C-62/96

JUDGMENT OF 27.11.1997 — CASE C-62/96

J U D G M E N T O F T H E C O U R T (Fifth Chamber) 27 November 1997*

In Case C-62/96,

Commission of the European Communities, represented by Frank Benyon, Legal Adviser, and Maria Condou Durande, of its Legal Service, acting as Agents, with an address for service in Luxembourg at the office of Carlos Gómez de la Cruz, also of its Legal Service, Wagner Centre, Kirchberg,

applicant,

v

Member State after having been employed in that State (OJ, English Special Edi- tion 1970 (II), p. 402) and Article 7 of Council Directive 75/34/EEC of 17 Decem- ber 1974 concerning the right of nationals of a Member State to remain in the ter- ritory of another Member State after having pursued therein an activity in a self- employed capacity (OJ 1975 L 14, p. 10),

T H E C O U R T (Fifth Chamber),

composed of: M. Wathelet, President of the First Chamber, acting as President of the Fifth Chamber, J. C. Moitinho de Almeida, D. A. O. Edward, P. Jann (Rap- porteur) and L. Sevón, Judges,

Advocate General: G. Tesauro,

Registrar: H . A. Rühi, Principal Administrator,

having regard to the Report for the Hearing,

the right to registration in the Greek shipping registers to vessels more than half the shares in which are owned by Greek nationals or owned by Greek legal per- sons more than half of whose capital is held by Greek nationals, the Hellenic Republic has failed to fulfil its obligations under Articles 6, 48, 52, 58 and 221 of the E C Treaty, Article 7 of Regulation (EEC) N o 1251/70 of the Commission of 29 June 1970 on the right of workers t o remain in the territory of a Member State after having been employed in that State (OJ, English Special Edition 1970 (II), p. 402) and Article 7 of Council Directive 75/34/EEC of 17 December 1974 con- cerning the right of nationals of a Member State to remain in the territory of another Member State after having pursued therein an activity in a self-employed capacity (OJ 1975 L 14, p. 10).

6 O n 5 June 1992, the Commission sent a third registered letter claiming that the conditions contained in Article 5 of the Code for granting the Greek flag to com- mercial vessels were contrary to Articles 7, 52 et seq. and 221 of the E E C Treaty.

7 As it received no reply to this last letter and was not satisfied with the replies to its other letters, the Commission issued a reasoned opinion on 27 July 1993 concern- ing the conditions for granting the Greek flag to vessels of all types in the Greek shipping register, the restrictions on the employment of crew members from other Member States on Greek fishing vessels and the conditions for granting licences for sponge fishing.

s Although the Hellenic Republic replied to that reasoned opinion, the Commission was not satisfied with the reply concerning the conditions for granting Greek nationality to vessels of all types and lodged this application.

9 Article 5 of the Code, entitled 'Nationality of the Vessel', provides as follows:

'Conditions for granting Greek nationality

1. Without prejudice to specific legislation, Greek nationality shall be granted to vessels more than half the shares in which are owned by Greek nationals or owned

n The Hellenic Republic considers, first of all, that, in the light of the judgment in Factortame and Others (Case C-221/89 [1991] E C R 1-3905, paragraph 17), it is entitled to apply Article 5 of the 1958 Geneva Convention on the High Seas and Article 91 et seq. of the 1982 United Nations Convention on the Law of the Sea, which provide that each State is to fix the conditions for the grant of its nationality to ships, for the registration of ships in its territory and for the right to fly its flag, to ensure the existence of a genuine link between the State and the ship. The rea- son why such a link is required is that States must meet a large number of obliga- tions with regard to ships flying their flag. The chief criterion for granting the right to fly a flag is the nationality of the shipowner. In that connection the Hellenic Government also refers to the 1986 United Nations Convention on Conditions for Registration of Ships which, in Articles 7 to 10 thereof, gives a very clear definition of the factors constituting a genuine link. It argues that the

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Greek legislation is in line with Article 8, which lists the criteria for the determina- tion of ownership of ships.

12 Secondly, the Hellenic Republic contends that Greek law does not prevent nation- als of other Member States from acquiring and using in Greece vessels flying the flag of another State.

1 3 It argues, further, that there are certain activities which are reserved to ships flying the national flag, as provided for by Council Regulation (EEC) N o 3760/92 of 20 December 1992 establishing a Community system for fisheries and aquaculture (OJ 1992 L 389, p. 1) and Council Regulation (EEC) N o 3577/92 of 7 December 1992 applying the principle of freedom to provide services to maritime transport within Member States (maritime cabotage) (OJ 1992 L 364, p. 7). Although it con- cerns the provision of services, the latter regulation, it is argued, also has an impact on freedom of establishment if it is to have any effect at all. The concept of estab- lishment includes the provision of services, which should be liberalized gradually. Furthermore, special arrangements are provided for the Hellenic Republic in Article 6(3) of Regulation N o 3577/92 for reasons of socio-economic cohesion.

i7 In this connection the first point to note is that national legislation similar to the Greek legislation in issue is the subject of well-established case-law of the Court (see, primarily, Factortame and Others, cited above, and Case C-93/89 Commission v IreUnd [1991] ECR 1-4569, Case C-246/89 Commission v United Kingdom [1991] ECR 1-4585, Case C-334/94 Commission v France [1996] ECR 1-1307 and Case C-151/96 Commission v IreUnd [1997] ECR 1-3327).

is It is clear from those decisions that as regards vessels used for the pursuit of an economic activity, each Member State must, in exercising its powers for the pur- pose of defining the conditions for the grant of its 'nationality' to a vessel, comply with the prohibition of discrimination against nationals of Member States on grounds of nationality, and that a condition which stipulates that where a vessel is

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owned or chartered by natural persons they must be of a particular nationality and, in the case of a company, the shareholders and directors must be of that nationality is contrary to Article 52 of the Treaty. A condition relating to registra- tion or management of a vessel in the case of a secondary establishment such as an agency, branch or subsidiary is contrary to Articles 52 and 58 of the Treaty (see, in particular, Commission v IreUnd, cited above, paragraph 12).

i9 As regards vessels not used for the pursuit of an economic activity, the Court held in Commission v IreUnd, cited above, paragraph 13, that, under Community law, every national of a Member State is assured of freedom both to enter another Member State in order to pursue an activity as as employed or self-employed per- son and to reside there after having pursued such an activity. Access to leisure activities available in that State is a corollary to freedom of movement.

23 Secondly, the argument of the Hellenic Government that its legislation is not an obstacle to the activities of nationals of other Member States is not relevant under the second paragraph of Article 52 of the Treaty. As the Court found in its judg- ment in Factortame and Others, cited above, at paragraph 25, freedom of establish- ment includes, in the case of nationals of a Member State, 'the right to take up and pursue activities as self-employed persons ... under the conditions laid down for its own nationals by the law of the country where such establishment is effected ...'.

24 As for the argument of the Hellenic Republic based on Regulation N o 3760/92, suffice it to note that the purpose of national legislation on the registration of ves- sels, such as that in issue, is not to determine the arrangements for the use of quo- tas or access to waters at the disposal of fishermen from a Member State. More- over, national legislation concerning the registration of all vessels cannot be justified by the existence of a Community fisheries system authorizing reserved national zones.

25 As regards Regulation N o 3577/92, which in Article 6(3) grants a temporary exemption to the Hellenic Republic, it should be pointed out that that exemption cannot be taken to authorize discriminatory conditions for the registration of ves- sels. Whilst the regulation defers until January 2004 the application of the principle

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of freedom to provide services to certain maritime transport services, it cannot constitute a basis for imposing additional restrictions on freedom of establishment.

O n those grounds,

THE COURT (Fifth Chamber)

hereby:

1. Declares that, by maintaining in force legislative provisions which restrict the right to registration in the Greek shipping registers to vessels more than half the shares in which are owned by Greek nationals or owned by Greek legal persons more than half of whose capital is held by Greek nationals, the Hellenic Republic has failed to fulfil its obligations under Articles 6, 48, 52, 58 and 221 of the EC Treaty, Article 7 of Regulation (EEC) N o 1251/70 of the Commission of 29 June 1970 on the right of workers to remain in the territory of a Member State after having been employed in that State and Article 7 of Council Directive 75/34/EEC of 17 December 1974 concerning the right of nationals of a Member State to remain in the territory of another Member State after having pursued therein an activity in a self- employed capacity.

2. Orders the Hellenic Republic to pay the costs.

Wathelet Moitinho de Almeida Edward