Case C‑400/08, Commission v Spain

In this case, the Commission of the European Communities claimed that  Spain had  failed to fulfil its obligations under Article 43 EC, by imposing restrictions on the establishment of shopping centres in Catalonia.

The action brought by the Commission comprised, in essence, three complaints relating to the incompatibility with Article 43 EC of: (i) the restrictions on the location and size of large retail establishments; (ii) the conditions for obtaining the specific retail licence required to set up such establishments; and (iii) certain aspects of the procedure for the grant of that licence.

The first complaint, which related to the restrictions on the location and size of large retail establishments, concerned a prohibition on setting up such establishments outside consolidated urban areas of a limited number of municipalities and the sales area limitations for each district and municipality . As regards the sales area limitations for each district and municipality, the Commission argued that the limitation was particularly severe in the case of hypermarkets. 

The second complaint, which related to the conditions for obtaining a specific retail licence, was composed of six parts, respectively concerning: (i) the need to obtain a specific retail licence before opening large retail establishments; (ii) the taking into account, under the licensing procedure, of the existence of retail facilities in the area concerned and the effects of setting up a new establishment on the retail structure of that area; (iii) the requirement, under the licensing procedure, of a market share report which was binding if unfavourable and which must be unfavourable if the market share exceeds a certain value; (iv) the required consultation with the Competition Court; (v) the obligation to obtain the opinion of the Retail Facilities Committee, whose members include potential competitors of the applicant; and (vi) the lack of a clear definition of the criteria applicable. 

Lastly, the third complaint, which related to certain aspects of the procedure for the issue of retail licences, was composed of three parts, respectively concerning: (i) a ‘negative silence’ rule ; (ii) the charging of fees which were unrelated to;  and (iii) the excessive length of the procedure .

The existence of restrictions on the freedom of establishment

The Court first of all held that in proceedings for failure to fulfil obligations under Article 226 EC, it was incumbent upon the Commission to prove the allegation that an obligation had not been fulfilled. It was the Commission’s responsibility to place before the Court all the factual information needed to enable the Court to establish that the obligation had not been fulfilled and, in so doing, the Commission may not rely on any presumption (see, to that effect, inter alia, Case 290/87 Commission v Netherlands [1989]; and Case C‑241/08 Commission v France [2010]).

The Court held that if the Commission’s allegation that the contested legislation had indirectly discriminatory effects as regards operators from Member States other than Spain was to be regarded as sound, the Commission must first show that large retail establishments were treated differently from other retail establishments and that that difference constituted a disadvantage for large retail establishments. Secondly, the Commission must show that that difference in treatment worked to the advantage of Spanish operators, because Spanish operators favoured small and medium-sized establishments while operators from other Member States prefered large retail establishments.

The Court found that  the Commission had not adduced conclusive evidence capable of establishing that the figures which it had provided in support of its argument actually confirm that its argument was sound. Nor had the Commission put forward other factors to show that the contested legislation indirectly discriminated against operators from other Member States as compared with Spanish operators.

 However, the Court reiterated that Article 43 EC precluded any national measure which, even though it was applicable without discrimination on grounds of nationality, was liable to hinder or to render less attractive the exercise by EU citizens of the freedom of establishment that was guaranteed by the Treaty (see, inter alia, Case C‑299/02 Commission v Netherlands [2004], and Case C‑140/03 Commission v Greece [2005]).

The Court furthermore reiterated that the concept of ‘restriction’ for the purposes of Article 43 EC covers measures taken by a Member State which, although applicable without distinction, affected access to the market for undertakings from other Member States and thereby hindered intra-Community trade (see  Case C‑442/02 CaixaBank France [2004] ; Case C‑518/06 Commission v Italy [2009] and, by analogy, Case C‑110/05 Commission v Italy [2009]).

The Court stated that national legislation which made  the establishment of an undertaking from another Member State conditional upon the issue of prior authorisation fell within that category, since it was capable of hindering the exercise by that undertaking of freedom of establishment, by preventing it from freely pursuing its activities through a fixed place of business (see Joined Cases C‑570/07 and C‑571/07 Blanco Pérez and Chao Gómez [2010]).

The Court found that in the present case, the contested legislation, taken as a whole, established a system under which prior authorisation, in the form of a licence, was necessary for the opening of any large retail establishment on the territory of the Autonomous Community of Catalonia.

 The Court held that that legislation restricted the localities available for new establishments and imposed limits on the sales areas for which such a licence could be obtained.

 Secondly, the legislation provided for the licensing of new establishments only in so far as there would be no effect on existing small traders.

 Thirdly, for the issue of licences, it laid down a number of procedural rules which were likely to have an appreciable negative effect on the number of licence applications made and/or granted.

Consequently, according to the Court, the contested legislation, taken as a whole, had the effect of hindering or of rendering less attractive the exercise by economic operators from other Member States of their activities on the territory of Catalonia through a permanent establishment and thus of affecting their establishment in the Spanish market.

Moreover,  Spain  accepted that that legislation entailed certain restrictions on the freedom of establishment.

The Court found that the contested legislation, taken as a whole, constituted a restriction on the freedom of establishment for the purposes of Article 43 EC.

 The justifications for restrictions on the freedom of establishment

The Court reiterated that restrictions on freedom of establishment which were applicable without discrimination on grounds of nationality might be justified by overriding reasons relating to the general interest, provided that the restrictions were appropriate for securing attainment of the objective pursued and did not go beyond what was necessary for attaining that objective (Case C‑169/07 Hartlauer [2009]; Joined Cases C‑171/07 and C‑172/07 Apothekerkammer des Saarlandes and Others [2009]; and Joined Cases C‑570/07 and C‑571/07 Blanco Pérez and Chao Gómez [2010]).

The Court held that Spain had not produced sufficient evidence to explain the reasons for which the restrictions at issue were necessary to achieve the objectives pursued. According to the Court, given that lack of explanation and the significant impact of the restrictions in question on the possibility of opening large retail establishments on the territory of Catalonia, the restrictions on the freedom of establishment laid down in that regard were not justified.

 The second complaint

With regard to the requirement to obtain a specific retail licence to open large retail establishments,  Spain contended that the disputed provisions pursue, in general, objectives of environmental protection, town and country planning and consumer protection, by seeking, as regards that last objective, to ensure more effective competition in terms of price, quality and choice.

 The Commission, however, maintained that those provisions pursue purely economic objectives in that they seek to protect small local traders.

In that regard, the Court held that that contested provisions required the application of ceilings as regards the market share and the impact on existing retail trade, above which it was impossible to open large retail establishments and/or medium-sized retail establishments.

Being purely economic, such considerations could not, according to the Court,  constitute an overriding reason in the public interest.
 
The third complaint.

With regard to the third complaint, relating to a negative silence system, the Court reiterated that Member States could not be denied the possibility of pursuing objectives such as environmental protection, town and country planning and consumer protection through the introduction of rules which were easily managed and supervised by the competent authorities (see Case C‑137/09 Josemans [2010]).

 The Court explained that the negative silence system, provided for in the context of a retail licensing procedure the objectives of which were environmental protection, town and country planning and consumer protection and the role of which was to ensure legal certainty in the event that the authority responsible for ruling on that application did not take an express decision within the period allowed, by providing that that failure to act constituted an implied decision rejecting the application, thus enabling the party which made that application to apply to the courts, was a system which the competent authorities could easily manage and supervise. Where no decision was taken in the context of its system, the administration was required to adopt a reasoned act. The Court found that, therefore, the third complaint must be rejected.