C-302/97

The TGVG 1993 The national provisions on acquisition of immovable property

3. Under Paragraphs 9(l)(a) and 12(l)(a) of the TGVG 1993, the person acquiring the property at issue in the main proceed- 2. The Austrian Federal Constitution con- ings is required to obtain prior authorisa- fers on the Länder competence to regulate tion from the competent authority. Author- the transfer of agricultural and forestry

1 — See Tiroler LGB1. 82/1993 and Tiroler LGB1. 61/1996, * Original language: Italian. respectively.

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isation may be refused if the person seeking The TGVG 1996 to acquire the property does not provide convincing proof that it is not to be used for a secondary residence (Paragraph 14(1) of the TGVG 1993). However, Austrian 4. Under the new law too, authorisation nationals who have declared that they do cannot be granted if the person seeking to not want to establish a secondary residence acquire the property does not provide on the property they acquire are exempt convincing proof that it is not to be used from the requirement to obtain authorisa­ to establish a secondary residence (Para- tion (Paragraph 10(2) of the TGVG 1993). graph ll(l)(a)).

Under Paragraph 3, the new law applies to Austrian nationals and foreigners alike, in Under Paragraph 3, which entered into cases where the property is acquired within force on 1 January 1994, as prescribed in the framework of freedom of movement for Paragraph 41, the provisions relating to workers, freedom of establishment, free­ foreigners are not applicable to persons dom to provide services and the free move­ who can show that they are acting within ment of capital, provided that other rules the framework of the freedoms guaranteed do not apply under Article 70 of the Act of by the Agreement on the European Eco­ Accession of Austria or Article 40 of the nomic Area (hereinafter the ΈΕΑ Agree­ EEA Agreement. On the other hand, for­ ment'). 2 eigners who are not entitled to the same treatment as Austrian nationals must com­ ply not only with the provisions applicable 2 — OJ 1994 L 1, p. 420. to those nationals but also with the other

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specific condition laid down in the earlier The Treaty obligations that are the subject law, which still applies, namely that the of the alleged breach in this case concern acquisition must not conflict with the freedom of establishment and the free economic interests of the Austrian State movement of goods. 4 and there must be an economic, cultural or . social interest in the acquisition (see Para- graph 13(1 )(b)). Those provisions do not however apply if they conflict with inter- national agreements.

Facts

4 — Article 52 of the Treaty reads as follows: 'Within the framework of the provisions set out below, restrictions on the freedom of establishment of nationals of a Member State in the territory of another Member State shall be abolished by progressive stages in the course of the transitional period. Such progressive abolition shall also apply to restrictions on the setting up of agencies, branches 'Notwithstanding the obligations under the or subsidiaries by nationals of any Member State established Treaties on which the European Union is in the territory of any Member State. Freedom of establishment shall include the right to take up founded, the Republic of Austria may and pursue activities as self-employed persons and to set up and manage undertakings, in particular companies or firms maintain its existing legislation regarding within the meaning of tne second paragraph of Article 58, under the conditions laid down for its own nationals by the secondary residences for five years from the law of the country where such establishment is effected, date of accession.' subject to the provisions of the Chapter relating to capital.' Under Article 73b(l) of the Treaty: 'Within the framework of the provisions set out in this Chapter, all restrictions on the movement of capital between Member States and between Member States and third 3 — OJ 1995 L 1, p. 1. countries shall be prohibited.'

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Mr Konle first lodged an appeal with the 7. Considering that the application of the Landesgrundverkehrskommission (Land TGVG 1993 and the TGVG 1996 in his Transfer Commission attached to of the case was injurious to the fundamental Tirol Land Government, hereinafter the freedoms guaranteed to him under the EC 'LgvK'). The LGvK, by decision of 12 June Treaty, Mr Klaus Konle also brought an 1995, upheld the decision of 18 November action for damages against the Republic of 1994 on the ground that Mr Konle had not Austria before the Landesgericht für Zivil- provided proof that he did not intend to rechtssachen Wien. To quote the order for establish a secondary residence or that he reference: 'The plaintiff considers, with intended to exercise his right to freedom of respect to the application of the TGVG establishment. Mr Konle then brought an 1993, that he has been discriminated appeal before the Verwaltungsgerichtshof against and his freedom of establishment (Administrative Court). That court too, by and free movement of capital affected, in judgment of 10 May 1996, dismissed the that he was required to prove that he would appeal as unfounded. Having exhausted the not establish a secondary residence, administrative remedies, Mr Konle applied whereas for Austrians the mere declaration to the Verfassungsgerichtshof (Constitu- under Paragraph 10(2) of the TGVG 1993 tional Court, hereinafter the 'VfGH') on would have sufficed. ... With respect to the the basis of Paragraph 144(1) of the TGVG 1996, the plaintiff considers that his Constitution. The VfGH, by judgment of fundamental freedoms under European law 25 February 1997, decided to extend to Mr have been infringed, in that he has to Konle the effects of its own judgment of submit to an authorisation procedure 10 December 1996 in which it had ruled before acquisition of the land (that is, that the whole TGVG 1993 was unconsti- before his property right is entered in the tutional. It therefore set aside the LGvK's land register).' The authorisation proce- decision. dures had delayed the completion of Mr

The questions (b) in that, under the TGVG 1996, the plaintiff, even before his property right is entered in the land register, must — as Austrians now also 8. The Landesgericht für Zivilrechtssachen must — undergo a consent proce- Wien felt obliged, in the context of the dure, the possibility of making an action brought by Mr Konle, to refer the effective declaration that no holi- following questions to the Court for a day residence is being created no preliminary ruling: longer existing for Austrians either, Community law was infringed and the plaintiff injured in respect of a fundamental freedom guaranteed by provisions of Community law? '1. Does it follow from the interpretation of Article 6, Article 52 et seq. (Part Three, Title III, Chapter 2) and Arti- cle 73b et seq. (Part Three, Title III, Chapter 4) of the EC Treaty and Article 70 of the Act of Accession (Act concerning the conditions of accession of ... the Republic of Austria ... and the adjustments to the Treaties on which the European Union is founded) that 2. If so, is it for the Court of Justice in proceedings under Article 177 of the EC Treaty also to decide whether a breach of Community law is "suffi- ciently serious" (as the phrase is used, (a) in that, while the TGVG 1993 was for example, in the judgment in Joined in force, the plaintiff was required Cases C-46/93 and C-48/93 Brasserie to prove that he would not estab- du Pêcheur and Factortame) ?

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10. The provisions at issue in this case Substance have, as I explained, undergone various modifications. For the purposes of applying the derogation granted to Austria under the Act of Accession, it is therefore important to establish what is meant by the 'existing legislation' that can be maintained in force Applicability of Article 70 of the Act of under Article 70. In my view, the criterion Accession for a correct reading of the provision in question is clearly discernible from the case-law of the Court. Article 70 constitu- tes a derogation and, as such, it can be 9. Mr Konle claimed in the case before the interpreted only in the light of the aim it is national court that the fact that he had had intended to achieve and must in any event to go through the prescribed authorisation be interpreted restrictively in accordance procedures, first under the TGVG 1993 with the relevant judgments of the Court. 5 and then under the TGVG 1996, had In the first place, the Contracting Parties caused the alleged damage he had suffered, granted Austria the option of maintaining as a result of the breach of the EC Treaty rules on the right of establishment, free 5 — The requirement to interpret provisions that constitute a movement of capital and the prohibition of derogation restrictively was recently reiterated by the Court discrimination. I have already pointed out, in its judgment of 3 December 1998 in Case C-233/97 KappAhl Oy [1998] ECR I-8069, in particular paragraphs however, that according to the Austrian 15 and 21.

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6 — In view of the express reference to existing 'legislation', I cannot agree with the interpretation of Article 70 proposed by Austria — as defendant State — according to which the 7 — Mr Konle's application was based on Article 144(1) of the maintenance of the existing restrictions on the acquisition of Constitution, which provides that: 'The Constitutional secondary residences is in any case necessarily authorised Court shall rule on appeals against decisions of the from 1 January 1995 to the end of 1999. Nor, for the same administrative authorities... where the appellant considers reasons, can I agree with the Commission's argument that he has suffered injury in respect of his rights... through that — since the derogation is provided in Chapter 2, the application of an unconstitutional law.... An appeal may which refers expressly in the list of contents only to 'free be lodged only after all administrative remedies have been movement of workers, services and capital' — it does not exhausted'. extend to the guarantees relating to freedom of establish- 8 — See Öhlinger, Verfassungsrecht, third edition, 1997, p. 398 ment and the principle of non-discrimination. Such a view is et seq., Peyrou-Pistouley, La Cour constitutionnelle et le inconsistent with tne actual content of the provision and contrôle de la constitutionnalité des lois en Autriche, 1993, overlooks the fact that the list of contents of Chapter 2 is p. 325 et seq., and Palermo, Codice di diritto costituzionale exactly the same as that of Title III of the EC Treaty, which austriaco, Padua, 1998, p. 27. As regards the procedures for also includes the right of establishment. As to the principle challenging provisions adopted by the public authorities, the of non-discrimination, it is an essential part of the rules on Constitutional Court had initially ruled out the possibility of fundamental freedoms: any derogation affecting the exer- giving retroactive effect to annulment decisions but that cise of those freedoms inevitably has repercussions on the possibility was admitted following judgment VfSlg 10.203, rights arising from the Treaty. see Öhlinger, op. cit., p. 410 et seq.

ruling that the TGVG 1993 was unconsti- in Hans Kelsen's words — 'negative' legis- tutional took effect after accession to the lation. 10 That being established, we may Treaty. It remains to be seen what conclu- disregard the fact that the Austrian court sions are to be drawn from that fact. Had held in its judgment of 25 February 1997, the legislation existing at the time of pursuant to Paragraph 140(7) of the Bun- accession, the TGVG 1993, which the desverfassungsgesetz, that with respect to national court is required to take into Mr Konle it should proceed 'as if the account under the express terms of the provision that had been ruled unconstitu- aforementioned Article 70, the power to tional [in its previous judgment of produce effects in respect of time conferred 10 December 1996 with reference to the in this case by the judgment handed down whole of the Tirol law of 1993] was not by the Constitutional Court? In my view, part of the legal order at the time when the the answer is that it had not. The judgment events at issue in this case occurred'. 1 1 It in question must be regarded, in the present must not be forgotten that the derogation case, as a normative act. I refer specifically under consideration is only intended to to the power of annulment erga omnes of a relieve the Austrian State of any liability it declaration of unconstitutionality, the first might incur in maintaining existing provi- example in Europe being found, as we sions in force during the time allowed, even know, in the Austrian legal order. For the if they were incompatible with its Commu- purposes of the Act of Accession, the ruling nity obligations. In adopting that provision, of unconstitutionality is, in my view, only the parties to the Act of Accession certainly relevant when it has the objective result of did not intend that maintaining those removing measures that have been declared national measures in force should be con- illegal from the legal order. Its possible tingent on observance of the rules of the effect on the 'existing legislation' that may Austrian Constitution. The derogation be maintained in force should, I think, be relates only to the compatibility of provi- assessed in the light of the position the sions maintained in force with Community Court has taken in other judgments where law. It could not be otherwise. In the it has held (or at least implied), with regard present case, therefore, there is no occasion to the internal legal order of the Member to take account of the judgment by which States, that the constitutional procedure of the Constitutional Court confirmed Mr repealing laws is equivalent to the proce- Konle's right under Austrian law not to be dure culminating in their removal by means subject to provisions that had been declared of a declaration of constitutional illegal- illegal. For the purposes of the present ity. 9 If that is the case, the Austrian court's examination, as I have already said, the ruling can affect existing legislation, within only relevant judgment is the other judg- the meaning of the Act of Accession, in so ment ruling that the whole TGVG 1993 far as and only from the time when it enters was unconstitutional and that judgment is into effect as an act of legislation, even — relevant because of its power of annul-

ment — equivalent in my view to the effect dures from those laid down in the TGVG of a repeal of the legislation in question — 1993 at the time of accession. In place of which affected the maintenance in force of the declaration procedure (reserved for the provisions in question only from the Austrians and — from 1 January 1996 — date on which it became operative. persons enjoying freedom of movement under the EEA Agreement), the TGVG 1996 introduced a general obligation to obtain authorisation and also allowed the competent administrative authorities to grant authorisation to those acquiring the property in question under an abridged The TGVG 1993 can therefore be regarded procedure. Thus the two laws prescribe as existing legislation for the purposes of objectively different control procedures. the derogation. 12 Also, the abolition of the declaration pro- cedure and the introduction of an author- isation procedure for all applicants placed even greater restrictions on the transfer of immovable property, to the disadvantage of Austrian nationals and also of other nation- als eligible for equal treatment under 12. In the second place, it must be borne in Paragraph 3 of the 1993 law. mind that the Landesgrundverkehrskom- mission, to which the Konle case had been referred back after the Constitutional Court's decision of 25 February 1997, was obliged to apply the TGVG 1996, which had superseded the TGVG 1993. That law, the most recent Tirol legislation, entered into force on 1 October 1996, that is after Austria's accession to the Union. The Austrian Government contends that that The question of a possible breach of the law too is covered by the derogation. Treaty According to it, the TGVG 1996 made purely formal amendments to the system of the TGVG 1993, leaving the provisions of that law substantially unaltered. That view cannot however be accepted. The TGVG 1996 in fact introduced different proce- 13. Since the TGVG 1996 is not covered by the derogation, it is necessary to answer question 1(b) in the order for reference, 12 — Since Austria's liability does not depend on the application which seeks to ascertain whether, the fact of the TGVG 1993, there is no occasion to consider that 'under the TGVG 1996, the plaintiff, whether, as Mr Konle claims, the system of declaration and authorisation laid down in the TGVG 1993 constitutes a even before his property right is entered in breach of the principle of non-discrimination and funda- mental freedoms. Nor is there any need to consider the the land register, must — as Austrian objection raised by Austria — as defendant Govern- citizens now also must — undergo a con- ment — that Mr Konle has not succeeded in establishing the alleged breach of the Treaty. Austria had in fact sent procedure, the possibility of making an contended that if Mr Konle thought he was entitled, on the basis of Community provisions that had direct effect, to effective declaration that no holiday resi- apply for authorisation in the same way as Austrian dence is being created no longer existing for nationals, he ought to have submitted a declaration in the form laid down in Paragraph 10. Austrians either', constitutes an infringe-

ment of Community law, with the result the subject-matter of that legislation is that 'the plaintiff [was] injured in respect of referred to in Article 222. If that were a fundamental freedom guaranteed by the case, there would have been no need to provisions of Community law'. The provide the derogation we find in Arti­ national court refers, in particular, to cle 70 of the Act of Accession. Access to the Articles 6, 52 et seq. and 73b et seq. of ownership of immovable property is in fact the Treaty, on the principle of non-discri­ implicit in the freedoms guaranteed by the mination, freedom of establishment and Treaty and the right to stay and reside in free movement of capital. 1 3 another Member State within the limits prescribed in Article 8a of the Treaty. If the provisions of national law cited in the order for reference are not covered or justified by the derogation, there is no reason why the Court should not examine their compat­ ibility with the requirements of Community law and, in particular, with the conditions 14. The plaintiff claims that it is an in­ governing any restriction on the exercise of fringement of freedom of establishment and the freedoms guaranteed by the Treaty. the free movement of capital to make the acquisition of immovable property subject to administrative authorisation. Austria contends — in the statement it submitted as a party in the main proceedings — that the prescribed authorisation procedures are not discriminatory and do not unduly restrict the exercise of the freedom guaran­ teed by the Treaty. In its view, Article 222 of the Treaty leaves the rules in Member States governing the system of property ownership intact. 15. That being established, let us begin by considering whether the provisions in ques­ tion unduly restrict the freedom of estab­ lishment. As the Commission has observed, the Court has stated that 'as is apparent from Article 54(3)(e) of the Treaty and the general programme for the abolition of restrictions on freedom of establishment of 18 December 1961, the right to acquire, I cannot agree with the Austrian Govern­ use or dispose of immovable property on ment's contention that the Tirol legislation the territory of a Member State is the at issue is exempt from the requirement to comply with the Treaty and consequently from scrutiny by this Court, simply because 14 — In interpreting Article 222, the Court has held that 'although Article 222 of the Treaty does not call into question the right of Member States to institute a system of public expropriation, such a system does not however 13 — With regard to Article 6, the Court has already stated that escape the fundamental principle of non-discrimination that provision 'applies independently only to situations underlying the Chapter of the Treaty on the right of g overned by Community law in regard to which the Treaty ays down no specific prohibition of discrimination'. See establishment'. See judgments in Case 44/79 Hauer [1979] ECR 3727, paragraph 17, and Joined Cases C-248/95 and judgment in Case 305/87 Commission ν Greece [1989] C-249/95 SAM Schiffahrt and Stapf [1997] ECR 1-4475, ECR 1461. paragraph 72.

corollary of freedom of establishment'. 15 A governing property transactions at issue in system of prior authorisation for the acqui this case are closely connected. 1 7 The sition, such as the system prescribed in the Austrian Constitutional Court recognised TGVG 1996, may therefore constitute an the importance of the requirements laid obstacle to the exercise of freedom of down by the Tirol legislature in its judg establishment. It is true that the rules in ment on the Tirol Raumordnungsgesetz. 18 the present case make no reference to the These are essentially to do with land nationality of those to whom they are management and they are determined by addressed and may be regarded in that the particular characteristics of the region respect as applicable without distinction. concerned, namely the limited amount of However, they must also comply with the space suitable for human habitation and criteria established in the Community case- the need to make sparing use of it; the law, according to which measures of this pressing need to guarantee adequate kind, in addition to being applied in a non accommodation for the resident popula discriminatory manner, must be justified by tion, in a situation where any increase in imperative requirements in the general the already high number of secondary interest, must be suitable for securing the residences may cause property prices to attainment of the objective which they rise and make purchase more difficult; the pursue, and must not go beyond what is advantage of avoiding further development necessary in order to attain it. 1 6 and other costs that would have repercus sions for local communities if the demand for secondary residences was not kept within reasonable limits.

tion. These are clear from the preparatory ment and environmental protection and work on the Law on the construction of that, in accordance with the acquis, their secondary residences, the Tirolerraumord application does not involve direct or nungsgesetz of 1994, with which the rules indirect discrimination among nationals of 19 the Member States'. 15 — J u d g m e n t in Case C-305/87, Commission ν Greece, cited above, paragraph 22. That view is based on the assump tion that the guarantees with regard to establishment provided in the Treaty are concerned not solely with 'the 17 — See annex to the minutes of the Tirol Landtag, eleventh specific rules on the pursuit of occupational activities but legislature, sixth session, fourth sitting, held on 6, 7 and also with the rules relating to the various general facilities 8 July 1993, p. 45 et seq. which are of assistance in the pursuit of those activities', 18 — J u d g m e n t of the Verfassungsgerichtshof of 28 November citing in this connection the statement made in the 1996, paragraph 3.3.3.2. judgment in Case 63/86 Commission ν Italy [1988] ECR 19 — That statement cannot be regarded as having absolute 29. authority.

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20 — See inter alia the judgment in Case C-145/88 Torfaen [1989] ECR 3851, paragraph 15. 18. As regards the criteria that may be 21 — Judgment of the Verfassungsgerichtshof of 28 November 1996, cited above, paragraph 3.3.3.2. relevant to the aspect of the case we are

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Austrian nationals. 25 Thus, in his opinion, I repeat, is a purely hypothetical proposi- direct discrimination was replaced by in- tion advanced by Mr Konle's defence direct discrimination, permitted by the lawyer, which is not confirmed in the wording of the law. account of the facts and the relevant legislation given by the national court. On the basis of the documents in the case, therefore, the Court is not in a position to determine whether or not there is any indirect discrimination in the provisions of the so-called abbreviated procedure or the manner in which they are administered.

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Austria's liability for damages national court. The answer, it seems to me, follows from the case-law of the Court. The Court has repeatedly ruled that it is for the national court to verify whether or not the conditions governing State liability for a breach of Community law are fulfilled. 28 This is quite understandable since, in the Community legal order, the national courts are responsible for protecting the rights of individuals in judicial proceedings. This does not mean, however, that the Court itself is not required to define the scope of the principles and rules of Community law 23. The questions relating to liability must that the national courts must then apply in now be considered. In the second and third specific cases. This task of centralised questions, the Court is asked whether it has supervision, so to speak, is reserved for jurisdiction, in proceedings under Arti- the Court and is connected with the need to cle 177, to determine whether or not a ensure correct and uniform interpretation breach of Community law is sufficiently of Community law, a need that is fulfilled serious and, if so, whether in the present through the permanent dialogue between case the possible breach committed by Community and national courts within the Austria falls into that category. framework of the well-known instrument of judicial cooperation represented by the procedure for preliminary rulings under Article 177 of the Treaty. Only the Court therefore may, in general interpretative terms, clarify the concept at issue in this case, that is to say only the Court may define the scope of a 'sufficiently serious' breach, by establishing the conditions in which an individual may claim protection of his right to reparation from a Member State, and only the Court may explain how those conditions are to be understood. It is

then for the national court to determine the limits set to the action of the States are whether or not the facts in the case before it not clearly defined. 30 meet the conditions defined by the Court. If in doubt, the national court is, of course, still free to apply to the Court for further interpretative clarification under the preli- minary-ruling procedure, to help it to solve the problem. 26. In the present case, it must be borne in mind that the Community obligations to be considered in the case of the Tirol legisla- tion on second homes are difficult to define precisely because of the problem, now referred to the Court, of defining the scope of the derogation provided in Article 70 of the Act of Accession. In the present case, the Community rule at issue is not applic- able with the clarity and precision required 25. Let us now consider the nature of the under Community law to establish an breach on which the national court seeks obligation by the State to make reparation clarification. In this connection, the Court for any damage suffered by the individual. has already suggested some factors that Although the national rules must be applied national courts may take into consideration in accordance with the requirements of the in deciding whether a breach is 'sufficiently Treaty, in the circumstances the error of serious'. They include 'the clarity and law committed by Austria may, for the precision of the rule breached, the measure reasons I have given, be regarded as of discretion left by that rule to the national excusable. This effectively precludes the or Community authorities, whether the hypothesis that the breach of its obligations infringement and the damage caused was under the Treaty is sufficiently serious. intentional or involuntary, whether any error of law was excusable or inexcusable, the fact that the position taken by a Community institution may have contrib- uted towards the omission, and the adop- tion or retention of national measures or practices contrary to Community law. On any view, a breach of Community law will clearly be sufficiently serious if it has The fourth question persisted despite a judgment finding the infringement in question to be established, or a preliminary ruling or settled case-law of the Court on the matter from which it is clear that the conduct in question consti- tuted an infringement'. 29 In such cases, as 27. The answer I have proposed to the Advocate General Tesauro has observed, second and third questions relieves me of the obligation to answer the fourth.

The aims of securing land management and environmental protection are imperative requirements in the general interest. However, national legislation based on those aims must meet the conditions defined in the case-law of the Court, that is to say they must be applied in a non-discriminatory manner, must be suitable for securing the attainment of the objective which they pursue, and must not go beyond what is necessary in order to attain it.

Any restrictions on the freedoms guaranteed by the Treaty imposed by national legislation with the aims of securing land management and environmental protection may be regarded as proportionate only in so far as they are confined to areas in which those requirements are in fact imperative and in so far as the aims cannot be pursued by measures that are less restrictive. I - 3120

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(2) & (3) Although in principle it is for the national courts to determine whether the conditions for establishing a Member State's liability for damages are fulfilled, it is for the Court, within the framework of the procedure provided for in Article 177 of the Treaty, to clarify the principles on which those conditions are defined.

A breach cannot be regarded as sufficiently serious when the Community rules in question are not sufficiently clear and precise.

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