SEGRO' Kft. v Vas Megyei Kormányhivatal Sárvári Járási Földhivatala and Günther Horváth v Vas Megyei Kormányhivatal.
Date: 2018-03-06
38


The Hungarian Government contends, first, that, since the usufruct contracts at issue in the main proceedings were entered into before the 2003 Treaty of Accession entered into force, their validity depends exclusively on the rules of national law in force when they were entered into. Consequently, the Court lacks jurisdiction to assess those rules in the light of EU law and, therefore, to rule on the subsequent cancellation, by the rules at issue in the main proceedings, of rights of usufruct which, in this instance, were created unlawfully in the light of the national law prior to the accession of the Member State concerned to the European Union.
39


However, it is clear from settled case-law that the Court has jurisdiction to interpret EU law as regards its application in a new Member State with effect from the date of that State’s accession to the European Union (see, to that effect, judgment of 10 January 2006, Ynos, C‑302/04, EU:C:2006:9, paragraph 36 and the case-law cited).
40


In the present instance, and as is apparent from the orders for reference, the rights of usufruct at issue in the main proceedings still existed on 30 April 2014 and they were cancelled and deleted from the property register not pursuant to legislation which was in force and produced all its effects in their regard before the date of Hungary’s accession to the European Union, but exclusively by virtue of the provisions at issue in the main proceedings, which were adopted nearly 10 years after Hungary’s accession.
42


As to those submissions, it should be recalled that, according to settled case-law, in the context of the cooperation between the Court and national courts provided for in Article 267 TFEU, it is solely for the national court before which the dispute has been brought, and which must assume responsibility for the subsequent judicial decision, to determine, in the light of the particular circumstances of the case, both the need for a preliminary ruling in order to enable it to deliver judgment and the relevance of the questions which it submits to the Court. Consequently, where the questions submitted concern the interpretation of EU Union law, the Court is in principle bound to give a ruling (judgment of 24 April 2012, Kamberaj, C‑571/10, EU:C:2012:233, paragraph 40 and the case-law cited).
43


A reference from a national court may be refused only if it is quite obvious that the interpretation of EU law sought bears no relation to the actual facts of the main action or to its purpose, or where the problem is hypothetical or the Court does not have before it the factual or legal material necessary to give a useful answer to the questions submitted to it (judgment of 24 April 2012, Kamberaj, C‑571/10, EU:C:2012:233, paragraph 42 and the case-law cited).
45


As regards the Hungarian Government’s assertion that the referring court is not able to decide upon the preservation of the rights of usufruct cancelled by Paragraph 108 of the 2013 Law on transitional measures and deleted pursuant to Paragraph 94 of the Law on the property register, it should be noted that, according to the Court’s settled case-law, provisions such as Articles 49 and 63 TFEU, which are directly applicable, may be relied on before national courts and may render national rules that are inconsistent with them inapplicable (see, to that effect, judgments of 5 November 2002, Überseering, C‑208/00, EU:C:2002:632, paragraph 60, and of 14 September 2017, The Trustees of the BT Pension Scheme, C‑628/15, EU:C:2017:687, paragraph 49 and the case-law cited).
46


Thus, both the administrative authorities and the national courts called upon, in the exercise of their respective powers, to apply provisions of EU law are under a duty to give full effect to those provisions, if necessary refusing of their own motion to apply any conflicting provision of national law, and without requesting or awaiting the prior setting aside of that provision of national law by legislative or other constitutional means (judgment of 14 September 2017, The Trustees of the BT Pension Scheme, C‑628/15, EU:C:2017:687, paragraph 54 and the case-law cited).
48


It should be recalled that, according to settled case-law, national courts have the widest discretion to refer to the Court of Justice questions of interpretation of relevant provisions of EU law and that a rule of national law cannot prevent a national court from using that discretion. Such a discretion is an inherent part of the system of cooperation between the national courts and the Court established in Article 267 TFEU and of the functions of the court responsible for the application of EU law which are entrusted by that provision to the national courts (see, to that effect, judgment of 5 April 2016, PFE, C‑689/13, EU:C:2016:199, paragraphs 32 and 33 and the case-law cited). The Court has thus held in particular that the existence of a rule of national law whereby courts against whose decisions there is a judicial remedy are bound on points of law by the rulings of a court superior to them cannot, on the basis of that fact alone, deprive the lower courts of that discretion (judgment of 22 June 2010, Melki and Abdeli, C‑188/10 and C‑189/10, EU:C:2010:363, paragraph 42).
51


A preliminary point to note is that, whilst Article 345 TFEU, to which the Hungarian Government 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 Article 345 TFEU 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, to that effect, judgment of 23 September 2003, Ospelt and Schlössle Weissenberg, C‑452/01, EU:C:2003:493, paragraph 24 and the case-law cited).
52


Also, since the questions submitted for a preliminary ruling refer to the provisions of the Treaty relating both to freedom of establishment and to the free movement of capital, it is necessary to determine which freedom is at issue in the main proceedings (see, to that effect, judgment of 5 February 2014, Hervis Sport- és Divatkereskedelmi, C‑385/12, EU:C:2014:47, paragraph 20).
53


To do this, the purpose of the national legislation at issue must be taken into consideration (judgment of 5 February 2014, Hervis Sport- és Divatkereskedelmi, C‑385/12, EU:C:2014:47, paragraph 21 and the case-law cited).
54


In the case of legislation such as that at issue in the main proceedings, the purpose of which has been stated in paragraph 50 above, it should be noted that, when the right to acquire, use or dispose of immovable property on the territory of another Member State is exercised as the corollary of the right of establishment, it generates capital movements (see, to that effect, judgment of 25 January 2007, Festersen, C‑370/05, EU:C:2007:59, paragraph 22 and the case-law cited).
55


Thus, although that legislation is, prima facie, capable of being covered by both the fundamental freedoms mentioned by the referring court, the fact remains that, in the context of the main proceedings, any restrictions on freedom of establishment resulting from that legislation are an inevitable consequence of the restriction of the free movement of capital and, therefore, do not justify an independent examination of that legislation in the light of Article 49 TFEU (see, to that effect, judgment of 17 September 2009, Glaxo Wellcome, C‑182/08, EU:C:2009:559, paragraph 51 and the case-law cited).
56


As is clear from the nomenclature of capital movements set out in Annex I to Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the [EC] Treaty (an article repealed by the Treaty of Amsterdam) (OJ 1988 L 178, p. 5), capital movements include investments in real estate on the territory of a Member State by non-residents; that nomenclature still has the same indicative value for the purposes of defining the notion of capital movements (judgment of 25 January 2007, Festersen, C‑370/05, EU:C:2007:59, paragraph 23 and the case-law cited).
57


That notion encompasses, inter alia, investments in real estate relating to the acquisition of a usufruct over agricultural land, as is attested, in particular, by the clarification, contained in the explanatory notes in Annex I to Directive 88/361, that the category of investments in real estate covered by the directive includes the acquisition of rights of usufruct over buildings and land.
59


The same is true of the situation in Case C‑52/16. Whilst it is admittedly not in dispute that the rights of usufruct at issue in that case were acquired by a commercial company set up in Hungary, it is also apparent from what is stated in the order for reference that that company was set up by natural persons residing in another Member State. As the Advocate General has noted in point 55 of his Opinion, an acquisition of immovable property by non-residents is capable of falling within the free movement of capital even when it is carried out by means of a legal person set up in the Member State where the property concerned is located (see, to that effect, judgments of 11 December 2003, Barbier, C‑364/01, EU:C:2003:665, paragraphs 58 and 59, and of 1 October 2009, Woningstichting Sint Servatius, C‑567/07, EU:C:2009:593, paragraphs 12, 13, 19, 20 and 39).
61


According to settled case-law, Article 63(1) TFEU generally prohibits restrictions on movements of capital between Member States (judgment of 22 October 2013, Essent and Others, C‑105/12 to C‑107/12, EU:C:2013:677, paragraph 39 and the case-law cited).
62


In the present instance, it must be found that, by virtue of its very subject matter, legislation such as that at issue in the main proceedings, which provides for the extinction of rights of usufruct acquired by contract over agricultural land, including those held as a result of exercise of the right to free movement of capital, restricts that freedom on account of that fact alone. The possible adoption, envisaged by the referring court in its second question in Case C‑52/16, of a measure compensating the persons who, after acquiring such rights, have been deprived of them in this way by that legislation would not be capable of affecting that finding.
63


That legislation deprives the person concerned both of the ability to continue to enjoy the right which he has acquired, by preventing him, in particular, from using the agricultural land concerned for the purposes for which he acquired that right, and of the ability to dispose of that right.
64


By depriving in that way nationals of Member States other than Hungary, who are entitled to benefit from free movement of capital, of enjoyment of the property in which they invested capital, the national legislation at issue in the main proceedings constitutes a restriction on such free movement.
65


Furthermore, as is clear from settled case-law, the measures prohibited by Article 63(1) TFEU, as restrictions on the movement of capital, include those which are likely to discourage non-residents from making investments in a Member State (judgments of 25 January 2007, Festersen, C‑370/05, EU:C:2007:59, paragraph 24 and the case-law cited, and of 1 October 2009, Woningstichting Sint Servatius, C‑567/07, EU:C:2009:593, paragraph 21).
66


It follows that national legislation such as that at issue in the main proceedings constitutes a restriction on the fundamental freedom guaranteed in Article 63 TFEU.
73


The existence of any such disadvantage must be assessed by comparing the group formed by nationals of Member States other than Hungary directly or indirectly holding rights of usufruct over agricultural land and the group formed by Hungarian nationals directly or indirectly holding such rights of usufruct and by determining the proportion of each of those groups affected by the measure extinguishing rights that was enacted. In the light of the matters referred to in paragraphs 68 to 70 above, it appears likely that that measure affected a markedly higher proportion of the members of the first of those groups than of the second (see, to that effect, judgment of 9 February 1999, Seymour-Smith and Perez, C‑167/97, EU:C:1999:60, paragraph 59).
76


As is apparent from the Court’s case-law, measures such as those at issue in the main proceedings, which restrict the free movement of capital while giving rise in all likelihood to indirect discrimination, are permissible only if they are justified, on the basis of objective considerations independent of the origin of the capital concerned, by overriding reasons in the public interest and if they observe the principle of proportionality, a condition which requires them to be appropriate for ensuring the attainment of the objective legitimately pursued and not to go beyond what is necessary in order for it to be attained (see, to that effect, judgments of 25 October 2007, Geurts and Vogten, C‑464/05, EU:C:2007:631, paragraph 24, and of 5 February 2014, Hervis Sport- és Divatkereskedelmi, C‑385/12, EU:C:2014:47, paragraphs 41 and 42).
77


Such measures may likewise be justified by the reasons referred to in Article 65 TFEU provided that they comply with the principle of proportionality (judgment of 1 October 2009, Woningstichting Sint Servatius, C‑567/07, EU:C:2009:593, paragraph 25 and the case-law cited).
78


It must also be pointed out in this connection that national legislation is appropriate for ensuring attainment of the objective relied on only if it genuinely reflects a concern to attain it in a consistent and systematic manner (judgment of 26 May 2016, Commission v Greece, C‑244/15, EU:C:2016:359, paragraph 35 and the case-law cited).
79


While it is ultimately for the national court, which has sole jurisdiction to assess the facts and interpret the national legislation, to determine whether those requirements are met in the case in point, the Court of Justice, which is called on to provide answers of use to the national court in the context of a reference for a preliminary ruling, may provide guidance, on the basis of the documents relating to the main proceedings and the written and oral observations which have been submitted to it, in order to enable the national court to give judgment (see, to that effect, judgment of 17 July 2014, Leone, C‑173/13, EU:C:2014:2090, paragraph 56 and the case-law cited).
82


As to those submissions, the Court has accepted that national legislation may restrict the free movement of capital on the ground of objectives such as those of preserving the farming of agricultural land by means of owner-occupancy and ensuring that agricultural property is lived on and farmed predominantly by the owners, as well as of preserving a permanent population in rural areas as a town and country planning measure and of encouraging a reasonable use of the available land by resisting pressure on land. These objectives are indeed consistent with those of the common agricultural policy which, under Article 39(1)(b) TFEU, aims ‘to ensure a fair standard of living for the agricultural community’ and in the working-out of which, according to Article 39(2)(a) TFEU, account must be taken of ‘the particular nature of agricultural activity, which results from the social structure of agriculture and from structural and natural disparities between the various agricultural regions’ (see, to that effect, judgment of 25 January 2007, Festersen, C‑370/05, EU:C:2007:59, paragraphs 27 and 28 and the case-law cited).
83


The same is true of the objective of maintaining a distribution of land ownership which allows the development of viable farms and sympathetic stewardship of green spaces and the countryside (judgment of 23 September 2003, Ospelt and Schlössle Weissenberg, C‑452/01, EU:C:2003:493, paragraph 39).
85


In that context, it should also be pointed out that the reasons which may be invoked by a Member State by way of justification must be accompanied by appropriate evidence or by an analysis of the appropriateness and proportionality of the restrictive measure adopted by that State, and by specific details substantiating its arguments (see, by analogy, judgment of 23 December 2015, Scotch Whisky Association and Others, C‑333/14, EU:C:2015:845, paragraph 54 and the case-law cited). Thus, if a Member State wishes to rely on an objective that is capable of justifying an obstacle to the free movement of capital arising from a national restrictive measure, it is under a duty to supply the court called upon to rule on that question with all the evidence capable of enabling that court to be satisfied that that measure does indeed fulfil the requirements arising from the principle of proportionality (see, by analogy, judgment of 8 September 2010, Stoß and Others, C‑316/07, C‑358/07 to C‑360/07, C‑409/07 and C‑410/07, EU:C:2010:504, paragraph 71).
92


Also, it is apparent that other measures less restrictive of the free movement of capital than those laid down by the legislation at issue in the main proceedings could have been adopted for the purpose of ensuring that the existence of a right of usufruct over productive land does not result in that land ceasing to be farmed by the person in occupation of it or that the acquisition of such a right neither has purely speculative aims nor leads to a use or fragmentation which might be incompatible with the lasting use of the land for agricultural purposes.
93


In this regard, it would, for example, have been possible, as the Advocate General has noted in point 114 of his Opinion, to require the usufructuary to preserve the agricultural use of the land concerned, as the case may be by actually farming it himself, under conditions ensuring the viability of farming it. The explanations provided by the Hungarian Government seem, moreover, to indicate that such a requirement was favoured in the case of acquiring full ownership of a parcel of agricultural land or being granted a long lease over it. In the light of the information in the case file before the Court, it is not apparent that such an approach could not have been adopted as regards acquisitions of a usufruct.
96


As a derogation from the fundamental principle of the free movement of capital, Article 65(1)(b) TFEU must be interpreted strictly (see, to that effect, judgment of 14 September 2006, Centro di Musicologia Walter Stauffer, C‑386/04, EU:C:2006:568, paragraph 31).
98


It should be recalled that, in proceedings under Article 267 TFEU, which are based on a clear separation of functions between the national courts and the Court of Justice, any assessment of the facts is a matter for the national court (judgment of 8 May 2008, Danske Svineproducenter, C‑491/06, EU:C:2008:263, paragraph 23 and the case-law cited). Likewise, it falls exclusively to the national court to interpret national legislation (see, to that effect, judgment of 15 January 2013, Križan and Others, C‑416/10, EU:C:2013:8, paragraph 58 and the case-law cited). Finally, it is for the national court alone to determine the subject matter of the questions which it proposes to refer to the Court (judgment of 1 October 2009, Gaz de France — Berliner Investissement, C‑247/08, EU:C:2009:600, paragraph 19 and the case-law cited).
106


As the Advocate General has also observed in points 95 and 98 of his Opinion, it is clear that other measures with less far-reaching effects than the cancellation of the rights in rem concerned could have been adopted for the purpose of penalising from the outset any infringements of the applicable exchange control legislation, such as, for example, administrative fines (see, by analogy, judgment of 1 December 2005, Burtscher, C‑213/04, EU:C:2005:731, paragraph 60).
114


As regards the prevention of practices intended to circumvent national law, the Court has already accepted that a measure restricting a fundamental freedom may in appropriate cases be justified where it is designed to combat wholly artificial arrangements, aimed at circumventing the national legislation concerned (judgment of 1 April 2014, Felixstowe Dock and Railway Company and Others, C‑80/12, EU:C:2014:200, paragraph 31 and the case-law cited).
115


However, it is also settled case-law that such a justification is permissible only in so far as it specifically targets wholly artificial arrangements pursuing such an aim (see, to that effect, judgments of 12 September 2006, Cadbury Schweppes and Cadbury Schweppes Overseas, C‑196/04, EU:C:2006:544, paragraphs 51 and 55 and the case-law cited, and of 13 March 2007, Test Claimants in the Thin Cap Group Litigation, C‑524/04, EU:C:2007:161, paragraphs 72 and 74).
116


This rules out in particular any enactment of a general presumption of abusive practices that would be sufficient to justify a restriction on the free movement of capital (see, to that effect, judgment of 19 November 2009, Commission v Italy, C‑540/07, EU:C:2009:717, paragraph 58 and the case-law cited).
117


In order to comply with the principle of proportionality, a measure pursuing such a specific objective of combating wholly artificial arrangements should, on the contrary, enable the national court to carry out a case-by-case examination, having regard to the particular features of each case and taking objective elements as a basis, in order to assess the abusive or fraudulent conduct of the persons concerned (see, to that effect, judgment of 17 September 2009, Glaxo Wellcome, C‑182/08, EU:C:2009:559, paragraph 99).
120


Accordingly, the view cannot be taken that such legislation pursues the specific aim of combating conduct that consisted in the creation of artificial arrangements aimed at circumventing national legislation relating to acquisition of agricultural land. It should, moreover, be noted that such legislation seeks, generally, to cancel by operation of law all rights of usufruct held by legal persons, or by natural persons in so far as they cannot demonstrate a close family tie with the owner of the agricultural land, without in any way linking those cancellations to the reasons which led the persons concerned to make such acquisitions (see, by analogy, judgment of 12 December 2002, Lankhorst-Hohorst, C‑324/00, EU:C:2002:749, paragraph 37).
121


Second, assuming that the legislation at issue in the main proceedings can be regarded as having been adopted with such a specific aim of combating artificial arrangements, it cannot reasonably be inferred from the mere fact that the holder of a right of usufruct over a parcel of agricultural land is a legal person or a natural person who does not have the status of close relation of the owner of that land that the conduct of such a person when acquiring such a right of usufruct constituted an abuse. As has been pointed out in paragraph 116 above, the enactment of a general presumption of abusive practices cannot be allowed.
122


Thus, other measures less restrictive of the free movement of capital such as penalties or specific actions for a declaration of invalidity before the national courts in order to combat any circumventions of the applicable national legislation that are established could, provided that they comply with the other requirements arising from EU law, be prescribed for the purpose of combating those abusive practices.
123


In this connection, the Hungarian Government’s line of argument that is based on budgetary considerations and considerations relating to the economising of judicial resources cannot be accepted. It is settled case-law that grounds of a purely economic nature cannot constitute overriding reasons in the public interest justifying a restriction of a fundamental freedom guaranteed by the Treaty (judgment of 17 March 2005, Kranemann, C‑109/04, EU:C:2005:187, paragraph 34 and the case-law cited). The same is true of considerations of a purely administrative nature (see, to that effect, judgment of 23 November 1999, Arblade and Others, C‑369/96 and C‑376/96, EU:C:1999:575, paragraph 37 and the case-law cited).