Case C-341/14, Harmsen – red light services and the language of EU law

Amsterdam has a red light district. Aspects of the neighbourhood are regulated by the local authority. So can the local authority refuse to licence a Dutch company that rents apartments to Bulgarian and Hungarian sex workers, on the basis that the people running the company do not speak the languages of those self-employed workers? Or is the local authority’s policy, which effectively restricts the renting of apartments to those self-employed workers who can speak either Dutch or English, incompatible with the EU’s ‘services’ Directive 2006/123/EC?

Facts
One characteristic of Amsterdam’s red light district is that sex workers do not walk the streets. They are to be found in small one-bed apartments which are fronted by a window or a glass door. Sex workers sit behind the window. The ‘windows’ and the adjoining room can be leased from so-called ‘window-prostitution’ companies either for an entire day or just parts of a day. They are leased to self-employed sex workers.

However, these ‘window-prostitution’ companies need a local-authority licence to run their business from a specific premises in the red light district. In this way, the local authority in Amsterdam can regulate through public law a part of what goes on in the red light district.

This case concerns a window-prostitution company which was already operating from one location but which sought to run two further window-prostitution companies from two other locations. Consequently, the company applied to the local authority for the relevant licences.

However, these applications were turned down. The local authority had read the police reports and the reports from the regulatory inspectorate as to what had happened at the window-prostitution company’s first premises. The local authority also believed that the company was organising its business in ways which contravened the commercial plan which had been submitted by the company to the local authority as part of its initial application. Of particular concern was that the company had been leasing windows to sex workers from Hungary and Bulgaria without being able to communicate effectively with them in Dutch or English (the languages spoken by those running the window-prostitution company).

In that context, the Amsterdam’s mayor decided that he had no faith in any procedure being in place that could deal with and resolve ‘misunderstandings’, and he had no confidence that there would be sufficient guarantees put in place which could prevent criminality taking place on the premises where those self-employed sex workers would be working.

The ensuing dispute with the local authority was escalated up to the administrative law chamber of the Dutch Council of State [Raad van State]. In essence, there are two issues at stake. The first is whether this is a situation which EU law would describe as a purely domestic, ‘internal situation’, so that EU law simply does not apply.

And if EU law does apply, then the second issue is whether the local authority’s stipulation that a window-prostitution company may only lease windows to sex workers who effectively speak either Dutch or English, is a stipulation which is incompatible with the EU ‘services’ Directive 2006/123/EC. After all, Article 10 of the Directive governs ‘Conditions for the granting of authorisation’ and it stops authorities from exercising their powers in an arbitrary manner. Indeed, sub-section 2 of Article 10 requires an authority’s criteria to be: (a) non-discriminatory; (b) justified by an overriding reason relating to the public interest; and (c) proportionate to that public interest objective.

It is not clear whether those criteria are met here. Are there more-proportionate means to tackling enforced prostitution and human trafficking than the existence of such a language requirement? The mayor thinks not. He believes that the requirement allows the commercial operator to assess the motives of the self-employed sex worker without the need for anyone else to be there to ‘translate’. However, the commercial operator of the window-prostitution company disagrees with the mayor. He points out that there are translation companies and sites on the internet. And language is not the only means of picking up signals about forced prostitution or human trafficking. In any event, for the purposes of ‘picking up signals’ the current site of the window-prostitution company is kitted out with CCTV camera-surveillance, a system which he operates, and he also ensures he is always on the premises. Where appropriate he informs and warns the relevant specialist department of the Dutch police force.

Questions Referred
My unofficial translation of the rococo questions asked by the Dutch Council of State reads:

1. Is Chapter III of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market (OJ [2006] L376/36) applicable to purely internal situations or is the Court’s case law on the Treaty provisions governing freedom of establishment and the freedom to provide services relevant in deciding whether this Chapter is applicable to a purely internal situation?

2. If the answer to Question 1 is that the case law of the Court of Justice [of the European Union] on the Treaty provisions governing freedom of establishment and the freedom to provide services in a purely internal situation is applicable when assessing whether Chapter III of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market applies:

a) should the national court apply the provisions contained in Chapter III of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market in a situation such as that in the present case in which the service provider is not established on a cross-border basis, offers no cross-border services, and nevertheless seeks to rely on those provisions?

b) When answering this question, is it relevant that the commercial operator provides services primarily to self-employed sex workers who come from Member States other than The Netherlands?

c) When answering this question, should it be ascertained whether companies established in other Member States have shown any real interest (or would show any such interest) in establishing a window-prostitution company in Amsterdam?

3. In so far as the service provider invokes the provisions in Chapter III of Directive 2006/123/EC of the European Parliament and of the Council of 12 December 2006 on services in the internal market, does Article 10(2)(c) preclude a measure such as that in the present case in which a commercial operator running window-prostitution companies is only permitted to lease rooms for parts of the day to sex workers who can communicate with the commercial operator in a language which that operator understands?

Update – 27 July 2014
The reference of Case C-341/14, Harmsen coincides with another one which has been made by the Dutch Council of State. Again, the issue is the ability of Amsterdam’s local authority to resist the application of EU law by claiming that a policy area is a ‘purely internal situation’ to which EU law does not apply. See further, Case C-340/14, Trijber – the Treaty is more than an incoming tide, it is even in the canals.