Brussels, 24 June 2010
Internal Market: Commission refers Austria to Court over restrictions on investment in agricultural real estate in Vorarlberg
The European Commission has today acted to ensure the compliance with the Treaty rules on free movement of capital by referring Austria to the EU's Court of Justice over the acquisition of agricultural real estate in Vorarlberg (Austria). Under rules applied in the region of Vorarlberg, if a non-farmer wants to acquire agricultural land, any farmer may notify his interest to buy the land at the usual local price. No appropriate exceptions to this pre-emption mechanism are applied, making it difficult for non-farmers to invest in the region, even for agricultural purposes. The Commission is concerned that Austria has failed to fulfil its obligations under EU rules on the freedom of establishment and the free movement of capital (Articles 49 and 63 of the Treaty on the Functioning of the European Union - TFEU) by maintaining disproportionate restrictions. The Commission sent a reasoned opinion to Austria in November 2009 asking it to comply with EU law. As no satisfactory reply was received, the Commission has decided to take the case to the Court of Justice of the EU.
What is the aim of the EU rules in question?
Free movement of capital is at the heart of the Single Market and is one of its 'four freedoms'. It enables integrated, open, competitive and efficient European markets and services. For citizens it means the ability to do many operations abroad, as diverse as opening bank accounts, buying shares in non-domestic companies, investing where the best return is, and purchasing real estate. For companies it principally means being able to invest in and own other European companies and take an active part in their management.
How is Austria not respecting these rules?
The Vorarlberg Land Transfer Law (VGVG) stipulates that if a non-farmer wants to acquire agricultural land, any farmer may notify his interest to buy the land at the usual local price. No exceptions are made, even when the acquisition by a non-farmer would be intended for continued farming by a long-term tenant.
In addition, if a farmer notifies his interest but subsequently the purchase does not take place, the prospective acquirer might still be exposed to the pre-emption mechanism and could potentially delay the acquisition even further. Moreover, an interested farmer may even intervene if the present owner transfers his plot to a company he owns or a foundation he controls for continued agricultural purposes. The law also states that future agricultural use by a farmer within an agricultural undertaking has always to be ensured - even when no other farmer from the region has shown interest to buy the land.
In the Commission's view, these provisions constitute restrictions of the free movement of capital and the freedom of establishment. As they apply without appropriate exceptions, the Commission finds that they are disproportionate to attaining the VGVG's objectives to preserve plots for family farming establishments and to preserve a broad distribution of land ownership, which include reduction of price pressure on land and preservation of farming land for farmers. The Commission's position follows from another case before the Court of Justice of the European Union in 2001 with regard to the same law. In case C-452/01, the Court ruled that not only the interests of owning farmers are to be considered when selling agricultural land.
How are EU citizens and/or businesses suffering as a result?
Acquisitions in the Vorarlberg region by non-farmers from other EU countries are impossible if a farmer makes use of the pre-emption mechanism. This applies without appropriate exceptions, in particular even if there is continued farming by a long term tenant.
As cultivation by a farmer within an undertaking has to be assured without exceptions, acquisitions by non-farmers from other EU countries may also be impossible even if no farmer intervenes to acquire a plot, unless cultivation by another farmer is assured.
What are the next steps?
The case will be referred to the Court of Justice of the European Union.
The case was brought to the attention of the Commission by a complainant claiming that the pre-emption mechanism in Vorarlberg was discriminatory. This and other aspects of the Vorarlberg Land Transfer Law were included in the Commission's letter of formal notice sent in December 2008. While some concerns, including the claim of discrimination, were not upheld, the Commission still found that the current pre-emption mechanism is disproportionate to its objectives. As a result, the Commission sent a reasoned opinion to the Austrian authorities in November 2009. However, the reply to the reasoned opinion did not completely remove the Commission's concerns.
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