The European Commission has published an interpretative communication on agricultural land sales. The communication is in response to requests by Member States for clarification regarding what they can and cannot do to regulate the sale of farmland.

The right to acquire, use or dispose of agricultural land falls under the free movement of capital principles set out in Articles 63 et seq of the Treaty on the Functioning of the European Union (TFEU). These Treaty provisions bestow enforceable rights upon both the investor and the recipient of the investment. As a rule, all restrictions on the movement of capital between Member States but also between Member States and third countries are prohibited. The Court of Justice of the European Union (CJEU) has interpreted the term ‘restriction’ to mean all measures which limit investments or which are liable to hinder, deter, or make them less attractive.

When investment in farmland serves agricultural entrepreneurial activities, it may also be covered by the freedom of establishment: Article 49 TFEU prohibits all restrictions on the establishment of nationals (legal or physical persons) of a Member State in the territory of another Member State for the pursuit of a self-employed economic activity such as farming.

Article 345 TFEU preserves the competence of Member States to take decisions concerning the system of property ownership, but subject to the requirements of EU law.

The communication refers to the benefits and challenges of foreign investment in EU agricultural land. It outlines applicable EU law as well as the related jurisprudence of the CJEU. The communication also draws some general conclusions from the jurisprudence on how to achieve legitimate public interests in conformity with EU law.

For instance, national measures indirectly discriminating against non-EU nationals are likely to be considered incompatible with EU rules. These include residence or language requirements as a precondition to the acquisition of land, or the request for reciprocity, meaning that a Member State will only allow nationals of another Member State to buy land if the other Member States does so vice versa. Similarly, measures that disproportionately restrict cross-border investment might also be considered incompatible with EU law. Examples of such restrictions are self-farming obligations, the prohibition for legal entities to acquire land, or qualifications in farming as eligibility criteria to the acquisition of land.

View Agricultural land sales, 28 November 2017