High thresholds for branching in a zoning plan

The Court of Justice's ruling on the European Services Directive (ECLI:EU:C:2018:44) has far-reaching consequences, according to today's follow-up ruling by the Council of State in the Appingedam case.

The case study

A property owner on the Woonplein in Appingedam also wants to be able to rent out a store to a shoe store (Bristol), but comes up against the zoning plan that has branching rules and only allows retail trade in bulky items, such as furniture, kitchens and building materials. The property owner believes the branching rules violate the European Services Directive and the municipality believes the branching rules are necessary to maintain the livability of the city center and prevent vacancy.

Court ruling

In response to preliminary questions raised by the Council of State, the Court of Justice confirmed in the judgment of January 30, 2018 that (1) retail trade in goods is covered by the European Services Directive, (2) the aim of preserving the livability of a city center and preventing vacancy in inner-city areas, all in the interest of good spatial planning, constitutes an overriding reason of general interest that can justify an interbranching scheme, and (3) that interbranching scheme must then meet the requirements of Article 15(3) of the Services Directive.

Assessment against criteria of Article 15(3) Services Directive

Those requirements mean that the regulation (1) must not discriminate, (2) must be necessary to achieve the objective, and (3) must pass the proportionality test.

The discrimination test is not at issue in this case and the necessity test is easily passed. The Attorney-at-law-General had already given a clear indication of this in his conclusion preceding the ECJ's ruling. The relatively high vacancy rate, as well as the desire to maintain a livable city center, attuned to the needs and purchasing behavior of consumers, constitute an overriding reason of general interest that justifies branching out into shopping areas elsewhere outside the center as necessary for the protection of the urban environment.

On the proportionality test, however, things go wrong. The Council of State begins with an analysis of the requirements for assessment under the proportionality test. The question here is whether the branching regulation is appropriate to achieve the aim pursued and also does not go beyond what is necessary to achieve the aim. To determine how the Council of State tests on this criterion, the necessary case law of the Court of Justice is cited. The upshot is that it is up to the municipality to substantiate its assertions about the suitability of the branching regulation to achieve the objective pursued by means of a specific investigation aimed at that end. The municipality had only relied on general rules of experience, such as the rule of experience that when retail is allowed to establish itself outside the center - where rents are lower and parking facilities are more ample - that has a self-reinforcing effect and has an ever-increasing attraction for out-of-center stores, causing vacancy rates to increase there. Such a general rule of experience is not sufficient, but rather constitutes the proposition that must be substantiated with research data for the specific case.

The Council of State does give some pointers for the research that the municipality must now conduct. Research into the effectiveness of spatial retail policy at the national, provincial or local level and data derived from shopping flow research, insofar as applicable to the specific situation in Appingedam, can be considered. Research data may also be available on the effects of branching in the region or regions similar to the region in which Appingedam is located.

The municipality is given six months to still conduct the study and demonstrate that its branching rules are proportionate.

Concluding remark

The Council of State does give the municipality some leeway. The outcome of the study will not be tested 'in full', but marginally. After all, the Council of State indicates it wants to assess "whether the council could reasonably conclude that the branching regulation included in the plan is suitable to preserve the livability of the city center and prevent further vacancy in the inner-city area of Appingedam." The words "reasonably could conclude" give the municipality that space. That said, the burden of investigation is not small and lies with the municipality. To be continued...

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