On 12 October, the European Commission issued guidelines to help EU countries design national rules to protect farmland from challenges such as excessive price speculation and ownership concentration. The move follows a number of infringement procedures launched in 2015 against Member States that discriminate against investors from other EU countries. The guidelines identify measures that could under certain conditions be acceptable. They are based on the case law of the European Court of Justice.

Special asset

The guidelines emphasise that agricultural land is a ''scarce and special asset'' that deserves special protection. EU Member States have the right to regulate this sector and may impose certain restrictions on the purchase of farmland. They can do so to achieve legitimate policy objectives such as the preservation of agricultural communities and the promotion of sustainable agriculture. However, the guidelines stress that countries that decide to impose restrictions must still ensure that they comply with EU law. In particular the communication emphasises that foreign investment, both within the EU and from non-EU countries, is protected under the EU rules on free movement of capital. It is an important source of capital, technology and knowledge that can boost agricultural productivity and improve access to finance for local businesses.

In 2015, the European Commission opened infringement procedures against five Member States (Bulgaria, Hungary, Latvia, Lithuania and Slovakia). These Member States had adopted measures on the sale of farmland that discriminate against investors from other EU countries and create disproportionate restrictions on cross-border investment.

The guidelines come in response to requests by the Member States for clarification regarding what they can and cannot do to regulate the sale of farmland. For instance, national measures indirectly discriminating against foreigners 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 State does so vice versa. Similarly, measures that disproportionately restrict cross-border investment might also be considered incompatible with European 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.

Compatible with EU law

On the other hand, restrictions could under certain conditions be considered compatible with EU law. These are: prior authorisation schemes; pre-emption rights favouring certain categories of buyers (such as tenants, neighbours, co-owners or the state); obligations to keep the land in agricultural use; price control on the sale; or speculation taxes. However, the guidelines stress that any measures must be proportionate and cannot be discriminatory towards other EU citizens.  

Finally, the communication also refers to the recent Commission proposal for the screening of foreign direct investment. The proposal aims to enable Member States to adopt or maintain appropriate review mechanisms for foreign direct investment from non-EU countries to protect essential interests for reasons of public order or security.

The communication follows a call in March 2017 by the European Parliament, which asked the Commission to set a set of criteria for land market regulations.  This is needed to ensure a level playing field in compliance with EU law.

Read more on the communication on the sale of farmland