C-182/83

T H E IRISH LAND COMMISSION,

respondent,

on the interpretation of Article 58 of the EEC Treaty,

T H E COURT, composed of: Lord Mackenzie Stuart, President, O. Due and C. Kakouris (Presidents of Chambers), U. Everling, K. Bahlmann, Y. Galmot, and R. Joliét, Judges,

Advocate General: M. Darmon Registrar: H. A. Rühi, Principal Administrator

gives the following

That provision contains an exception to the powers of compulsory acquisition in "Where a statute of a Member State favour of tenants or proprietors who contains a condition requiring that a reside either on the land itself or in person (other than a body corporate) the immediate neighbourhood thereof who own land should have resided on it (meaning any place which is not more for a certain period, if the owner of the than three miles from the nearest point land is a body corporate, is Article 58 to of the relevant land). be interpreted as prohibiting a condition requiring that each of the persons entitled to a beneficial interest in the body corporate should have resided on As regards land of which a body cor- the land during a similar period ?" porate is the tenant or proprietor, each of the persons entitled to a beneficial interest in the body corporate must have, The order making the reference was throughout the whole of the qualifying lodged at the Court Registry on 25 period, resided either on the land or in August 1983. the immediate neighbourhood thereof. In the case of a limited company, this provision means that each of the members must meet the residence Pursuant to Article 20 of the Protocol on requirement. the Statute of the Court of Justice of the European Economic Community, written observations were submitted by Robert Fearon and Company Limited, rep- The objector/appellant was not allowed resented by Kathleen J. H. O'Brien of to avail itself of the exception because its the Northern Ireland Bar, instructed by members resided neither on the land Messrs Finbar Cahill and Company, to be acquired nor in the immediate Solicitors, Dublin, by the Irish Land neighbourhood thereof. In fact, four of Commission, represented by Michael the members live in England. The fifth, G. O'Beirn, Solicitor, acting as Agent, who is both secretary of the company by the Commission of the European and manager of the farm, lives in Communities, represented by D. R. Northern Ireland, but more than three Gilmour, a member of its Legal miles from the land in question. One of Department, acting as Agent, and by

The compulsory acquisition powers also According to the objector/appellant in contravene the principle of propor- the main proceedings, Robert Fearon and tionality, given that the Land Com- Company Limited, Article 58 requires the mission's other compulsory acquisition Member States to accord companies, powers are entirely adequate. within the meaning of that article, the right of establishment granted to natural persons by virtue of Article 52. Finally, the provision at issue creates a situation of legal uncertainty. A company can acquire agricultural land and farm it In its view, Article 52 guarantees equality without its shareholders being subjected of treatment to the nationals of each to a residence test, but that test comes Member State in the other Member into operation in the event of com- States. That prohibition of discrimination pulsory acquisition. This legal uncer- includes but is not restricted to discrimi- tainty constitutes an obstacle to capital nation on grounds of nationality. The investment in agricultural land and to the objector/appellant refers to the case-law exercise of the freedom of establishment. of the Court, according to which all Furthermore, any attempt to end the instances of different treatment of like uncertainty by putting the land up for situations may constitute discrimination. sale increases the prospect of compulsory acquisition.

In the view of the objector/appellant, the Irish legislature clearly intended to In its observations submitted to the discriminate on grounds of nationality. Court, the Irish Land Commission begins Even though the law does not expressly by stating that the land belonging to so provide, an intention to keep Irish Robert Fearon and Company Limited land for the Irish is revealed in the par- was compulsorily acquired because the liamentary debates preceding the passing objector had not discharged the onus of of the Act. In particular, the amendment establishing, in accordance with Section passed in 1965 was designed to deal with 35 of the Land Act 1965, that each of

the persons entitled to a beneficial law for the exercise of the right of interest had throughout the whole of the establishment and which are applicable qualifying period resided either on the to Irish nationals as well. Consequently, land or in the immediate neighbourhood it is applicable if nationals of other thereof. Member States exercise their right of establishment. Analysing the provisions of Article 58 of the EEC Treaty, the Irish Land Com- Thirdly, the objector/appellant in the mission considers that the essence of the main proceedings is a company formed article is that companies to which it in accordance with the laws of Ireland applies shall, for the purposes of Chapter and carrying on business in Ireland. Thus 2 of Title III, be treated in the same way is cannot rely, in Ireland, upon any right as natural persons who are nationals of of establishment under Articles 52 and 58 Member States. Those purposes are to be of the EEC Treaty. found in Article 52. In the view of the Irish Land Commission, that article Finally, in the fourth place, the Irish requires that all restrictions on the Land Commission contends that the freedom of establishment of nationals residence requirement in Section 35 is of a Member State in the territory of not only in conformity with Article 58 another Member State be abolished. of the EEC Treaty but is required by Freedom of establishment includes the that article. The absence of any such right to set up and manage companies or provision in the Land Act would have firms to which Article 58 applies under been a discrimination against companies the conditions laid down for its own as it would have prevented them from nationals by the law of the country complying with the residence re- where such establishment is effected. quirement. The provision made for com- panies in Section 35 comes as close as The Irish Land Commission submits that possible to treating companies in the the provisions of Section 35 of the Land same way as natural persons. Act 1965 requiring residence by the persons entitled to a beneficial interest in In conclusion, the Irish Land Com- a body corporate are not contrary to mission submits that the question re- Article 58 for the following reasons: ferred to the Court should be answered as follows: In the first place, the residence re- Article 58 of the EEC Treaty is not to be quirement does not affect the right of interpreted a prohibiting the condition in establishment of a company, because a Section 35 of the Land Act 1965 company, whether Irish or from another whereby, in the case of a corporate body Member State, would first have to be owning land, each of the persons entitled established in Ireland and to own land there before it could be affected by to a beneficial interest in the body Section 35 of the Land Act, which corporate is required to have resided governs the exercise of this property either on the land or in the immediate right. neighbourhood thereof throughout the whole of the qualifying period.

one and the same time to prevent specu- nationals who are the beneficial owners lation in land, to ensure as far as possible of the interests in question, via the device that the land belonged to those who of a limited company, cannot give rise to worked it and, lastly, to increase the size discrimination contrary to Article 52. of uneconomic holdings in order to overcome the problems of agrarian poverty to which this gave rise. Although a legal person and all those entitled under it may not be able readily to fulfil certain stringent conditions imposed on natural persons, that does According to the Commission, the not mean that those conditions must not essence of the question put to the Court be applied to the legal person. Any other is how far it is lawful for Ireland to interpretation would simply turn Article exclude the members of a land-owning 58 into a discrimination against natural company from the benefit of an absolute persons, whereas its purpose is to ensure defence against a compulsory purchase that there is no discrimination against order. The Commission expresses its legal persons. doubts as to the relevance of formulating that question in terms of the interpret- ation of Article 58, since the company in Finally, the Commission mentions that question is Irish. The true position is that the system of compulsory purchase by the shares in this Irish company are the Land Commission and the various owned by British nationals who have conditions surrounding it are part of the thus exercised their right of es- system of property ownership in Ireland, tablishment, primarily or secondarily, which, by virtue of Article 222 of the under Article 52 of the EEC Treaty. In EEC Treaty, is in no way prejudiced the view of the Commission the question by that Treaty. In the view of the for consideration is therefore whether a Commission, that provision on its own residence requirement of the land can be would be sufficient to justify a negative applied to foreign shareholders of an answer to the question posed the court Irish company, in conformity with the making the reference. provisions of the EEC Treaty relating to establishment. The Commission concludes by suggesting that the Court answer the The Commission states that Article 52 of question as follows: the EEC Treaty requires the standard of national treatment for all Community nationals seeking to exercise the right of Nothing in the provisions of the EEC establishment. It is the law of Ireland Treaty concerning the right of estab- that any natural person who owns land lishment prohibits a condition requiring may be subject to a compulsory purchase that each of the persons entitled to a by the Land Commission unless certain beneficial interest in the body corporate conditions are fulfilled, one of which should have resided on the land during being that he lives on the land or within the qualifying period. three miles of it. This limitation on ownership cannot be circumvented by forming a limited company and es- Ireland contends, in its observations tablishing a fictive residence on the land. submitted to the Court, that the question Since those rules apply to all Irish asked by the Supreme Court, although it citizens, their application to non- expressly refers only to Article 58 of the

Decision

1 By o r d e r of 15 J u n e 1983, received at the C o u r t Registry on 25 August 1983 the Supreme C o u r t of Ireland referred to the C o u r t for a preliminary ruling* u n d e r A r u d e 1 7 7 ' o f t h e E E C T r e a t y a question relating to the interpretation or Article 58 or the E E C T r e a t y in order to determine the compatibility with the T r e a t y of Section 32 (3) of the Land Act 1933 as amended by Section 35 of the Land Act 1965.

JUDGMENT OF 6. 11. 1984 — CASE 182/83

2 That question was raised in the context of proceedings concerning the decision of the Irish Land Commission to acquire compulsorily land owned by Robert Fearon & Company Limited, a company registered under Irish law.

s The purpose of both the Land Act 1933 and the Land Act 1965 is to increase the size of holdings of land which, if that were not done, could not be exploited on an economic basis, to prevent land speculation, and, finally, to ensure as far as possible that the land belongs to those who work it. T o achieve the latter objective, Section 32 (3) of the Land Act 1933, as amended by Section 35 of the Land Act 1965, provides that the Irish Land Commission cannot exercise its powers of compulsory acquisition against persons who have resided for more than one year within three miles of the land or against bodies corporate all of whose shareholders meet the same residence requirement. In this case, the five shareholders of Robert Fearon & Company Limited are British nationals none of whom meets the residence requirement set out above.

4 The Supreme Court of Ireland, before which the matter had been brought by way of a final appeal, submitted the following question to the Court of Justice for a preliminary ruling:

7 Consequently, although Article 222 of the Treaty does not call in question the Member States' right to establish a system of compulsory acquisition by public bodies, such a system remains subject to the fundamental rule of non- discrimination which underlies the chapter of the Treaty relating to the right of establishment.

s As the Commission rightly points out, Article 58 of the Treaty, to which the national court's question refers, does not govern the solution of the matter in litigation in the main proceedings. The effect of that article is to assimilate, for the purposes of giving effect to the chapter relating to the right of establishment, companies or firms formed in accordance with the law of a Member State and having their registered office, central administration or principal place of business within the Community, to natural persons who are nationals of one of the Member States. In this case, since Fearon & Company Limited is an Irish company for the purposes of Article 58 of the EEC Treaty, it cannot claim in Ireland the benefit of the right of establishment granted to companies formed under the laws of the other Member States.

9 The question raised by the Supreme Court of Ireland seeks to ascertain, however, whether, having regard to the rules laid down in the Treaty, nationals of other Member States who have execised their right of establishment in Ireland under Article 52 of the Treaty by participating in the formation of a company within the meaning of Article 58 of the Treaty can be required to meet a residence requirement.

On those grounds,

T H E COURT,

in answer to the question referred to it by the Supreme Court of Ireland by order of 15 June 1983, hereby rules:

Article 52 of the Treaty does not prevent a Member State from making exemption from compulsory acquisition measures adopted under legislation governing the ownership of rural land subject to a re- quirement that nationals of other Member States who have taken part in the formation of a land-owning company reside on or near the land, if

FEARON v IRISH U N D COMMISSION

that residence requirement also applies to nationals of that Member State and if the powers of compulsory acquisition are not execised in a discrim- inatory manner.