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How much freedom does Europe allow local administrations in defining shopping areas?

 
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How much freedom does Europe allow local administrations in defining shopping areas?

Thomas Christiaens, Wouter Moonen

In its judgment of 30 January 2018 the Court of Justice of the European Union has ruled that the European Services Directive applies to local zoning plans establishing rules for retail. A city or municipality zoning plan which, for instance, allows nothing but retail in a certain shopping area, may constitute a restriction of the freedom of establishment and the freedom to provide services and consequently, violate the law.

The Court’s judgment comes after the prejudicial question from the Dutch ‘Raad van State’ (Council of State) assessing the legality of a zoning plan which imposes retail restrictions. The Court’s judgment is of importance for retail policies issued by (local) authorities, as application of the Services Directive constitutes a restriction on the policy freedom of authorities concerning retail.

Background information

The underlying dispute before the Dutch Raad van State involves a zoning plan regarding the Woonplein on the outskirts of the Appingedam municipality. The plan defines the Woonplein as a shopping area for ‘comprehensive retail’ (NL: omvangrijke detailhandel), such as furniture, kitchens and construction materials. The zoning plan forbids the sale of small goods, such as clothes and shoes.

One real estate company objected to the restrictions, arguing that in allowing nothing but ‘comprehensive retail’ in the zoning area, the municipal council had violated the Services Directive.

In its ruling of 13 January 2016 the Dutch Raad van State submitted to the European Court of Justice a number of prejudicial questions concerning the scope of the Services Directive.

The judgment of the Court of Justice

In its judgment of 30 January 2018 and following the opinion of the Advocate General, the Court of Justice found that under the Services Directive the activity consisting of retailing goods (NL: detailhandel in goederen) constitutes a service.

According to the Court, the provisions in the Services Directive about freedom of establishment of service providers also apply in a situation where all the relevant aspects take place within one single Member State.

In addition, the Court decided that a zoning plan which imposes restrictions on the free movement of services by imposing retailing rules (NL: kleinhandelsvoorschriften), constitutes a restriction of the freedom of establishment and of service provision.

It added that the Services Directive does not oppose such restriction, provided that all the conditions of article 15(3) have been fulfilled. Said conditions encompass the principle of non-discrimination, the principle of necessity and the principle of proportionality. The Court concluded that the Dutch Raad van State is responsible for verifying whether those principles have been met.

Importance of the judgment

The starting point that the Services Directive applies to retail has relevance for the assessment of the current Belgian act of 2004 on establishment licences (NL: handelsvestigingsvergunningen). In this context, in an earlier contribution the authors already identified a few bottlenecks in current legislation, not in the least caused by the application of the Services Directive.

The draft Flemish Decree on commercial establishment (not yet in effect) takes into consideration the applicability of the Services Directive. There is no doubt that the options laid down in the new Decree according to which local authorities may in their spatial implementation plans specify retail zones, core shopping areas and areas without many shops will be limited by the restrictions in the Services Directive, as now has been confirmed also by the Court of Justice.

In its judgment of 30 January 2018 the Court of Justice of the European Union has ruled that the European Services Directive applies to local zoning plans establishing rules for retail. A city or municipality zoning plan which, for instance, allows nothing but retail in a certain shopping area, may constitute a restriction of the freedom of establishment and the freedom to provide services and consequently, violate the law.

The Court’s judgment comes after the prejudicial question from the Dutch ‘Raad van State’ (Council of State) assessing the legality of a zoning plan which imposes retail restrictions. The Court’s judgment is of importance for retail policies issued by (local) authorities, as application of the Services Directive constitutes a restriction on the policy freedom of authorities concerning retail.

Background information

The underlying dispute before the Dutch Raad van State involves a zoning plan regarding the Woonplein on the outskirts of the Appingedam municipality. The plan defines the Woonplein as a shopping area for ‘comprehensive retail’ (NL: omvangrijke detailhandel), such as furniture, kitchens and construction materials. The zoning plan forbids the sale of small goods, such as clothes and shoes.

One real estate company objected to the restrictions, arguing that in allowing nothing but ‘comprehensive retail’ in the zoning area, the municipal council had violated the Services Directive.

In its ruling of 13 January 2016 the Dutch Raad van State submitted to the European Court of Justice a number of prejudicial questions concerning the scope of the Services Directive.

The judgment of the Court of Justice

In its judgment of 30 January 2018 and following the opinion of the Advocate General, the Court of Justice found that under the Services Directive the activity consisting of retailing goods (NL: detailhandel in goederen) constitutes a service.

According to the Court, the provisions in the Services Directive about freedom of establishment of service providers also apply in a situation where all the relevant aspects take place within one single Member State.

In addition, the Court decided that a zoning plan which imposes restrictions on the free movement of services by imposing retailing rules (NL: kleinhandelsvoorschriften), constitutes a restriction of the freedom of establishment and of service provision.

It added that the Services Directive does not oppose such restriction, provided that all the conditions of article 15(3) have been fulfilled. Said conditions encompass the principle of non-discrimination, the principle of necessity and the principle of proportionality. The Court concluded that the Dutch Raad van State is responsible for verifying whether those principles have been met.

Importance of the judgment

The starting point that the Services Directive applies to retail has relevance for the assessment of the current Belgian act of 2004 on establishment licences (NL: handelsvestigingsvergunningen). In this context, in an earlier contribution the authors already identified a few bottlenecks in current legislation, not in the least caused by the application of the Services Directive (W. MOONEN and T. CHRISTIAENS, "De wet op de handelsvestigingsvergunningen – Knelpunten anno 2016", TBO, 2016, no. 3, 248 et seq.).

The draft Flemish Decree on commercial establishment (not yet in effect) takes into consideration the applicability of the Services Directive. There is no doubt that the options laid down in the new Decree according to which local authorities may in their spatial implementation plans specify retail zones, core shopping areas and areas without many shops will be limited by the restrictions in the Services Directive, as now has been confirmed also by the Court of Justice.

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