14 December 2015

Boris Johnson used his column in The Daily Telegraph today to point out that Denmark has a derogation from the EU Treaty that enables it impose residency tests on those buying property in the country – providing it with a carve out from the ‘founding EU principle’ of the free movement of capital (which along with goods, services and people is one of the EU ‘four freedoms’). This Danish-style opt-out might provide the basis for a compromise on the UK’s demand for a four-year restriction on access to welfare.

The Danish derogation applies to second homes, whereby Denmark is able to apply residency and other restrictions such as ‘special family or linguistic ties to Denmark’ before granting permission to non-residents to buy such a property (EU nationals moving to Denmark full-time and wanting to buy a property need to prove that it is their main residence). This exception from EU rules was designed to ensure that locals’ homes were not all snapped up as holiday homes, primarily by German citizens who might want a regular get-away just over the border.

A protocol attached to the EU treaty, negotiated when the country joined along with the UK in the 1970s and maintained in the Maastricht and Lisbon Treaties, therefore gives Denmark the right to maintain its own rules on the purchase of second homes. These Danish rules must not directly discriminate between nationalities but they do allow the Danish government discretion to impose its own requirements.

The rules are explained on the website of the Danish Justice Ministry:

“Section 1(1) of the Acquisition of Real Property Act stipulates that persons who are not residents of Denmark and have not either had their residence in this country for a total period of five years previously may only acquire title to real property in Denmark with permission from the Ministry of Justice.

All persons who are covered by section 1(1) of the Acquisition of Real Property Act must irrespective of their nationality obtain permission from the Ministry of Justice to acquire a secondary dwelling in Denmark. Such permission will be granted according to current practice if the applicant has special ties to Denmark.

Examples of aspects that will be considered in the overall assessment of whether permission to the acquisition of a seasonal property may be granted based on the applicant’s ties to Denmark include:

Previous stays in Denmark,

special family ties to Denmark, and

special linguistic or cultural ties to Denmark.”

Despite the same terms applying to all EU nationals, you can certainly see how these rules might be considered ‘indirectly discriminatory’ in favour of Danes since they are far more likely to a) be resident in Denmark and/or b) have special family or linguistic ties to the country.

While the Danish case is distinctive, examples such as this could provide the basis for compromise in the UK’s case – an eligibility test for access to benefits based on residency could be more acceptable to other EU governments since, while it would temporarily deny access to new arrivals, it would not directly discriminate between UK and EU nationals. The question would be how many British people might be affected by such a rule, a devil which would need to be addressed in the detail of the plan. Denmark’s derogation could provide a model for agreement with the EU that would enable the UK to impose a new residency test.

We still don’t know what will be agreed in the end but, as Boris notes today, the Danish precedent illustrates that the EU has been willing to grant exceptions to the four freedoms to accommodate particular concerns when it has had to.