishment from the Associated States lawfully present in the Union is appropriate to pursue a distinct legitimate aim recognised by the Association Agreements.

80. Before concluding, it is important to address the possibility of interpreting the Netherlands rules in conformity with the Association Agreements. This hypothesis has been suggested by the Commission.

81. The Court has consistently recognised that whenever a rule is open to more than one interpretation, preference should be given to the interpretation which is conform to Community law. The Court has affirmed this possibility with regard to Community rules of different rank: when the wording of secondary Community law is open to more than one interpretation, preference should be given to the interpretation which renders the provision consistent with the Treaty rather than the interpretation which leads to its being incompatible with the Treaty. ( ) The same principle has also been repeatedly stated with regard to the interpretation of national law. ( ) It is a rule that maximises the useful effect of Community law and minimises potential conflicts with national law. It must not however prejudice legal certainty and it must respect the autonomy of national courts in the interpretation of national law. Although the Court is the interpreter of Community law, it is not the interpreter of national law. ( ) When the Court considers national law, it has to abide by the interpretation provided by the national court. In this case, it is very clear from the reference for a preliminary ruling and also from the written and oral observations submitted on behalf of the Netherlands Government that the Netherlands legislation cannot be interpreted along the lines proposed by the Commission. In other words, it could only be rendered compatible with the Association Agreements through contra legem interpretation. This means that the conflict of norms is unavoidable and the national judge must set aside the conflicting national norm. Moreover, to leave such a norm in force could lead to problems of uniformity and administrative practice. The declaration of incompatibility with the Association Agreements imposes, in addition to the non-applicability of the national rule, an obligation to change the national rule, a consequence which will have clear advantages in this case.

82. A final point to bear in mind is the particular nature of the activities that the plaintiffs intended to pursue as self-employed persons in the Netherlands. Throughout this Opinion I have not referred to this issue, as the legislation in question is general and constitutes a restriction for all kinds of activities that may be exercised on a self-employed basis. However, if the Court reaches the two main conclusions advocated above, that is, first, that the automatic unlawfulness for otherwise lawful short-stay aliens provided for in the legislation is incompatible with the Association Agreements and, second, that the general requirement of a temporary residence permit obtained in the country of origin in order to apply for a full residence permit strikes at the very substance of the right of establishment enshrined in the Association Agreements in so far as aliens lawfully present in the territory of the Netherlands are concerned, the Court should then remind the national court of the rather stringent conditions imposed in Jany in order to characterise an activity of prostitution as an economic activity carried out as a self-employed person.

83. In the light of that judgment, prostitution can be regarded as an economic activity pursued by a self-employed person only where it is established that it is being carried out by the person providing the service outside any relationship of subordination concerning the choice of that activity, working conditions and conditions of remuneration, under that person’s own responsibility, and in return for remuneration paid to that person directly and in full. ( ) These conditions have to be assessed by the national authorities and courts to make sure that the activity is genuinely pursued on a self-employed basis. The test is designed to prevent criminal organisations and networks of prostitution from using to their advantage national legislation designed to protect the situation of prostitutes.

IV – Conclusion

84. Accordingly, the questions referred by the national jurisdiction should, in my opinion, be answered as follows:

(1) Articles 45(1) and 59(1), read together, of the Association Agreement with Bulgaria, Articles 44(3) and 58, read together, of the Association Agreement with Poland and Articles 45(3) and 59, read together, of the Association Agreement with the Slovak Republic confer on nationals of those States rights of entry and residence, as corollaries of the right of establishment, which can however be limited by the rules of the host Member State governing the entry, stay and establishment of nationals of those States.

(2) Restrictions on the right of establishment granted by the Association Agreements arising out of the application of those rules are acceptable so long as they are based on objective criteria that can be known in advance by the applicants and are susceptible to review by the courts, are appropriate to a legitimate purpose in such a way as not to make the exercise of the right of establishment impossible or excessively difficult, and are consistent with the fundamental rights and general principles of law to which Member States are subject when acting within the scope of Community law.

(3) A national rule which requires national authorities to refuse to consider an application for residence with a view to establishment, pursuant to the abovementioned provisions of the Association Agreements, when the applicants have unlawfully entered the host Member State is, in principle, appropriate to pursue the legitimate objective of controlling immigration for purposes other than establishment and does not make the exercise of this right impossible or excessively difficult.

(4) A national rule under which any application for residence with a view to establishment, pursuant to the abovementioned provisions of the Association Agreements, by nationals of the Associated States lawfully present in the Member State is automatically rejected without consideration on the sole basis that the applicants did not have a temporary residence permit to be obtained in the country of origin or residence is not appropriate to pursue any legitimate objective and is capable of making the exercise of the right of establishment impossible or excessively difficult.