Report on European Land Ownership Restrictions

A recent report commissioned by the Scottish Government looks at how countries have changed their land ownership laws and the extent to which these reforms comply with the right to property included in the European Convention on Human Rights. The report aims to support the policy development for new land reform proposals in Scotland.

Background

Concern about who owns Scotland, and how much of it they own, has been central to the land reform debate in recent years. In 2019 the pattern of Scotland's landownership was investigated by the Scottish Land Commission (the "Commission"). A report was published containing a list of recommendations for legislative measures aimed at addressing the issues identified by the Commission in their review of the scale and concentration of land ownership.

The Scottish Government has committed to taking forward a new Land Reform Bill that would tackle the scale and concentration of land ownership in rural and urban Scotland. Their recent consultation titled "Land Reform in a Net Zero Nation" ("the Consultation") was the next stage towards taking forward this commitment.

One of the proposals contained within the Consultation was the introduction of a public interest test which would apply where a "large scale landholding" is being transferred, or where a "large scale landholding" would be created as a result of a transfer. The Consultation states that the purpose of the public interest test is to assess whether, at the point of transfer, a risk would arise from the continuation or creation of a situation in which excessive power acts against the public interest. Further information on the criteria for a large scale landholding can be found in our previous blog.

The Report

The report by Dr Kirsteen Shields titled "A Review of Evidence on Land Acquisition Powers and Land Ownership Restrictions in European Countries" (the "Report") was commissioned by the Scottish Government to "inform the thinking around land reform proposals". The Report identifies regulations around land transactions, focusing on (i) land ownership restrictions and (ii) land acquisition powers, and examines the public interest processes attached to those transactions. The geographical focus of the Report was on European countries given that the UK (like many other countries in Europe) is a signatory to the European Convention on Human Rights and so therefore applies in Scotland.

The powers of states / authorities to carry out "land acquisitions" (i.e. action by the state or an authority of taking property from its owner for public use or benefit) were also studied in the Report. As the Scottish Government have not proposed changes to their compulsory purchase powers, we have focussed on the evidence found in the Report in relation to land ownership restrictions.

What regulatory standards or approval processes (including public interest tests) exist in other jurisdictions to restrict the mass concentration of land ownership?

The Report identified a number of restrictions or tests that allow for specific intervention by the state in the buying and selling of land and highlighted that ownership restrictions can come in a variety of different forms. For example, there are restrictions on agricultural land in France, restrictions by owner nationality in Switzerland and restrictions on regions of special interest in Finland. 'Public interest' is highlighted in the Report as being the key justifications for interventions in land transactions in these countries.

One of the countries set out in the Report as "standing out internationally" is New Zealand. New Zealand have developed restrictions on foreign ownership of land through the following 'three tests':

• "the investor test"- this test is used to determine whether investors are suitable to own or control sensitive New Zealand assets.
• "the Benefit to New Zealand Test"- this test is applied to transactions involving "sensitive land" or fishing quotas. It establishes a framework for determining whether or not the investment will be beneficial by assessing applications against 7 factors (e.g. will the investment result or be likely to result in economic benefits, will the investment result in or be likely to result in benefits to the natural environment and will the investment result in, or is likely to result in, continued or enhanced access by the public within or over the sensitive land).
• "the National Interest Assessment"- this test is applied for some overseas investment consent applications. The Minister of Finance reviews these transactions to determine whether they are contrary to New Zealand's national interest. While this assessment is mandatory for transactions that meet certain criteria, Ministers can use their discretion to call in any transaction.

The Report highlights that the New Zealand model is an example of a public interest test that is "comprehensive, accessible and easy to use". It covers broad categories, such as economic benefits, benefits to natural environment and public access, and advancing a government policy. However, there is no evidence available to show the effectiveness of these tests as they were only brought into force in 2021. It is also important to note that New Zealand is not a signatory to the European Convention of Human Rights.

The Report highlights that land ownership restrictions in France have resulted in "limiting the rise of land prices and reducing consolidation of agricultural land and concentration of ownership". Agricultural land ownership restrictions were introduced in France in response to demands of young farmer movements who were struggling to access land. The French Government introduced a new system of agricultural land administration known as Société d’Aménagement Foncier et d’Etablissement Rural ("SAFER"). SAFER (a private sector company with public interest functions), can buy and sell land in rural and peri rural areas. It can also monitor farm sales and intervenes in a transaction in order to make the sale best suit the objectives of the law. SAFER take action by buying the land and selling it to the person they choose.

Where public interest tests have been introduced, what was the justification for interfering with property rights under the ECHR?

The Report notes that from the countries examined, public interest tests have rarely come under scrutiny in terms of the European Convention of Human Rights. The case law examined in the Report highlights that "where a country's parliament passes a law to approve a particular policy that the government considers is in the public interest, the court will only find the law non-compliant if the restrictions imposed by that law are not proportionate to the policy aim". According to the research, the European Court of Human Right's will respect the legislatures judgement as to what is in the public interest unless that judgement is manifestly without reasonable foundation.

Next Steps

The Report sought to expand the understanding of regulatory processes, including public interest tests, to restrict concentration of land ownership.

While the research found that land ownership restrictions and acquisitions in European countries are widely interpreted as legitimate interferences with property rights under the European Convention of Human Rights, it recognises that further research will be required to understand the public interest test processes in European countries and their applicability to Scotland.

If you have any queries in relation to the Report, or land reform in general, please contact your usual Brodies contact.