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Freedom of establishment and EU’s neutrality towards church-state relations in the Member States

Mateusz Milek , 9 février 2023

In its judgment C-372/21 Freikirche der Siebenten-Tags-Adventisten in Deutschland KdöR, the Court of Justice of the European Union (‘the CJEU’) has held that public subsidy paid to denominational private schools may be reserved only to those churches and religious communities that are legally recognized in the subsiding Member State. On this occasion, the ECJ has also provided clarifications on the relationship between Article 49 TFEU which guarantees the freedom of establishment, and Article 17(1) TFEU, which expresses theEU’s neutrality towards the organization by the Member States of their relations with churches and religious communities.

The case concerned the Austrian Law on private schools, under which churches and religious societies could benefit from public subsidies for staff costs in denominational private schools. The benefit was, however, reserved only for churches recognized under national law. To be recognized as such, a church or religious society must have satisfied one of the three alternative conditions laid down in Federal Law on the legal status of registered religious communities: (i) to have existed in Austria for at least 20 years; or (ii) to be active for at least 100 years internationally and for at least 10 years in Austria; or (iii) to be organisationally and doctrinally integrated into an internationally active religious society which has existed for at least 200 years and to have a membership equal to at least two per thousand of the population of Austria.

Although the German Adventist Church, an applicant in the main proceeding, was established and recognized only in Germany, it operated a denomination school in Austria for which it applied for a subsidy. Yet, given that it has not been legally recognized in Austria, it was refused by national authorities. The Church, therefore, challenged this decision before the Federal Administrative Court which dismissed the case. It then appealed to the Supreme Administrative Court, which decided to stay the proceedings and to inquire the ECJ whether EU law precludes such national legislation. 

The ECJ developed its reasoning around two main points. Firstly, the ECJ has held that the situation in the main proceedings fell within the scope of EU law. While according to Article 17(1) TFEU ‘[t]he Union respects and does not prejudice the status under national law of churches and religious associations of communities in the Member States’, the ECJ has explained that ‘that provision cannot be relied on in order to exclude from the scope of EU law altogether the activity of churches or religious associations and communities where that activity consists in the provision of services for remuneration in a given market’. Furthermore, since the Austrian school is a private establishment, whose courses are financed largely by private funds, that establishment (as opposed to publicly financed schools) is to be regarded as carrying out an economic activity.

Secondly, based on its settled case law, the ECJ has reasoned that running a school on a stable and continuous basis fell under the ambit of the freedom of establishment guaranteed by Article 49 TFEU, rather than the freedom to provide services under Article 53 TFEU. The ECJ has recalled that Article 49 TFEU precludes ‘all national measures which prohibit, impede or render less attractive the exercise of the freedom of establishment’. Having examined national rules on the recognition of churches and religious communities, the ECJ has noted that those conditions require a presence in Austria and a membership of the Austrian population. As such, they are likely to be more easily satisfied by the churches and religious communities that are established in Austria rather than those established in other Member States. The ECJ has therefore concluded that such national legislation constitutes a restriction on the freedom of establishment.

Yet, following the opinion of Advocate General N. Emiliou, the ECJ has recognized for the first time that ‘enabling parents to choose an education for their children according to their religious beliefs’ is an overriding public interest requirement that is capable of justifying a restriction on the freedom of establishment, subject to the requirement of suitability and necessity. Regarding the suitability criterion, the ECJ has held that limiting public subsidies to denominational schools of recognized churches and religious societies in Austria is meant to cater for a significant portion of the population who may choose that type of education in addition to State schools. As for the necessity criterion, fulfilled in this case, the ECJ has reasoned that Article 49 TFEU, read in conjunction with Article 17(1) TFEU cannot require Member State to recognize the status that those churches and religious associations or communities enjoy under the law of other Member State. Overall, the freedom of establishment has been interpreted as not precluding the national contested legislation.

In conclusion, the German Adventist Church case illustrates how a nationally negotiated compromise between the right to education and the freedom of religion can come into tension with the freedom of establishment. While national (higher) education systems have been already subject to abundant ECJ’s scrutiny (see, for example, Case C-65/03 Commission v. Belgium, Case C-147/03 Commission v. Austria), this is the first case where the ECJ has interpreted Article 17(1) TFEU expressing the EU’s neutrality towards church-state relations in the context of the internal market. The overall outcome of this judgment clearly suggests that national authorities may enjoy a wide margin of appreciation when it comes to recognizing churches and religious societies established in other Member States. It is, however, regrettable that neither the ECJ nor the Advocate General did at any point refer to Article 14(3) of the Charter. This provision expressly provides that ‘the right of parents to ensure the education and teaching of their children in conformity with their religious, philosophical and pedagogical convictions shall be respected in accordance with the national laws governing the exercise of such freedom and right’. It seems to correspond to the objective of ‘enabling parents to choose an education for their children according to their religious beliefs’ that the ECJ has recognized as an overriding public interest requirement in this case. Moreover, this provision expressly prescribes that this right should be respected in accordance with national law. Had the ECJ engaged in the interpretation of Article 14(3) of the Charter, it would have had an opportunity to provide greater clarity on the relationship between the internal market’s fundamental freedoms and the Charter’s fundamental rights in the post-Lisbon order.



Mateusz Miłek, Freedom of establishment and EU’s neutrality towards church-state relations in the Member States, actualité du CEJE n° 4/2023, 9 février 2023, disponible sur www.ceje.ch