In a ruling of October 28, 2020, the Administrative Law Division of the Council of State (hereinafter: the Division) ruled on the province's refusal to permit retail trade outside shopping centers. That ruling shows that the Division does not go along with technical discussions about market space, turnover effects can already be sufficient to refuse cooperation and that precedent can (partly) justify a refusal.
History
There is a long-running conflict in South Holland between the municipalities of Schiedam and The Hague and the province of South Holland. The municipalities want to allow Decathlon to establish itself outside shopping centers. This is because Decathlon would not be able to fit into the center because of the space required. In early 2019, the Council of State has already ruled that these developments violate the Omgevingsverordening Zuid-Holland. Therefore, an exemption from the Executive Council of the Provincial Executive of South Holland (hereafter: the College) is needed to grant cooperation to that plan. I wrote about that earlier in this blog.
Services Directive
The Services Directive regulates that restrictions may not simply be placed on the establishment of services within EU member states. For a long time it was unclear whether this Services Directive is also relevant to planning regulations on retail trade. With the ruling of the Court of Justice in the Appingedam case, it has been established that the Services Directive also applies to regulating retail trade and that this also applies to zoning plans.
Refusal of exemption
The college refuses the necessary waiver. With the refusal, it becomes clear that the provincial regulations and the refusal of that waiver together result in restricting the establishment of a service (stores of Decathlon). That refusal is challenged and reviewed under the Services Directive. The October 28 ruling is very interesting because it shows how the Division deals in this context with expert studies, the relevance of vacancy or turnover effects and precedent setting.
Services Directive review framework
The following are relevant to the Services Directive test:
- the measures must not discriminate;
- the interest to be served by the measures must be an "overriding reason in the public interest.
- the measure must be appropriate to achieve that goal (be effective) and therefore must:
- be applied coherently and systematically;
- make a meaningful contribution in the aggregate to that interest;
- not to go further than necessary.
In this case, the provincial ordinance and denial of exemption for large-scale sports stores outside existing shopping centers are the measure. The purpose of the measure is to prevent vacancy and prevent deterioration of livability in centers. The ruling specifically addresses the appropriateness of that measure. Therefore, I will not go into the other requirements here.
Studies on effectiveness measures
In the context of the effectiveness of a branching scheme, distribution planological research is regularly invoked. Such a study identifies the extent to which there is a quantitative and/or qualitative need for the intended store in the catchment area. We are also familiar with such studies from the cases about the ladder for sustainable urbanization. Such research reports often lead to discussions between experts on the side of different parties. Small differences in assumptions and interpretations can lead to very different outcomes from different reports. The October 28 ruling shows that the Division does not judge which consultant is "right," but rather whether the administrative body was entitled to rely on the expert report that it based its decision on. Other experts' reports are disregarded by the Division insofar as they go beyond demonstrating inaccuracies and/or gaps in the findings in the reports relied upon by the college.
An expert counter-report should therefore be concerned with proving inaccuracies or omissions. It makes no sense in that context to want to discuss minor differences in assumptions or interpretations on appeal, even if those minor differences lead to different results at the bottom of the line. Incidentally, the ruling also shows that in that context it also makes no sense to refer to other locations, where the vacancy effects, for example, turn out to be less than expected.
Vacancy effects
Furthermore, the ruling shows that in this context, in the context of the Services Directive test, it is not necessary to demonstrate that actual vacancy will occur. It is already sufficient that a significant turnover effect may occur. This is striking because the policy goal is to prevent vacancy and damage to livability. Turnover effects in themselves do not result in vacancy or degradation of livability.
This judgment also differs from the assessment in relation to the ladder for sustainable urbanization. This is because, as part of that test, it is assessed whether realization of the project may result in unacceptable vacancy effects (e.g. in the case ECLI:NL:RVS:2020:283).
In the above it should be realized that it concerns the assessment of an exemption - in fact an exception to the main rule. This does not mean that the Division will rule the same way when assessing a decision to adopt or refuse a zoning plan.
It is important to take into account the nuances of the different review frameworks when conducting expert research.
Precedent
In the context of assessing the (meaningful) contribution to the policy objective and impacts, it may also be a factor that granting cooperation may set a precedent.
Decathlon argues that it cannot be located in centers because it also needs a lot of space for its "try & buy" concept. With that, Decathlon offers customers space to try out sports and products in the store or the spaces around it.
The college does not wish to participate in this. According to the college, this could lead to undesirable precedent setting, as it could send a signal to other business owners that combining retail with other space-demanding activities offers opportunities to locate outside existing shopping centers.
The Division considers that this precedent is indeed not excluded. Together with the already occurring turnover effects, this means that the Municipal Executive was entitled to refuse to grant the exemptions for the establishment of Decathlon stores.
Considerations when preparing zoning plan or appeal
Three lessons for practice can be drawn from the Oct. 28 ruling.
- When investigating market space or vacancy effects in the context of a Services Directive test, it is not useful to have a discussion about the exact size of the market space because of differences in assumptions and interpretations. The Division only tests whether the report used by the governing body contains inaccuracies or omissions;
- Under the Services Directive, it is not necessary for the measure to prevent vacancy. Preventing substantial turnover effects may be sufficient justification;
- It is also important in the assessment of measures that the granting of cooperation may set a precedent.
Particularly with regard to the turnover effects, it must be taken into account that in this case the Division is ruling on a refused exemption from provincial regulations. An exemption is by its nature an exception, so it cannot be ruled out that the Division may not wish to annul such a refusal quickly. This may therefore result in a somewhat different test than the assessment of the zoning plan itself.
In any case, it is important for parties and experts to take into account the points of interest and nuances in the Division's test when preparing a zoning or environmental permit for retail or an appeal against it.
