EUrrest Services Directive

Is a zoning plan that prohibits small-scale retail trade outside the city centre allowed under the Services Directive?

February 2018

Introduction

On 30 January 2018, the European Court of Justice gave a preliminary ruling in two Dutch cases. This long-anticipated ruling is of importance to local and regional authorities, as the ECJ provides clarity with respect to the scope of application of Directive 2006/123 (hereinafter: the Services Directive). It appears from the Visser Vastgoed Beleggingen case, one of the two joined cases, that the zoning plan of the municipality of Appingedam, the Netherlands, on the basis of which small-scale retail trade outside the city centre is prohibited, is subject to the Services Directive, but is nonetheless legally permitted under certain circumstances. The other case (X) will be dealt with in a separate EUrrest.

Case

CJEU, 30 January 2018, C-31/16, ECLI:EU:C:2018:44 (Visser Vastgoed Beleggingen).

Policy files and subject matter

Services Directive
Information society

Factual Summary

The zoning plan of the municipality of Appingedam only allows large-scale retail trade, such as furniture, kitchens and building materials, in the so-called Woonplein (a shopping area outside the city centre). Visser Vastgoed Beleggingen BV (hereinafter: Visser) owns commercial premises in the Woonplein and would like to let one of its properties to Bristol BV, which operates a chain of self-service discount shoes and clothing shops. However, according to the zoning plan, retail trade in shoes and clothing is not allowed in that area. According to Visser, this is contrary to the provisions of the Services Directive. Therefore, Visser brought an appeal proceedings before the Administrative Jurisdiction Division of the Council of State, the Netherlands, challenging the decision of the municipal council of Appingedam establishing the zoning plan. The municipal council of Appingedam contends that the challenged regulation is justified from the perspective of town and country planning: in this way, the municipality can ensure that there are no vacant premises in the city centre and the viability of the centre is preserved. Subsequently, the Dutch Council of State requested a preliminary ruling by the European Court of Justice.

Legal questions

  • Is retail trade in goods such as shoes and clothing a ‘service’ within the meaning of the Services Directive?
  • Does Chapter III of the Services Directive, which deals with the freedom of establishment for providers, apply to a ‘purely internal situation’ (i.e. a situation in which all relevant aspects take place within a single EU member state)?
  • Is the establishment of a zoning plan that prohibits small-scale retail trade outside the city centre contrary to the Services Directive?

Summary of the judgment

The Court establishes that, according to Article 2(1) of the Services Directive, the latter directive applies to services supplied by providers established in a member state, excluding the activities and business listed under Article 2(2) and (3) (also refer to the above). According to Article 4(1), ‘service’ means any self-employed economic activity, normally provided for remuneration, as referred to in Article 57 of the Treaty on the Functioning of the European Union (TFEU). As a result, the Court concludes that retail trade in goods such as shoes and clothing is indeed a ‘service’ within the meaning of Article 4(1) of the Services Directive. After all, retail trade is a self-employed economic activity, normally provided for remuneration, which does not fall under the exclusions listed under Article 2(2) and (3) of the Services Directive. In addition, the Court asserts that activities of a commercial character are expressly referred to in Article 57 TFEU as services.

Furthermore, the Court notes that the wording of the provisions of Chapter III of the Services Directive (on the freedom of establishment for providers) does not lay down any condition as to the existence of a foreign element. On the basis of a further analysis, the Court concludes that the provisions of Chapter III of the Services Directive are also applicable to a situation in which all relevant aspects take place within a single EU member state (a ‘purely internal situation’)?

In conclusion, the Court assesses whether the zoning plan of the municipality of Appingedam falls within the scope of the term ‘authorisation scheme’ or within the scope of the term ‘requirement’ within the meaning of the Services Directive. The Court concludes that the zoning plan is no authorisation scheme within the meaning of Article 4(6) of the Services Directive. After all, this is not about a procedure under which a provider is required to take steps in order to obtain from a competent authority a decision concerning access to a service activity or the exercise thereof. Therefore, Articles 9 and 10 of the Services Directive do not apply.

Still, the zoning plan can be deemed to be a ‘requirement’ within the meaning of Article 4(7) of the Services Directive. A requirement means ‘any obligation, prohibition, condition or limit provided for in the laws, regulations or administrative provisions of the member states’. According to the Court, there can be no discussion that the zoning plan results in the situation that small-scale retail trade (such as in shoes or clothing) outside the city centre is prohibited. Therefore, the zoning plan must be tested against Articles 14 and 15 of the Services Directive, relating to prohibited requirements or requirements to be evaluated.

In this instance, the zoning plan contains one of the requirements within the meaning of Article 15(2)(a), since it makes access to a service activity or the exercise of a service activity subject to a territorial restriction. However, a territorial restriction is allowed, provided that the conditions of Article 15(3) are satisfied (non-discrimination, necessity and proportionality). As a result, a zoning plan prohibiting small-scale retail trade outside the city centre, is not contrary to the Services Directive, provided that all conditions of Article 15(3) of the directive are satisfied. It is for the Dutch Council of State to assess whether that is the case.

As regards the necessity requirement, the Court also notes that, pursuant to Article 4(8) in conjunction with recital 40 of the Services Directive, the purpose of the zoning plan – to maintain the viability of the city centre of Appingedam – constitutes an overriding reason relating to the public interest (i.e. protection of the urban environment) that may justify a territorial restriction.

Local and regional relevance

The judgment of the European Court of Justice discussed above is relevant to all municipalities that, just like Appingedam, wish to counter vacant premises in the city centre by means of a zoning plan. To all these municipalities, it is of importance that this is in principle allowed by the Services Directive. However, such restrictions must satisfy the conditions of non-discrimination, necessity and proportionality (Article 15(3) of the Services Directive). It is expected that the Council of State will follow the ECJ in its final judgment. At that moment, it will be clear whether the prohibition included in the zoning plan of the municipality of Appingedam is allowed in this specific instance.

By:

Chris Koedooder, Europa decentraal