At the plenary session of 26 May 2013, a representative of the Parliamentary Majority, Gigla Agulashvili, stated: “New member states of the European Union: Poland, Hungary, Romania and the Czech Republic, imposed restrictions of various kinds upon foreigners. For instance, after its accession to the European Union, Poland introduced a restriction of twelve years for the alienation of agricultural lands to foreign citizens.”
Gigla Agulashvili brought the example of the European Union countries in order to strengthen his arguments in support of a draft law which introduced changes into the Georgian legislation on ownership of agricultural lands. The draft law proposes modifying Paragraph 1 of Article 4 of the Law on Ownership of Agricultural Lands as follows: 1. Those who have a right to acquire agricultural land (including through inheritance) are: a) a citizen of Georgia, a household, a legal entity registered in Georgia, and b) a citizen of a foreign country and a legal entity registered abroad. The same draft law proposes adding a Paragraph 3 to Article 22 according to which the enforcement of Paragraph 1 of Article 4 should be suspended until 1 January 2017. Subsequently, if this draft law is approved, foreign citizens and the legal entities registered abroad will lose their right to acquire agricultural land. It should be noted that this legislative amendment does not concern individuals and entities in ownership of agricultural land prior to the enforcement of the law. In the course of the discussion of the draft law the date has shifted from 2017 to 1 January 2014. This amendment, as explained by the MPs, represents a moratorium which will be in force until new regulations are set regarding the alienation of agricultural lands to foreign citizens. We can only guess what regulations will be adopted in the future, but for now the reality is that until 2014 this law bans foreign citizens from acquiring agricultural lands. Thus, we compare this moratorium period to those periods in the aforementioned European Union member state countries when they imposed restrictions on the alienation of agricultural lands to foreign citizens.
The explanatory note of the draft law clarifies that the amendment to the law will not ban the practice of investing in the cultivation or renting of agricultural land by people with a foreign or no citizenship. Furthermore, if a legal entity is registered in Georgia, regardless of the citizenship of its shareholders, it can purchase agricultural land based upon the fact that this entity falls under Georgian jurisdiction, takes part in the legal relations and takes on legal responsibilities towards the Georgian state.FactCheck inquired whether or not the abovementioned restrictions had been introduced in Poland, Hungary, Romania and the Czech Republic and tried to explore the nature of those restrictions. On 1 May 2004, Poland, Hungary and the Czech Republic became member states of the European Union and Romania joined in 2007. While conducting the research for this article we studied the following reports of the Centre for European Policy Studies (CEPS) – Review of the Transitional Restrictions Maintained by New Member States on the Acquisition of Agricultural Real Estate and Review of the Transitional Restrictions Maintained by Bulgaria and Romania with regard to the Acquisition of Agricultural Real Estate.
In 2004 during the negotiations with regard to the accession to the European Union, the candidate states (the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland and Slovakia) demanded the right to maintain their restrictions on the alienation of lands to foreign citizens despite the free market policy of the European Union. This demand was based upon the then still candidate states’ aspirations to sustain the internal socio-economic structure of agriculture and prevent a massive acquisition of land by foreigners which could have been triggered by low prices on land in comparison to other EU countries and by the existing problems in the internal agricultural credit market.
After extensive negotiations the European Union defined a transitional period for the abovementioned states during which they would maintain their restrictions. For the Czech Republic and Hungary the transitional period was set for seven years whereas for Poland it was extended to 12 years.
Nevertheless, it is stated in the CEPS research that the restrictions were kept to the minimum in the transitional period. This was achieved based upon various factors, among them by permitting multiple exceptions to the law which gave foreigners an opportunity of acquiring land.
Let us discuss each of these states separately.In Poland prior to 2004 (accession to the European Union) foreign citizens, including citizens of the EU, wishing to acquire agricultural land were required to obtain a permit from the Ministry of Internal Affairs after having consent from the Ministry of Agriculture. Only after the acquisition of such a permit were foreign citizens allowed to purchase land. After its accession to the European Union, Poland maintained those restrictions in the transitional period although several exemptions
were applied. Particularly, foreign citizens could acquire agricultural land in Poland provided:
- They were married to a Polish citizen, had been living in Poland for at least two years and after the acquisition the real estate would remain in the common ownership of the spouses.
- They had been living in Poland for five years after the acquisition of a permanent resident status.
Apart from this, several regions of Poland were singled out where citizens of the EU and the EEA were exempt from the abovementioned restrictions if they had been leasing the land which they wished to acquire for three or seven years. In the case of having a three-year lease, the land could be acquired in the Lublin, Łódź, Lesser Poland, Masovian, Subcarpathian, Podlaskie, Silesian and Świętokrzyskie Voivodeships. In the case of a seven-year lease, the land could be purchased in the Kuyavian-Pomeranian, Opole, Lubusz, Pomeranian, Masovian, Warmian-Masurian, Greater Poland and West Pomeranian Voivodeships.In the Czech Republic the Foreign Exchange Act No. 219/1995 Coll. went into force in 1995 which set restrictions to foreign citizens on the acquisition of real estate, including agricultural land. After the accession to the European Union restrictions were imposed equally upon European Union citizens. However, significant exceptions
were allowed, specifically foreign citizens, including citizens of the EU, could acquire agricultural land provided:
- They held citizenship of the Czech Republic or had a spouse holding Czech citizenship or living permanently in the Czech Republic.
- They exercised their pre-emptive rights which emerged from co-ownership.
- The land could not be separated from another asset that was already owned by the foreigner.
- They are registered as self-employed farmers and if they have been permanently staying in the Czech Republic for at least three years (this addition was adopted in 2004).
were made for EU nationals who wanted to establish themselves as self-employed farmers and who had been legally staying and farming in Hungary continuously for at least three years. Pre-emptive rights in the acquisition of ownership also applied to foreign individuals.
Two further exceptions applied to the ownership of farmsteads (i.e., the farmhouse and the land it is built upon) and farm buildings for intensive livestock breeding:
- Foreign nationals were allowed to acquire a farmstead formed as an independent real property (parcel of land) of 6,000 m² or less in accordance with the provisions of specific other legislation on other real properties not classified as arable land.
- Non-resident legal entities or private individuals were permitted to acquire real estate that was not qualified as arable land so that they could acquire farm buildings necessary to set up intensive livestock breeding production systems.
on the Stimulation of Direct Investments in 1997. In accordance with Article 6 of this Ordinance, any investor, resident or non-resident juristic person was allowed to acquire any movable and immovable property to the extent necessary for carrying out its activities, according to its social objectives, while respecting the legal provisions.In 2005 the Emergency Ordinance No. 92/1997 was replaced by the Act of Accession, Law No. 312/2005. Starting from 2007, during the transitional period of seven years, this law covered European Union citizens as well. According to the exceptions
made in Romania:
- Restrictions are not applied to the independent farmers who are citizens of an EU member state (or stateless persons having their domicile in Romania or an EU member state) and wish to establish their permanent residence in Romania. These farmers can buy land without restriction as far as they can prove their ability to farm.
- Foreigners who establish a firm in Romania can buy agricultural land without restriction if they establish a domestic legal entity, regardless of the origin of their capital.
- In some cases, even foreign legal companies are allowed to acquire agricultural and forestry land. A commercial company, either resident or non-resident legal entity, can acquire any real rights on immovable assets to the extent necessary for carrying out its activities, according to its social objectives, while respecting the legal provisions.
After the expiration of these restrictions, the abovementioned countries will follow the regulations of the European Union.
Having studied the cases of the abovementioned states, it becomes evident that three (Poland, the Czech Republic, Romania) of the four new member states of the European Union have indeed set restrictions upon the alienation of agricultural lands to foreign citizens. However, these restrictions did not represent complete bans; this was not the case even before their accession to the European Union. These states applied some exemptions which allowed foreign nationals to acquire agricultural lands. The restrictions have been maintained in these countries after their accession to the European Union as well, in the transitional period, but even in this case an extensive amount of exceptions have been made. As for Hungary, severe debates were held on the matter during 1990s and a final decision was made in 2001 according to which the restrictions would be maintained for another seven years after the accession to the European Union. However, these would not serve as prohibitions and foreign nationals would be allowed to acquire land provided they met specific criteria.
The research carried out by us revealed that the restrictions in three of the four countries mentioned by the MP did not qualify as prohibitions either before or after their accession to the European Union. As for the fourth country (Hungary), three years prior to its accession to the EU the decision was made that in the transition period exceptions would be applied alongside with the restrictions.
Accordingly, bearing in mind the fact that Gigla Agulashvili brings the examples of the abovementioned states in order to justify the banning of the alienation of agricultural lands to foreign nationals (the moratorium until 2014 bans the acquisition of land by foreigners without allowing any exemptions), we believe these examples to be irrelevant to the case. In Georgia we witness a case of a complete prohibition while the aforementioned European Union member state countries imposed restrictions and not prohibitions.Considering the described context, we conclude that Gigla Agulashvili’s statement is MOSTLY FALSE.
Editor’s note: After the publication of the initial version of this article, we spoke to Gigla Agulashvili. The Deputy disagreed with our research and declared that in the past the abovementioned countries had entirely prohibited the alienation of land to foreign nationals. We asked the MP to present his arguments in writing and provide the documentation supporting them for examination after which we would change our ruling in the case of being reassured of the opposite. Despite the fact that Mr Agulashvili has not provided the requested arguments and documentation, we still decided to look deeper into the matter and explore the details of the issue. Following our research, the ruling of FactCheck remains unchanged.