OPINION OF ADVOCATE GENERAL

delivered on 17 May 1995 (*1)

Introduction

1.In this case the Court has been asked to decide whether Community law precludes a Member State from refusing to grant a borrower a State interest rate subsidy on building, house-purchase or home-improvement loans on the ground that the loan has been raised with a credit institution which is not established in the Member State in question, whereas such a subsidy is granted in cases where the loan is raised in otherwise corresponding circumstances with a credit institution established in the Member State in question.

2.Peter Svensson and Lena Gustafsson, a married couple, are Swedish nationals and live with their two children in Luxembourg, where Peter Svensson works. With a view to building a house for their own use they took out a loan on 10 June 1990 with the Comptoir d'Escompte de Belgique SA in Liège, Belgium, where that company is established. On 7 October 1991 the couple applied to the Luxembourg authorities for an interest rate subsidy, but were refused on the ground that the loan was not raised with a credit institution authorized to operate in the Grand Duchy of Luxembourg.

3.The rules on the system of interest rate subsidy in Luxembourg may be found in the Grand-Ducal Regulation of 17 June 1991 (hereinafter ‘the Regulation’), issued under Article 14 bis of the Law of 25 February 1979 on housing benefit, as amended by the Law of 21 December 1990. According to Article 1 of the Regulation, a State interest rate subsidy is available for the building, purchase or improvement of a house on condition that the applicant is resident in Luxembourg, has at least one dependent child and has:

‘... raised a loan with a credit institution authorized to operate in the Grand Duchy of Luxembourg or with a social security pension fund for the building, purchase or improvement of a house situated within the Grand Duchy of Luxembourg which is, or is to be, actually and permanently occupied by the applicant’.

In answer to a question from the Court, the Luxembourg Government has stated that the abovementioned provision implies that the interest rate subsidy can be granted only if the loan in question is raised with ‘a financial institution domiciled in Luxembourg or which has established there a subsidiary company or a branch and which therefore appears in the official list of credit institutions authorized to operate in Luxembourg’.

4.Peter Svensson and his wife Lena Gustafsson brought an action on the ground of refusal of the interest rate subsidy before the Conseil d'État, Luxembourg, which, by judgment of 28 December 1993, stayed the proceedings and referred the following question to the Court of Justice for a preliminary ruling:

‘Do the provisions of the Treaty of Rome, in particular Articles 67 and 71, preclude a Member State from making the grant of a housing benefit, in particular an interest rate subsidy, subject to the condition that subsidized building, house-purchase and home-improvement loans are obtained from an approved credit institution in that Member State?’

5.The judgment of reference refers in particular to Articles 67 and 71 on movements of capital and the like. However, as also appeared from the procedure before the Court, there is some doubt as to whether those are the rules which are relevant for deciding the matter or whether it is not instead the rules of Article 59 et seq. on freedom to provide services which are relevant.

The relevant rules of Community law

6.According to Article 59 of the EEC Treaty, restrictions on freedom to provide services within the Community are to be abolished in respect of nationals of Member States established in a State of the Community other than that of the person for whom the services are intended. According to the second paragraph of Article 59 the Council may, acting by a qualified majority on a proposal from the Commission, extend the application of the rules of the Treaty on the provision of services to nationals of a third country who are established within the Community.

Under Article 60 of the Treaty, services are to be considered as such within the meaning of the Treaty where they are normally provided for remuneration, in so far as they are not covered by inter alia the provisions relating to freedom of movement of goods, capital and persons.

With a view to the more specific implementation of the rules relating to freedom to provide services, the Council had at the material time (1) adopted Directive 77/780/EEC on the coordination of the laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions (hereinafter ‘Directive 77/780’). Article 7(1) thereof provides as follows:

‘The competent authorities of the Member States concerned shall collaborate closely in order to supervise the activities of credit institutions operating ... in one or more Member States other than that in which their head offices are situated. They shall supply one another with all information concerning the management and ownership of such credit institutions that is likely to facilitate their supervision and the examination of the conditions for their authorization and all information likely to facilitate the monitoring of their liquidity and solvency.’

7.Under Article 67 of the EEC Treaty the Member States are progressively to abolish between themselves, during the transitional period and to the extent necessary to ensure the proper functioning of the common market, all restrictions on the movement of capital belonging to persons resident in Member States and any discrimination based on the nationality or the place of residence of the parties or on the place where such capital is invested.

With a view to implementing freedom of movement of capital the Council has adopted a series of directives. (2) At the material time liberalization of movements of capital was governed by Council Directive 88/361/EEC of 24 June 1988 for the implementation of Article 67 of the Treaty (3) (hereinafter ‘Directive 88/361’), Article 1 of which provides that Member States ‘shall abolish restrictions in movements of capital taking place between persons resident in Member States ...’. The other provisions of that directive contain a series of exceptions to that principle. The movements of capital liberalized by the directive include financial loans and credits granted by non-residents to residents and vice versa; see Category VIII of Annex I to that directive.

Which set of rules is relevant for answering the question?

8.National legislation which restricts the grant of State interest rate subsidies on loans for the building of a house to cases in which the loan is raised with a credit institution established in the Member State in question does not in itself imply that cross-frontier transactions with the capital paid over as a result of the raising of the loan are prevented or made more difficult. The essential point with regard to the national subsidy system described in the judgment of reference is, on the contrary, that the system makes it economically less attractive to raise the loan in a financial institution which is not established in the Member State in question and so to undertake a cross-frontier performance of services in the form of a housing loan. I think therefore that in this case it is less relevant to discuss the relationship between the national subsidy scheme described in the judgment for reference and the rules of the Treaty on free movement of capital.

9.On those lines the Court stated in the judgment in Case C-204/90 Bachmann ν Belgium (4) that ‘Article 67 does not prohibit restrictions which do not relate to the movement of capital but which result indirectly from restrictions on other fundamental freedoms ...’.

10.Directive 88/361 was adopted for the implementation of Article 67 of the Treaty and must be interpreted in the same way as that provision. (5)

11.It is my view that the question of the compatibility of the relevant national subsidy scheme with Community law should therefore be discussed not in relation to the rules of Community law on capital transactions but in relation to the rules of the Treaty on the provision of services.

Is there any restriction of freedom to provide services?

12.During the proceedings before the Court the Commission contended that national legislation such as that at issue in the judgment of reference involves a restriction of freedom to perform services. The Luxembourg and Greek Governments on the other hand have stated that it cannot be accepted that there is any such restriction.

13.It seems to me that the grant of a house-purchase loan must be regarded as covered by the concept of services within the meaning of Article 60 of the Treaty and hence of Article 59. (6) Under Directive 88/361 there was a liberalization of movements of capital linked to financial loans and credits granted by non-residents to residents and vice versa and the provisions of the Treaty on services are therefore applicable to a loan such as the one in question in the main proceedings. (7) The directly applicable provisions of Article 59 et seq. of the Treaty on freedom to provide services (8) may therefore, in a case such as this, be relied upon direct before the national courts.

The following paragraphs continue in a similar format, detailing the legal context and implications of the case, with appropriate numbering and indentation for clarity.

National legislation which restricts the grant of State interest rate subsidy on loans for house-purchase to cases in which the loan is raised with a credit institution established in the Member State concerned, makes it economically less attractive — as I said — to raise a building loan with a financial institution not established in the Member State in question. The lack of opportunity to obtain an interest rate subsidy on the loan must in practice be expected to discourage citizens of that State from raising loans with credit institutions established in another Member State. The manner in which the subsidy scheme is organized thus affects companies not established in the relevant Member State more severely than those established there.

15.The Court has stated that national tax measures which affect the trader's exercise of his right of freedom to provide services may constitute a restriction contrary to Article 59.

16.It does not seem to me to make any difference whether a restriction of freedom to provide services is brought about by means of tax measures or in relation to a rule on public subsidies. Both the rules on tax advantages and those on payment of public subsidies provide a benefit for certain persons from public funds. The Member States' choice between the two types of concession may in the individual case depend upon considerations of distribution policy, of monitoring or of technical legal or other matters. But whatever type a Member State may select, it must be regarded as a restriction of freedom to provide services if the concession is conditional upon the provision of a service and if the form of the rule affects those providing services from other Member States more severely than those from the State in question.

17.I therefore think that a national subsidy scheme such as that described in the judgment of reference must be regarded as involving a restriction of freedom to provide services.

18.However, that does not mean that the scheme in question is incompatible with the Treaty. According to the Court's consistent case-law, regard being had to the special nature of certain services, it cannot be regarded as incompatible with the Treaty to restrict freedom to provide services by rules justified by an overriding general interest and applied to all persons and undertakings subject to the national rules. According to the case-law that is also the case with regard to national rules which, like that now at issue, involve an indirect difference in treatment between the competitive positions of domestic and foreign undertakings as a result of a requirement of establishment.

The interests of consumer protection

19.The Greek Government has suggested that the interests of consumer protection in this case may justify a restriction of freedom to provide services, but the Commission does not think that legislation such as that in the case of Luxembourg is such as to advance consumer protection.

20.The interests of consumer protection must undoubtedly be regarded as important and according to the case-law may, as previously mentioned, justify certain restrictions on freedom to provide services. However, the fact that in a given field the protection of consumers' interests must in general be taken into consideration cannot in itself justify a restriction of freedom to provide services. It must first be demonstrated that the national legislation is, as a matter of pure fact, capable of advancing given consumer protection interests.

21.As regards banking, there is a need to protect consumers and other depositors against the risk that the financial institution might become bankrupt. Hov/ever, that interest does not apply in this case, where it is a question of a loan. With loans there is a need to protect consumers against unreasonable conditions of agreement and to ensure that they receive comprehensive information as to the conditions of the loan and similar information concerning the expense which the raising of the loan will entail for them.

22.It must however be stressed that provisions such as those at issue in this case do not concern such questions. I think it must therefore be concluded that an examination of the case has not revealed any circumstances which sufficiently establish that consumer interests might justify national legislation such as that described in the judgment for reference.

The interests of monitoring

23.The Commission has stated that the Member States have a legitimate interest in ensuring that public subsidies are paid only if the relevant rules are satisfied and that certain restrictions of freedom to provide services may therefore be justified by the need to secure reliable information regarding the existence and amount of loans and interest payments forming the basis of payment of the interest rate subsidy. However, the requirement of establishment, which the Luxembourg legislation specifies as a condition for borrowers' receiving interest rate subsidy is not, in the Commission's view, necessary to achieve that end. In that connection the Commission has stated that under Article 7 of Directive 77/780 the Member States have the opportunity to obtain information from other Member States concerning certain loans.

24.In my view there is no ground for assuming that the rules on exchange of information in Article 7 of Directive 77/780 in the version then in force were intended to give the national authorities the opportunity for exchange of information with a view to monitoring the particulars given by borrowers in applications for interest rate subsidies on loans raised in credit institutions in other Member States. It is clear from the introductory words of Article 7(1) that exchange of information takes place ‘in order to supervise the activities of credit institutions’ and the information specifically referred to in the provision is ‘information concerning the management and ownership of such credit institutions that is likely to facilitate their supervision and the examination of the conditions for their authorization and all information likely to facilitate the monitoring of their liquidity and solvency’.

25.The interests of monitoring may however be taken into account without difficulty in another and much less restrictive manner than by requiring that the credit institution be established in the Member State in question. The subsidy scheme might simply be framed in such a way that the national authorities were able to require the person applying for the subsidy to produce such proof as the authorities deem necessary of the existence and amount of the loan and the interest payments and where appropriate to refuse to allow deduction where such proof is not forthcoming.

The interests of cohesion of the national tax system

26.The Luxembourg and Greek Governments have contended that the Member States must have the right to adapt the conditions for the grant of the public housing subsidy to the special economic and social circumstances prevailing in their territory. If the loan for house-building and the like is raised in the country paying the housing aid, that Member State will be able to tax the lender's interest on the loan. If, on the other hand, the loan is raised in another Member State, the State granting the housing benefit will not be able to tax the lending credit institution, so that the State in question will not be able to obtain compensation in whole or in part for the aid it has paid to the house-owner.

27.The Commission, on the other hand, does not think that the interests of cohesion of national tax systems are such as to justify the restriction in question.

28.The Court has previously stated that economic considerations in themselves cannot justify national legislation which restricts freedom to provide services. National provisions of law may give the immediate appearance of being justified from the strict point of view of the national economy but nevertheless be contrary to Community rules, for example if they are discriminatory as regards citizens from other Member States.

29.Mention has been made during the proceedings, in support of the compatibility of the restriction with Community law, that in two judgments delivered on 28 January 1992 the Court decided that the need to preserve the cohesion of national tax systems, at any rate in some cases, may be an overriding public interest capable of justifying a restriction of freedom to provide services and that a national tax system which has such a restrictive effect on the provision of services may thus be compatible with the Treaty if the cohesion of the tax system cannot be ensured by means of measures which restrict the basic freedoms of the Treaty to a lesser extent. The judgments concerned national legislation which, for the purpose of calculating income, made the entitlement to deduct payments to inter alia certain old-age pension insurance schemes subject to the condition that the insurance company was established in the State concerned so that that State could safeguard its taxation of any benefits paid at the appropriate time as a result of the scheme. It was thus a tax system under which one and the same person had his tax deferred and in which the collection and monitoring of tax, in the absence of harmonized rules in the matter, made the restriction necessary in order to avoid the possibility of misuse of the deduction scheme so as to avoid taxation of the sums in question.

In this case the situation seems to me to be essentially different. The relevant cohesion of the tax system lies in this case not in a system in which one and the same person has his tax deferred or in which the restriction is necessary in order to avoid funds' being withdrawn from taxation by the State in question. The subsidy and the taxation pertain to different taxpayers and the scheme is entirely in line with other schemes in which the benefits from the public purse are financed from the State's general revenue, including direct and indirect taxes.

32.There is thus no actual connection between the amount of the subsidy paid by the Luxembourg authorities and the tax revenue which the authorities receive from the company taxation of credit institutions established in Luxembourg. The calculation to which the Luxembourg Government has referred during the proceedings does not take into account for example the fact that it is by no means certain that the Luxembourg credit institutions will generate taxable funds as a result of the interest rate subsidy scheme. There is in fact a basis of assessment only if the operations of the relevant credit institution as a whole produce a surplus, which is not necessarily the case since the result of operations may be negatively affected by other factors, for example losses on loans or exchange losses on holdings of securities. Nor does the calculation take into account the fact that even without the restriction a greater or lesser number of housing loans will be raised with Luxembourg credit institutions. Moreover a calculation in terms of national economy must no doubt also take into consideration all the economic effects of competition without the restriction in question between credit institutions in the various Member States to grant building loans to house-owners.

33.The consequence of recognizing a restriction such as that at issue in this case would be that it would also be necessary to recognize corresponding schemes in other fields. For example one may mention — simply within the sphere of housing — national rules which pay a house-improvement benefit but make it a condition that the craftsman involved must be established in the relevant Member State so that that State may tax the income he derives from improving the dwelling, or rules on rent subsidy in which the benefit is made conditional upon the lessor's being established in the Member State in question so that the income from the letting is taxed in that State.

34.I think it would be indefensible and would run directly counter to the objects of the Treaty if national requirements with regard to the establishment of providers of services were to be regarded as compatible with the Treaty in cases in which Member States grant a benefit which to a greater or lesser degree is meant to offset what the recipient of the service spends as consideration for the service.

35.Having regard to the foregoing considerations I think that the interests of cohesion of the national tax system cannot justify a Member State's restricting the grant of State interest rate subsidy for house-purchase to cases in which the loan is raised in a credit institution established in the Member State in question. The question raised by the national court should therefore be answered to the effect that the rules of the EEC Treaty on freedom to provide services are to be interpreted as meaning that a Member State cannot refuse to grant a borrower State interest rate subsidy on loans for the building, purchase or improvement of a house on the ground that the loan is raised with a credit institution which is not established in the Member State in question, whereas such a subsidy is granted in cases in which, in otherwise corresponding circumstances, the loan is raised with a credit institution which is established in the Member State in question.

The significance of the fact that the applicants are nationals of a third country

36.The Luxembourg Government has however pointed out that the Belgian credit institution is not a party to the case before the national court and has raised the question whether the applicants who, at the material time, were both nationals of a third country, namely Sweden, can in any event rely upon the rules of the Treaty on freedom to provide services.

37.The Commission has stated on the other hand that the Luxembourg Law does not distinguish between nationals of Member States and those of third countries. Article 59 of the Treaty lays down the requirement that the provider of services shall be a national of a Member State but does not lay down a similar requirement as regards the recipient of the service in question.

38.The first paragraph of Article 59 of the Treaty describes the right of freedom to provide services as a right for ‘nationals of Member States who are established in a State of the Community other than that of the person for whom the services are intended’. It is correct, as the Commission has stated, that the provision does not specify that the person for whom the service is intended shall be a citizen of a Member State, and that the essential content of the provision is therefore that the Member States may not prevent a provider of services from providing them for a recipient in another Member State. The fact that the provision is drafted in that way must be regarded in conjunction with the fact that it prevents not only restrictions on the provision of services already agreed between the provider and the recipient. It must also be accepted that the provisions of Articles 59 and 60 forbid certain restrictions which prevent the provider of services from making contact with potential recipients of services in other Member States, for example by refusing entry to the person concerned or forbidding him to advertise his services where such a prohibition does not apply to providers of services who are nationals of the relevant State itself.

39.Notwithstanding the fact that Article 59 is drafted from the point of view of the provider of services, the Court has consistently held that right of freedom to provide services under Article 59 covers not only providers but also recipients of services. Recipients of services inter alia have the right of entry to another Member State in order to receive a service there, for example as tourists, without being hampered by restrictions or exposed to discrimination. In relation to the recipient too the essential content of the right of freedom to provide services must be that Member States may not prevent the acceptance of services from those providing them in other Member States. The right of entry as a tourist into another Member State to receive services without being exposed to discrimination therefore does not presuppose that it must be possible to demonstrate specifically that providers of services, for example those renting hotel rooms are nationals of a Member State.

40.Providers of services who are nationals not of a Community country but of a third country have no right of freedom to provide services within the Community. That follows in itself from the fact that by the Treaty the Member States cannot in general be assumed only to have intended to show favour to their own citizens but is at the same time emphasized by a contrary deduction from the second paragraph of Article 59 according to which the Council may extend the provisions on services to nationals of a third country who provide services and are established within the Community. No such provisions have yet been adopted.

41.The provisions of Article 59, as already mentioned, were drafted from the point of view of the provider of services but extended by the case-law of the Court to cover also the recipient of the service in question. There is no ground for supposing that nationals of third countries were intended to be in a more favourable position as recipients of services than as providers of them. It may therefore be assumed that it is only nationals of Member States who may rely on the right which the rules on freedom to provide services attribute to recipients of the services in question. Nationals of third countries thus do not have that right, since such nationals living or staying in a Member State on the basis of a residence permit or a visa cannot for example derive from Article 59 of the Treaty an independent right of entry into other Member States in order to receive services there as tourists without restrictions or discrimination.

42.The plaintiffs in the main proceedings, Peter Svensson and Lena Gustafsson, are both Swedish nationals and were thus at the material time nationals of a third country. In the light of the foregoing considerations they cannot rely, as against a Member State, on the rules of the Treaty on freedom to provide services. On the other hand the Treaty naturally does not prevent the plaintiffs from obtaining on some other basis, for example national law in the Member State concerned, the same legal position as if they had been nationals of a Member State. The Agreement of 22 July 1972 between the EEC and Sweden contains no rules on freedom to provide services and Article 19 on payments and the like cannot in particular be regarded as settling such questions indirectly.

It might be possible simply to answer the question from the court of reference by saying that nationals of a third country cannot rely independently on the rules of the EEC Treaty with regard to freedom to provide services. Where nationals of third countries do not have that right under Community law, it is entirely a matter for national law whether they are to be assimilated to nationals of the Community Member States. However, it may be important for the national court's interpretation of national law to know what the legal position of nationals of the Member States is. During the proceedings it was moreover stated that a number of other cases were stayed pending the answer from the Court of Justice to the question raised. I think therefore that it would be expedient for the Court to give the court of reference the most appropriate and helpful answer possible to the question raised by giving its views also on the actual problem of interpretation raised.

Conclusion

On the basis of the foregoing considerations I propose that the Court should reply to the question referred to it by the Conseil d'État, Luxembourg, by judgment of 28 December 1993 in the following terms:

Article 59 of the EEC Treaty is to be interpreted as meaning that a Member State cannot refuse to grant a borrower State interest rate subsidy on loans for the building, purchase or improvement of a house on the ground that the loan is raised with a credit institution which is not established in the Member State in question, whereas such a subsidy is granted in cases in which, in otherwise corresponding circumstances, the loan is raised with a credit institution which is established in the Member Sate in question.

Article 59 of the EEC Treaty cannot be relied upon independently by nationals of a third country.

*1 Language of the case: Danish.

Directive 89/646/EEC of 15 December 1989 on lhe coordination of laws, regulations and administrative provisions relating to the taking up and pursuit of the business of credit institutions and amending Directive 77/780/EEC must be assumed to have been implemented by tile Member States only on 1 January 1993; sec Article 2*1 of the directive, in conjunction with Article 10(3) of Directive 89/647/EEC. Sec in this respect Memorandum No XV/120/90 of May 1990 from tile Advisory Committee on Banking, Commission of the European Communities.

According to the case-law of the Court, Article 67 is not directiv applicable: sec in particular Case 203/80 Calati [1981] ECR 2595, paragraphs 8 to 13, and Case 267/86 Van Eyckc [1988] ECR 4769, paragraph 23 and 24.

OJ 1988 L 178, p. 5.

[1992] ECR I-249, paragraph 34.

See Case C-148/91 Veronica Omroep Organisatie [1993] ECR I-487.

See for example Case 15/78 Koalier [1978] ECR 1971, paragraph 3.

See the second paragraph of Article 61 and cf. the judgment in Case 267/86; sec above, footnote 2.

See Case 33/74 Van Binsbergcn [1974] ECR 1299.

See Case C-172/99 Bachmann, paragraph 31, cited above, footnote 4, and in Case C-300/90 Commission v Beigumi [1992] ECR I-305, paragraph 22.

See most recently Case C-43/93 Vander Elst [1994] ECR I-3803, paragraph 13.

See Joined Cases 286/82 and 26/83 Luisi and Carbone ν Ministero del Tesoro [1984] ECR 377, and as regards the prohibition of discrimination, Article 7 of the EEC Treaty and Case C-43/93 Cowan [1989] ECR 195.

It is a different matter that there may be a right derived from Community rules for the family of a national of a Member State, for example under Articles 10, 11 and 12 of Regulation (EEC) No 1612/68 of the Council of 15 October 1968 on freedom of movement for workers within the Community (OJ, English Special Edition 1968 (II), p. 475). In the Van der Elst judgment in Case C-43/93, citea above, footnote 19, the Court stated that an undertaking which wishes to provide services in another Member State cannot be faced with a demand to obtain work permits and the like from the other Member State as far as concerns nationals of non-member countries who are lawfully and habitually employed by the undertaking in the Member State in which it is established.

OJ, English Special Edition 1972, 31 December, p. 99 (original reference OJ 1972 L 300, p. 97), subsequently amended.