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ECJ on Free Cross-border Movement of Capital
The EU Court of Justice (ECJ) recently gave an important ruling on free movement of capital in response to questions submitted for preliminary ruling by the Council of State of the Netherlands (Case C-567/07) concerning prior authorization of cross-border investmentso. The ECJ held that a prior authorization scheme constitutes a restriction on the free movement of capital. It could be justified if based on objective, non-discriminatory criteria known in advance.
On 1 October 2009 the EU Court of Justice (ECJ) gave an important ruling on free movement of capital. This was in response to questions submitted for preliminary ruling by the Council of State of the Netherlands (Case C-567/07).
This case involves a Dutch institution the main purpose of which is to provide housing for low-income households, the Woningstichting Sint Servatius. Dutch law requires the authorities to promote adequate housing. Woningstichting Sint Servatius is an institution approved by the Dutch authorities operating in the public housing sector which does not intend to distribute any profits other than in the interests of public housing. The institution wanted to build housing in Liege, Belgium. Its application to do so was turned down by the competent minister, because it was in Belgium and it was claimed that Sint Servatius had failed to demonstrate that the project would be of benefit to the Dutch housing market.
The ECJ held that the requirement for prior authorisation constitutes a restriction on the free movement of capital. The restriction could be justified if based on objective, non-discriminatory criteria known in advance. In this case this justification did not apply, because the compatibility of a project with "the interests of public housing in the Netherlands" is checked on a case-by-case basis, without any other specific criteria.
This case is important because it shows a willingness of the ECJ to accept certain restrictions of the free movement of capital. However they apply in very limited circumstances. The case is very interesting for those institutions involved in social housing, which face the question of to what extent they can invest outside their national market. By their very nature such institutions tend to be restricted to operating within national borders.
This case involves a Dutch institution the main purpose of which is to provide housing for low-income households, the Woningstichting Sint Servatius. Dutch law requires the authorities to promote adequate housing. Woningstichting Sint Servatius is an institution approved by the Dutch authorities operating in the public housing sector which does not intend to distribute any profits other than in the interests of public housing. The institution wanted to build housing in Liege, Belgium. Its application to do so was turned down by the competent minister, because it was in Belgium and it was claimed that Sint Servatius had failed to demonstrate that the project would be of benefit to the Dutch housing market.
The ECJ held that the requirement for prior authorisation constitutes a restriction on the free movement of capital. The restriction could be justified if based on objective, non-discriminatory criteria known in advance. In this case this justification did not apply, because the compatibility of a project with "the interests of public housing in the Netherlands" is checked on a case-by-case basis, without any other specific criteria.
This case is important because it shows a willingness of the ECJ to accept certain restrictions of the free movement of capital. However they apply in very limited circumstances. The case is very interesting for those institutions involved in social housing, which face the question of to what extent they can invest outside their national market. By their very nature such institutions tend to be restricted to operating within national borders.