Combatting EU farmland concentration and speculation

Written by Chris Chancellor

The European Commission has issued guidelines on how Member States can lawfully intervene in agricultural land markets

The issue of who owns or controls farmland in the European Union (EU) has become one  of increasing concern. Lately there has been a growing recognition that corporate farmland capture is not a problem reserved only for developing nations. Earlier this year, the European Parliament (EP) adopted an own-initiative report, revealing the way in which agricultural land is increasingly falling into the hands of a small elite.

EU legal frameworks have been shown to marginalise smaller farmers, creating concerns over the resulting dominance of industrial agribusiness; disappearing livelihoods for small-scale family producers, stagnant rural development, rural-urban migration, floundering farm succession and environmentally unsustainable agricultural practices, represent a few of the relevant issues. This has been a particularly hot issue for newer member states from Central and Eastern Europe, whose cheaper and more fertile lands, which in many cases still harbour significant peasant populations, are attracting the interest of investors from far and wide.

Many civil society groups have demanded clarity from DG FISMA (The Directorate General for Financial Stability, Financial Services and Capital Markets Union) on how Member States can act to address the above issues without violating EU law.

Bound by Fundamental Freedoms

In response, the European Commission (EC) has issued an interpretative communication on the acquisition of farmland. The document aims to set out the different options available to Member States in regulating arable land transactions.

The main barrier to restrictive national laws is the need to comply with wider EU laws, primarily those relating to the fundamental freedoms outlined in the Treaty for the Functioning of the European Union (TFEU). The main ones of relevance here are the free movement of capital, the freedom of establishment, and the principle of non-discrimination on grounds of nationality. Any Member States wishing to introduce legislation in order to protect or shape their agricultural land markets must do so in a way that does not contravene these principles. This is of course a near impossible task.

However, the jurisprudence of the Court of Justice of the European Union (CJEU) has recognised the special nature of agricultural land. There are certain policy objectives that are considered to justify intervention in farmland markets, including preventing speculation and maintaining socially and environmentally favourable distributions of land ownership. Thus, the EC document explains, measures hindering these fundamental freedoms can be taken in specific circumstances if:

– the measures are not discriminatory

– they are justified by an overriding public interest

– they comply with ‘principle of proportionality’ (they can achieve the relevant objective and there are no less restrictive options available to do so).

Options on the table

Based on the track record of the CJEU, the EC communication essentially identifies three viable options for Member States looking to control their markets for arable land:

– prior authorisation of transaction against clearly pre-defined and proportional, non-discriminatory criteria

– pre-emption rights for local farmers

– price controls to prevent ‘excessively speculative’ prices

Other options such as the obligation for the investor to farm the land themselves, prohibition on purchases by legal persons, and acquisition size caps, are all considered unlikely to pass CJEU scrutiny on grounds of disproportionality.

Just the bottom of the beanstalk

The release of these guidelines is a welcome clarification for NGOs and Member State officials worried about the pattern of increasing farmland concentration. Member States now have a more definitive framework within which to operate, and NGOs and activists have points against which to lobby their governments to take action.

However, it is unlikely to be a conclusive dictate on the matter. Concerned parties are now pouring through the document and offering their critical perspectives, with many highlighting the shortcomings of CJEU interpretations.

Regulating agricultural land transactions is set to become a much bigger political issue, not only in the context of growing nationalism across the EU, but also within the context of the food system sustainability crisis that we face today. The EC will be forced to address this in far greater depth in the coming years in order to avert major crises on both these fronts.

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