15 December 2021

Scarce right and compelling reason

Category: Scarce licenses

In the case of scarce permits, a distinction is made between permits that are scarce for overriding reasons in the general interest (Article 4 Services Directive) and situations in which the number of available permits is limited due to scarcity of available natural resources or usable technical capacity (Article 12 Services Directive).

Overriding reasons of general interest may include, among others, the protection of public order, public health or the protection of consumers. As an illustration, a strict regulation of coffee shop policy by maintaining a maximum system of two coffee shops per municipality can in some cases be justified on the grounds that an excess of coffee shops can form a danger to public order. In the case of scarcity of available resources, a limited number of available licences for the operation of beach pavilions may be considered, since space is in principle limited in these coastal areas.

Offering equal opportunities in the distribution of licences

In the case of Speelautomatenhal Vlaardingen, the Administrative Jurisdiction Division of the Council of State (hereinafter “the Division”) confirmed that where licences are scarce, the administrative body has the responsibility of creating a level playing field with sufficient scope for competition where all potential applicants have the opportunity to express their interest in a licence (ECLI:NL:RVS:2016:2927). According to the conclusion of the State Advocate General, this obligation follows from the formal principle of equality, also referred to as the principle of equal opportunities (ECLI:NL:RVS:2016:1421).

It follows that when a municipality decides to make a policy for the distribution of scarce permits, it is very important to organise a consultation round in which the parties involved are informed about the expected changes and their options.

Transitional arrangement for introduction of scarce permits policy

As for the form of the new policy to be introduced, a choice can be made for new policy per activity, or for the drafting of policy rules for a general allocation procedure.

If such a new policy is introduced, a transitional arrangement is required pursuant to the case law of the Trade and Industry Appeals Tribunal in light of the principle of legal certainty (ECLI:NL:CBB:2012:1). The purpose of this transitional arrangement is to inform existing permit holders at an early stage of the imminent changes, so that they are not taken by surprise – for example – by the municipality’s sudden decision that on expiry of the next term, unlike in previous years, the permit issued will not be automatically renewed. After all, the automatic granting of permits is not permitted under the Services Directive in the case of scarce rights.

According to the Division, an adequate degree of publicity must also be ensured regarding the availability of the scarce permit, the distribution procedure, the application period and the criteria to be applied. In this respect, a comparative test is permitted, provided that the criteria included therein are sufficiently guiding (ECLI:NL:RVS:2019:3918).

Advice on scarce licences

In order to reduce the risk of lawsuits, it may be wise to seek advice on the requirements with which policy on the distribution of scarce rights must comply.

Do you have any questions about the efficient regulation of scarce permits or need advice? Please contact one of the Blenheim administrative law attorneys.