Parties Grounds Operative part

In Case C‑567/07,

REFERENCE for a preliminary ruling under Article 234 EC from the Raad van State (Netherlands), made by decision of 19 December 2007, received at the Court on 27 December 2007, in the proceedings

Minister voor Wonen, Wijken en Integratie

v

Woningstichting Sint Servatius,

THE COURT (First Chamber),

composed of P. Jann, President of the Chamber, A. Tizzano (Rapporteur), A. Borg Barthet, E. Levits and J.-J. Kasel, Judges,

Advocate General: M. Poiares Maduro,

Registrar: M. Ferreira, Principal Administrator,

having regard to the written procedure and further to the hearing on 19 March 2009,

after considering the observations submitted on behalf of:

– Woningstichting Sint Servatius, by M. de Boer, J. de Pree and P. Slot, advocaten,

– the Netherlands Government, by C. Wissels and Y. de Vries, acting as Agents,

– the German Government, by M. Lumma, acting as Agent,

– Ireland, by D. O’Hagan, acting as Agent, and M. Gray, barrister,

– the Hungarian Government, by J. Fazekas, R. Somssich and K. Borvölgyi, acting as Agents,

– the Polish Government, by M. Dowgielewicz, P. Kucharski and K. Majcher, acting as Agents,

– the Swedish Government, by S. Johannesson, acting as Agent,

– the Commission of the European Communities, by E. Traversa, V. Di Bucci, H. van Vliet and A. Nijenhuis, acting as Agents,

having decided, after hearing the Advocate General, to proceed to judgment without an Opinion,

gives the following

Judgment

1. This reference for a preliminary ruling concerns the interpretation of Articles 56 EC, 58 EC, 86(2) EC, 87 EC and 88 EC.

2. The reference was made in the course of proceedings between the Minister voor Wonen, Wijken en Integratie (Minister for Housing, Districts and Integration) (‘the Minister’) and the Woningstichting Sint Servatius (‘Servatius’) concerning the Minister’s refusal to grant the latter, which is an approved institution active in the public housing sector in the Netherlands, authorisation to invest in a construction project in Liège (Belgium).

National law

3. Article 22(2) of the Netherlands Constitution provides that ‘it shall be the responsibility of the Government to promote adequate housing’. The nature and extent of that task are defined in the Housing Law (Woningwet) and the Decree concerning the management of the public rented-housing sector (Besluit beheer sociale-huursector: ‘BBSH’).

4. Article 70(1) of the Housing Law provides:

‘Associations with full legal capacity and foundations which have as their object to operate solely in the public housing sector and do not intend to distribute any profits other than in the interests of public housing may be approved by royal decree as institutions operating solely in the interests of public housing.’

5. Under Article 70c of the Housing Law:

‘Approved institutions shall give priority to the housing of persons who, owing to their income or other circumstances, have difficulty finding suitable accommodation …’.

6. Article 70d of the Housing Law states:

‘1. Approved institutions shall be answerable to the competent Minister, in accordance with Article 71a(1), introductory words and point (b).

2. Additional requirements concerning supervision shall be adopted by, or pursuant to, general administrative measures …’

7. Article 120a(1) of the Housing Law is worded as follows:

‘By or pursuant to general administrative measures, it may be stipulated that the competent Minister may, as an experimental project, depart temporarily, or permit a temporary departure, from rules laid down by or pursuant to general administrative measures.’

8. In accordance with Article 9 of the BBSH, amendments to the constitution of an approved institution, including any amendment relating to the geographical area of activity of the institution, are subject to approval by the competent Minister.

9. Article 11(1) of the BBSH provides that ‘[the] approved institution shall operate solely in the public housing sector’.

10. Finally, Article 49(1) of the BBSH provides:

‘The competent Minister may depart temporarily, or permit a temporary departure, from this Decree to permit experimental project which he believes to be in the interests of public housing.’

The dispute in the main proceedings and the questions referred for a preliminary ruling

11. Servatius is an approved institution within the meaning of Article 70(1) of the Housing Law. In accordance with its statutes, its objective is to operate solely in the public housing sector and its area of activity is confined to certain Dutch municipalities. Servatius is the sole shareholder and administrator of the holding company B.V. Servatius Holding Maastricht BV.

15. By decision of 29 December 2003, the Minister declared Servatius’ objection to his refusal of authorisation for its construction project to be unfounded.

16. By judgment of 19 May 2006, the Rechtbank Maastricht (District Court, Maastricht) (Netherlands) declared the action brought by Servatius against the decision refusing authorisation to be well-founded. It annulled that decision, referred the case back to the Minister and ordered him to take a fresh decision on Servatius’ objection.

17. On 29 June 2006, the Minister appealed to the referring court against that judgment.

18. Since it entertained some doubts concerning the interpretation of Articles 56 EC, 58 EC, 86(2) EC, 87 EC and 88 EC, the Raad van State (Council of State) (Netherlands) decided to stay proceedings and to refer the following questions to the Court of Justice for a preliminary ruling:

‘1. Does the requirement that the Minister give prior authorisation for any cross-frontier activities of an undertaking which is approved by law to promote the Netherlands’ public housing interests, which may rely on public resources for this purpose, which may operate, by law, solely in those interests, and which in principle has its area of activity within the Netherlands (“approved institution”), constitute a restriction on the free movement of capital, as referred to in Article 56 EC?

2a. Can a Member State’s public housing interests be regarded as a public policy interest as referred to in Article 58 EC?

2b. Can a Member State’s public housing interests be regarded as an overriding reason in the public interest recognised in the case-law of the Court of Justice?

2c. More specifically, can interest in the effectiveness of and the ability to finance a Member State’s public housing system be regarded as a public policy interest as referred to in Article 58 EC or as an overriding reason in the public interest recognised in the case-law of the Court of Justice?

3a. Assuming that the requirement of prior authorisation for an approved institution as referred to in Question 1 constitutes a restriction for which there is justification as referred to in Questions 2a, 2b and 2c, is that requirement necessary and proportionate?

3b. When applying that justification, does a Member State have a wide margin of discretion in determining the scale of the public interest concerned and the manner in which that interest is promoted? Is one of the determinants in this context the fact that the [European] Community has few, if any, powers in the public housing sector?

4a. Besides, or in conjunction with, the overriding reasons in the public interest referred to in Article 58 EC and recognised in the case-law of the Court of Justice, can a Member State rely on Article 86(2) EC to justify a restriction on the free movement of capital, if special rights have been granted to the undertakings concerned and those undertakings are entrusted with the operation of services of general economic interest?

4b. Do the public interests referred to in Article 58 EC and the overriding reasons in the public interest recognised in the case-law of the Court of Justice have the same content as the general economic interest referred to in Article 86(2) EC?

4c. Does reliance by the Member State concerned on Article 86(2) EC, its contention being that the undertakings to which special rights have been granted perform tasks of general economic interest, have additional weight over and above reliance on public interests as referred to in Article 58 EC and the overriding reasons in the public interest recognised in the case-law of the Court of Justice?

5a. Can undertakings, such as the approved institutions referred to in Question 1, which, on the one hand, are required to employ all their capital for the benefit of public housing, but which, on the other hand, also undertake commercial activities in respect of public housing, be regarded, for all or some of their tasks, as undertakings entrusted with the operation of services of general economic interest, as referred to in Article 86(2) EC?

5b. For the answer to Question 5a to be in the affirmative, is it necessary for the undertakings concerned to keep separate accounts from which it is absolutely clear what costs and receipts are associated with their social activities, on the one hand, and with their commercial activities on the other, and for that obligation to be laid down in national legislation? Should it then be ensured that a Member State’s financial resources benefit only the social activities and their continuity?

6a. If an approved institution as referred to in Question 1 can be regarded, in respect of all or some of its activities, as an undertaking entrusted with the operation of services of general economic interest as referred to in Article 86(2) EC, can the entrustment of the operation of such services justify the imposition on the approved institution of a restriction on the free movement of capital as referred to in Article 56 EC?

6b. When applying that justification, does a Member State have a wide margin of discretion in determining the scale of the general economic interest concerned and the manner in which that interest is promoted? Is one of the determinants in this context the fact that the Community has few, if any, powers in the public housing sector?

7a. Can the fact that a Member State provides certain undertakings as referred to in Article 86(2) EC with financial resources make it necessary for the territorial scale of their activities to be limited in order to prevent those financial resources from constituting prohibited State aid and the undertakings employing those resources in another Member State from competing with undertakings in that Member State under conditions which do not comply with market rules?

7b. Can a Member State, in this instance the Netherlands, require approved institutions as referred to in Question 1 wishing to undertake housing construction activities of a social and commercial nature in another Member State to obtain prior authorisation if there is as yet no legal obligation in the first-mentioned Member State to make a distinction between the two types of activity? Is the requirement of prior authorisation in this case a necessary and proportionate means of ensuring compliance with Articles 87 and 88 EC?’

The first to third questions

22. That is the case, in particular, of national measures which make investments in immovable property conditional upon a prior authorisation procedure and thus restrict, by their very purpose, the free movement of capital (see, to that effect, Case C-302/97 Konle [1999] ECR I‑3099, paragraph 39, and Reisch and Others , paragraph 32).

26. In the main proceedings, the Netherlands Government argues that the prior authorisation scheme in question is justified by requirements associated with the housing policy it pursues and with the financing of that policy, by grounds of public policy within the meaning of Article 58 EC and by an overriding reason in the public interest recognised in the case-law of the Court.

27. Thus, such a scheme seeks to ensure that approved institutions invest, in accordance with their statutes, in projects in the interests of public housing in the Netherlands, in particular for the purpose of ensuring an adequate supply of accommodation for persons on low incomes or for other categories of less fortunate members of the population. There is also a concern to prevent the financial facilities available to those institutions by virtue of the objects laid down in their statutes being diverted to other economic activities, thereby jeopardising the effectiveness and the financing of the public housing policy.

32. That stated, it remains important to ascertain whether the fact that an approved institution is required to follow a prior authorisation procedure before it can implement a construction project in a Member State other than the one in which it has its seat constitutes a measure which is necessary and appropriate to the attainment of the objectives referred to in paragraphs 26 and 27 of this judgment.

34. It is conceivable that that might be the case in relation to a housing policy pursuing objectives such as those laid down by the Housing Law and the BBSH. A prior examination carried out by the competent administration might appear better able to ensure that the resources of the approved institutions are used to meet, as a priority, the accommodation needs of certain sections of the population in the Netherlands, whilst a system of checks a posteriori could well occur at too late a stage, in particular when significant expenditure has already been made and is not easily recoverable.

35. Nevertheless, the Court has also held, on many occasions, that a scheme of prior administrative authorisation cannot render legitimate discretionary conduct on the part of the national authorities which is liable to negate the effectiveness of provisions of Community law, in particular those relating to a fundamental freedom such as that at issue in the main proceedings. Therefore, if such a scheme is to be justified even though it derogates from a fundamental freedom, it must be based on objective, non-discriminatory criteria known in advance, in such a way as adequately to circumscribe the exercise of the national authorities’ discretion (see, inter alia, Case C‑169/07 Hartlauer [2009] ECR I‑0000, paragraph 64 and the case-law cited).

36. In view of the material in the files lodged with the Court, it cannot be excluded that the provisions of the Housing Law and of the BBSH at issue in the main proceedings do not fully satisfy those requirements.

37. In that regard, it is apparent most particularly from the answers of the Netherlands Government to the Court’s written questions that the national provisions concerned make prior authorisation by the competent Minister dependent on a single condition, namely that the project concerned be in the interests of public housing in the Netherlands, as required by Article 49(1) of the BBSH. As to the question whether that condition is satisfied, it is apparent that a check is carried out on a case-by-case basis but that the check is not set within a legislative framework and that there are no other specific and objective criteria from which the institutions concerned can ascertain in advance the circumstances in which their application for authorisation will be granted and on the basis of which the courts, if an action is brought before them in respect of a refusal of authorisation, may exercise their powers of review to the full.

38. In those circumstances, subject to a review by the national court of such factors in the light of the criteria identified by the case-law referred to in paragraph 35 of this judgment, the prior administrative authorisation scheme at issue in the main proceedings might be considered not to be based on conditions capable of adequately circumscribing the exercise, by the national authorities, of their discretion and, therefore, of justifying a derogation from the free movement of capital.

The fourth to sixth questions

40. By its fourth to sixth questions, which it is appropriate to examine together, the national court asks in essence whether, in order to justify a restriction on the free movement of capital imposed on undertakings entrusted with the operation of services of general economic interest and to which special rights have been granted, a Member State may rely on Article 86(2) EC.

41. In connection with that issue, the national court queries whether, first, undertakings such as Servatius can, although they also carry on commercial activities within the housing sector, be regarded, with regard to all or part of their tasks, as undertakings entrusted with the operation of services of general economic interest within the meaning of Article 86(2) EC and whether, for that purpose, it is necessary for the undertaking concerned to keep separate accounts distinguishing the costs and receipts related to social activities from those relating to commercial activities. Second, it raises a question about the scope of the discretion enjoyed by the Member States in determining the scale of the general economic interest for the purposes of Article 86(2) EC and about the ways in which such an interest can be protected.

47. It follows that there is no need to reply to the fourth to sixth questions referred by the national court concerning the interpretation of Article 86(2) EC, since that provision is not applicable to a case such as that at issue in the main proceedings.

The seventh question

48. By this question, the national court asks essentially, first, whether, when a Member State provides financial resources to undertakings entrusted with the operation of services of general economic interest, the territorial scale of the activities of those undertakings should be limited in order to prevent those resources from constituting unlawful State aid in breach of Article 87 EC and the undertakings, when employing those resources in another Member State, from distorting conditions of competition. Second, the referring court asks whether, in a Member State in which there is no legal obligation to distinguish between commercial activities and activities within the social field, the fact that the Member State requires approved institutions wishing to pursue their activities in another Member State to obtain prior authorisation is a necessary and proportionate means of ensuring compliance with Articles 87 EC and 88 EC.

49. As has been observed in paragraphs 42 and 43 of this judgment, the presumption of relevance attaching to questions referred by the national courts for a preliminary ruling can be rebutted only in exceptional cases. Where the questions submitted concern the interpretation of Community law, the Court is in principle bound to give a ruling.

50. It is clear from well-established case-law, however, that the need to provide an interpretation of Community law which will be of use to the national court makes it necessary that the national court define the factual and legislative context of the questions it is asking or, at the very least, explain the factual circumstances on which those questions are based (Joined Cases C-320/90 to C-322/90 Telemarsicabruzzo and Others [1993] ECR I-393, paragraph 6; Case C‑470/04 N [2006] ECR I‑7409, paragraph 69; and the order in Case C‑305/07 RAI [2008] ECR I-55, paragraph 16).

51. It is also important that the national court should set out the precise reasons why it was unsure as to the interpretation of Community law and why it considered it necessary to refer questions to the Court for a preliminary ruling. In that connection, it is essential that the referring court provide at the very least some explanation of the reasons for the choice of the Community provisions which it requires to be interpreted and of the link it establishes between those provisions and the national legislation applicable to the dispute in the main proceedings (Joined Cases C‑453/03, C‑11/04, C‑12/04 and C‑194/04 ABNA and Others [2005] ECR I‑10423, paragraph 46; Joined Cases C-338/04, C‑359/04 and C‑360/04 Placanica and Others [2007] ECR I-1891, paragraph 34; and Centro Europa 7 , paragraph 54).

52. The information provided in the decision making the reference serves not only to enable the Court to give useful answers, but also to enable the governments of the Member States and other interested parties to submit observations in accordance with Article 23 of the Statute of the Court of Justice. It is the Court’s duty to ensure that that possibility is safeguarded, bearing in mind that, under that provision, only the decision making the reference is notified to the interested parties (see Joined Cases 141/81 to 143/81 Holdijk and Others [1982] ECR 1299, paragraph 6; and order in Case C-116/00 Laguillaumie [2000] ECR I‑4979, paragraph 14).

53. It should also be added that the need for precision, in particular with regard to the factual and legislative context of the main proceedings, applies in particular in the area of competition, which is characterised by complex factual and legal situations (see, to that effect, Case C-238/05 Asnef-Équifax and Administración del Estado [2006] ECR I‑11125, paragraph 23, and the order in RAI , paragraph 18).

54. In this instance, the seventh question is based on the premiss that, in the case with which the national court is concerned, if Servatius used public resources to implement a future project, that would constitute State aid within the meaning of Article 87(1) EC. Neither the decision making the reference nor the observations of the parties to the main proceedings contain any elements which might serve to establish that such an advantage would in fact have been granted in the context of the construction project at issue in the main proceedings – which in any event was not implemented as Servatius did not obtain the necessary prior authorisation.

55. Furthermore, it should be noted that the main proceedings are concerned not with the conditions on which such aid would have been or could be granted to Servatius but merely with an entirely separate and independent issue, namely Servatius’ challenge to the lawfulness of the refusal of its application for prior authorisation to implement a construction project outside the Netherlands.

56. Accordingly, the seventh question referred by the national court must be held to be inadmissible.

Costs

57. Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

On those grounds, the Court (First Chamber) hereby rules:

Article 56 EC must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which makes the exercise of cross-frontier activities of institutions approved under Article 70(1) of the Housing Law (Woningwet) in relation to housing matters subject to prior administrative authorisation, in so far as such legislation is not based on objective, non-discriminatory criteria which are known in advance and which are capable of adequately circumscribing the exercise by the national authorities of their discretion, a matter which falls to be determined by the national court.