C-222/97
ECLI:EU:C:1998:460
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TRÜMMER AND MAYER
OPINION O F ADVOCATE GENERAL LA P E R G O L A delivered o n 6 O c t o b e r 1998 *
I — Introduction 3. The request for registration of the lien was refused by the competent courts at both first and second instance. The court of first instance and the court of appeal held that registration of the lien relating to a foreign-currency debt and denominated in that currency for the 1. The present proceedings concern the ques- purposes of registration contravened Arti- tion whether or not the refusal to register a cle 3(1) of the Verordnung über wertbestän- mortgage in a currency other than the national dige Rechte (Decree on fixed-value rights) of currency, which is permitted by the law of a 16 November 1940, as subsequently amended. Member State, constitutes a restriction on the free movement of capital within the Commu- nity and whether, in any case, such a restric- tion can be considered justified within the meaning of the relevant provisions of the Treaty.
II — Facts of the case 4. The provision in question reads as follows:
2. By a contract dated 14 November 1995, Dr Peter Mayer, residing in the Federai Republic of Germany, sold his one-sixth share in a property in Rosenthal (Austria) to Mr Manfred Trümmer, residing in Austria. The parties agreed that payment of the price agreed for the sale, namely DEM 13 000, 'Within the area covered by the Allgemeines would be deferred, while stipulating that a Grundbuchgcsctz (General Land Register lien would be registered in favour of the Law) of 25 July 1871 (RGBl. (Reicbsgesetzb- creditor, who waived interest and the provi- latt) N o 95) (now the 1955 Land Register Law sion of a value guarantee. (BGBl. (Bundesgesetzblatt) 1955, p. 39, in the version currently in force), liens on property may, after the entry into force of this decree, be created, other than in imperial currency "* Original language: Italian. (now schillings), only if the amount of
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money to be paid in respect of the property not mentioned in the nomenclature annexed is determined by reference to the price of fine to Council Directive 88/361/EEC of 24 June gold.' 1988 for the implementation of Article 67 of the Treaty (hereinafter 'the directive'). 1 The Treaty gives no definition of 'capital move- ments'. Consequently, according to the court of appeal, it is necessary to be guided by the express provisions of the directive and thus to exclude mortgages from among the transac- tions to which Article 73b applies. Further- more, in the opinion of that court, the impos- sibility of treating the transaction as a loan also precludes the mortgage from falling within 5. The appellants then turned to the Oberster the Community nomenclature relating to Gerichtshof (Supreme Court), before which loans. they challenged the compatibility of the above- mentioned provision of Austrian legislation with Community law. That problem had already been examined by the lower courts, but they had considered that it was not per- tinent to the present case. The appellate court, in particular, had held that the Austrian pro- vision in question did not infringe the prin- ciple of non-discrimination set out in Article 6 of the EC Treaty nor restrict the freedom to provide services set out in Article 59 of the Treaty 'since, according to the underlying contractual agreement, payment of the pur- chase price alone is deferred; ... no loan has 7. The Oberster Gerichtshof, before which been granted, with the result that, in the cir- the case is now pending, has for its part held cumstances, there is no "provision of ser- that 'even if, by reference to the nomencla- vices" as understood in legal writings and in ture available up to now, a lien in respect of a the case-law on Article 60 of the EC Treaty. debt corresponding to a purchase price were At issue here is a non-profit-making activity.' to be recognized as a form of capital move- ment, there remains some scope for inter- preting whether the provision of liens in respect of such debts ought to be made to depend on the type of currency owed (whether national or foreign)'. That court has therefore raised the question whether on the basis of Article 73b 'restrictions are permissible if they are necessary and justified by mandatory requirements, such as the safeguarding of public order or consumer protection'.
6. With regard to the free movement of cap- ital, the court of appeal then observed that property liens, which include mortgages, are 1 — OJ 1988 L 178, p. 5.
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8. O n the basis of these considerations, the ANNEX I national court has therefore referred the fol- lowing question to the Court for a prelimi- nary ruling:
Nomenclature of the capital movements referred to in Article 1 of the directive
'Does the refusal to allow a mortgage to be created to cover an existing foreign-currency debt (in this case in German marks (DEM)) constitute a restriction on the movement of capital and payments compatible with Article 73b of the EC Treaty?' The capital movements listed in this Nomen- clature are taken to cover:
Ill — Community legislation
The directive contains the following provi- — operations to liquidate or assign assets sions which are relevant to the case under built up, repatriation of the proceeds of examination: liquidation thereof or immediate use of such proceeds within the limits of Com- munity obligations,
'Article 1 — operations to repay credits or loans.
1. Without prejudice to the following provi- sions, Member States shall abolish restrictions This Nomenclature is not an exhaustive list on movements of capital taking place between for the notion of capital movements — whence persons resident in Member States. To facili- a heading XIII — E "Other capital move- tate application of this Directive, capital move- ments ·— Miscellaneous". It should not there- ments shall be classified in accordance with fore be interpreted as restricting the scope of the Nomenclature in Annex I. the principle of full liberalisation of capital movements as referred to in Article 1 of the Directive,
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II — Investments in real estate (not included F — Miscellaneous under I)
A — Investments in real estate on national Explanatory notes territory by non-residents
For the purposes of this Nomenclature and the Directive only, the following expressions have the meanings assigned to them respec- tively: IX — Sureties, other guarantees and rights of pledge
A •— Granted by non-residents to residents
Investments in real estate B —· Granted by residents to non-residents
Purchases of buildings and land and the con- struction of buildings by private persons for gain or personal use. This category also includes rights of usufruct, easements and XI — Personal capital movements building rights.'
A — Loans IV — Examination of the dispute
9. The first point which the question sub- mitted to the Court for a preliminary ruling requires to be examined relates to the nature XIII — Other capital movements of the transaction by which the mortgage was created. The Court is called upon to establish as a preliminary matter whether or not it lies within the scope of Article 73b of the Treaty.
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The Commission sets out from the premiss however, with regard to the proposition that that the mortgage itself constitutes a move- the mortgage itself constitutes a capital move- ment of capital. As I shall explain below, I am ment. As I have already pointed out, this is puzzled by this point of view. To begin with, the view of the Commission, which seeks to I would like to point out that the question equate a guarantee in the form of a mortgage referred to the Court relates exclusively to to a pledge, listed under heading IX of Annex I whether the refusal to register the mortgage to the directive. Such a comparison docs not, in a currency other than the national cur- however, stand up to analysis. The fact that rency is compatible with the principle of the the pledge attaches to real property, which is free movement of capital; in order to answer one of the specific features of such guaran- that question it is not, in my opinion, neces- tees, necessarily entails the transfer of the sary to ascertain whether the creation of a property assigned as a guarantee from the mortgage constitutes per se a capital move- debtor (or person standing surety) to the ment falling within the scope of Article 73b. creditor. This is not so in the case of a mort- In the case before us, the existence of a capital gage, the entry of which in the land register movement is not the direct objective of cre- does not lead to changes in the possession ating the mortgage but the prerequisite for and ownership of the property offered as a
doing so. It reflects the sale of property guarantee. In fact, no discernible capital move- between a resident and non-resident, a situa- ment occurs as a result of the creation of a tion specifically envisaged by heading II A of mortgage. Annex I to the directive, namely an invest- ment in property (or a corresponding subse- quent disinvestment 2 ). In the case before the Court, the capital movement also appears to exist by virtue of the deferment of payment of the agreed price, granted by the vendor to the purchaser, provided that this type of operation is recognized as a loan. If it is,
deferment of payment could itself be regarded as a capital movement within the meaning of heading XI A of Annex I to the directive. 11. On the other hand, the mortgage is one of the most classical ways of guaranteeing an obligation. If the distinguishing mark of a mortgage is considered to be its accessory nature, its fate will be inextricably linked with that of the obligation it guarantees. Let us pause to consider this notion. Precisely because the accessory follows the principal, the mort-
10. This seems to me to be the correct gage must, for the purposes of the present approach to the case. Clarification is needed, case, be considered strictly in relation to the transaction for the existence (or effectiveness) of which it is an essential precondition. For that reason, it is necessary to look at the 2 — Sec the note contained in die fourth indent of the second underlying legal transaction guaranteed by paragraph of the explanatory notes set out at the beginning of the list in Annex I to the directive, which states specifi- the creation of the mortgage in order to cally that 'the capital movements listed in this Nomenclature examine whether or not that transaction comes are taken to cover: .
. . —operations to liquidate or assign assets built up, repatriation of the proceeds of liquidation within the concept of capital movements con- thereof or immediate use of such proceeds witliin Uic limits of Community obligations'. templated by the Treaty.
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12. Let us now consider the refusal to reg- of their own lien when the higher-ranking ister the mortgage in a foreign currency. That, mortgage is registered in a foreign currency, it seems to me, raises an obstacle to the free both because of the difficulty of establishing movement of capital. Such a refusal effectively the exact value of the currency in which the prevents the creditor of a sum denominated higher-ranking mortgage has been created and in a currency other than that of the country because of the risk of variation in the exchange in which the property to be mortgaged is rate between the currency of registration and situated from receiving a guarantee that cor- the currency which is legal tender in the responds entirely to the claim he holds. This country in question. Such concerns are not inevitably means that the creditor must bear entirely without foundation, but upon closer an exchange risk and has to make financial scrutiny they are not persuasive. arrangements to eliminate or reduce that risk; such arrangements are, however, more costly for the parties than if there were no prohibi- tion at all or do not in any case ensure that the value of the guarantee fully matches that of the claim over time. It is therefore a situ- ation which constitutes a serious disincentive for those who, intending to carry out transac- tions involving capital movements in various 14. In the first place, the Austrian law, while ways but denominated in currencies other prohibiting registration of a foreign-currency than the national currency of the country in mortgage, at the same time introduces an ele- question, are accorded liens on property situ- ment of uncertainty, namely the possibility of ated in that country in respect of such activi- expressing the value of the guaranteed debt ties. If that is the case, the prohibition in by reference to gold. This removes from the question clearly restricts the free movement provision in question the absolute certainty of capital within the meaning of Article 73b. which is purportedly ascribed to it. It is common knowledge that the price of gold, far from providing a secure and stable refer- ence for the value of money, is subject instead to continual and unforeseeable fluctuations. Moreover, in recent years the price of gold 13. At this juncture, however, it is necessary has actually fallen substantially against the to consider whether overriding factors such European currencies. as those mentioned in Article 73d of the Treaty may nevertheless justify the maintenance of a legislation such as the Austrian law at issue in the present dispute.
This calls for a number of remarks. It has 15. Another point to be considered is the been pointed out in this context that the relative value of the property provided as a national legislature needs to safeguard man- guarantee. It is true that in the past the use of datory requirements, such as certainty as to real property as a frame of reference brought the value of the lien. Reference has also been an almost mathematical certainty of stable made to the difficulty for lower-ranking mort- value and the consequent security of receiving, gage creditors in ascertaining the precise value in the event of compulsory sale, a sum of
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money not less than that initially foreseen. It are reasonable and proportionate to the objec- must be acknowledged, however, that this tive pursued. aspect is now largely a thing of the past: the current trend with regard to property prices, which is determined partly by factors that have nothing to do with general economic performance but depend on changes in tastes, urban planning trends and life style, leads even in the short term to substantial varia- tions in the value of the properties on which the guarantee rests. Certainty as to the value of the lien is therefore, for the reasons I have stated, more a fiction — let us say a question- able presumption on the part of the national 17. In the present case, the principle of pro- legislature — than a concrete fact. portionality docs not seem to me to have been
respected. I have already observed that the derogation in favour of gold deprives the regulation of the absolute certainty which has at times been read into it. In fact, it discrimi- nates against foreign currencies by comparison with the Austrian schilling (and gold). The discrimination created in this way is not justi- 16. Admittedly, there is the other aspect to fied, however, The extremely inflexible nature the question, which relates to the difficulty of of the prohibition in question — which, as I establishing the value of the foreign currency have shown above, is no longer reasonably or to the extreme volatility of its value in based — militates in favour of the view that relation to the national currency, on the the principle of proportionality has not been assumption that the latter, by contrast, dis- satisfied. There arc foreign currencies which plays a degree of stability. The considerations clearly guarantee a stable and certain value no involved here are far from negligible. More- less effectively than the Austrian schilling. 3 over, Article 73b treats the currencies of all Furthermore, there arc various financial countries, whether Community Member organisations and instruments, at Commu- States or not, as equivalent for the purposes nity and international level, designed to defend of the free movement of capital. In addition, the value of a currency and protect the Article 73d contains a reservation which per- economy, of which the currency is essentially mits Member States 'to take measures which the tangible and perceptible expression.
Main- are justified on grounds of public policy or taining that only the national currency satis- public security'. In order to safeguard the fies certain stability requirements is therefore overriding requirements to which Article 73d an extremely narrow view, which I feel unable refers, the national legislature is therefore to share and which, from the standpoint of authorised to introduce measures which Community law, is no longer permissible. restrict the free movement of capital. Let me be more specific. The justifying criterion that comes to mind in this regard is that of pro- portionality. In view of the requirements of 3 — It should be noted that the legislation of many Community public policy or public security on which they Member States permits the registration of mortgages denomi- may have been based, the measures adopted nated in the currency of a Community country or a non- Community country that belongs to an international organi- by the Austrian legislature should be consid- sation, sucli as the OECD. The fact that the State in question belongs to such bodies guarantees that the national currency ered compatible with the Treaty only if they benefits from minimum standards of certainty regarding the bases on which its economy rests.
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IV — Conclusions
18. O n those grounds, I propose that the Court answer the question submitted by the Oberster Gerichtshof as follows:
The prohibition laid down in Paragraph 3(1) of the Austrian Verordnung über wertbeständige Rechte on the creation of a mortgage denominated in a currency other than the national currency to cover a debt denominated in that same foreign currency constitutes an obstacle to the free movement of capital which is forbidden under Article 73b of the Treaty.
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