The objective of ensuring the supply of gravel, sand, and clay to the construction sector at the regional level cannot justify a restriction on the freedom of establishment, according to a judgment that the Court of Justice of the EU published on Thursday, 13 July.
In this case (C-106/22), the Hungarian company Xella Magyarország (concrete construction products) challenged, before a Hungarian court, the decision of the Hungarian minister for innovation that prohibited it from acquiring the Hungarian company Janes és Társa (gravel, sand, and clay quarry).
The minister believed that Janes és Társa should be considered a strategic company within the meaning of Hungarian legislation establishing a foreign investment screening mechanism. According to the minister, supposing that Janes és Társa were to indirectly become the property of a company registered in a third country (namely Bermuda), this would pose a longer-term risk to the security of supply of basic raw materials for the construction industry—such as gravel, sand, and clay—particularly in the region where the company is based.
The Court of Justice replied that the question had to be examined solely in the light of the freedom of establishment enjoyed by EU companies (Article 54 of the Treaty [TFEU]) and that this fundamental freedom precludes such a foreign investment screening mechanism, contrary to what the advocate general had said (see EUROPE 13154/20).
The screening mechanism constitutes a “serious” restriction on the freedom of establishment. This restriction cannot be justified by the objective of ensuring security of supply for the construction sector (at the local level) as far as certain basic raw materials (gravel, sand, and clay) are concerned. According to the European court, this objective does not, in fact, fall under [the concept of] a “fundamental interest of society” within the meaning of the court’s established case law, as is the case for security of supply in the oil, telecommunications, and energy sectors.
See the judgment: https://aeur.eu/f/81q (Original version in French by Lionel Changeur)