The Freikirche case: Is the Court of Justice reinforcing or eroding the European Wall of Separation?

1. Introduction

The term ‘Wall of Separation’ as described by Thomas Jefferson originates from the US concept of the relationship between the state and the church. It reflects the principles enshrined in the First Amendment to the US Constitution, which have later been applied by the US Supreme Court. ¹ This concept is based on a strict division between churches and the state wherein the US government and Congress are prohibited from interfering in the exercise of religious freedom or establishing a state religion. ² At the European level the EU does not have specific competence in religious matters, and the functioning of churches and religious organization is subject to the national legislation of EU Member States. ³ Article 17(1) of the Treaty on the Functioning of the EU (TFEU) explicitly obliges the EU to respect and not prejudice the status of churches and religious organizations in the Member States. According to the Court of Justice of the EU (the Court) this provision ‘expresses the neutrality of the European Union towards the organisation by the Member States of their relations with churches and religious associations and communities’. ⁴ At the same time, the Court derives from Article 17(1) the principle of organizational autonomy of religious communities. ⁵

The purpose of this provision is twofold: on one hand, it prevents the EU from interfering in the competences of the Member States regarding religious matters and on the other hand, it protects the autonomy of churches and religious groups. ⁶ The main distinction between these two elements lies in the protected interest. The first element focuses on the national regulatory framework related to the status of the religious communities. ⁷ The second element encompasses the regulation of internal activities of religious communities, such as worship, charity and pastoral care. ⁸ Both of these protected interests may potentially conflict with the EU free movement provisions or with EU law in general.

In this regard, some authors claim that the inherent element of neutrality derived from Article 17(1) as a safeguard clause implies the concept of separation between the EU institutions on the one hand and the sovereignty of the Member States over religious matters, and the autonomy of churches, on the other hand. ⁹ Consequently, it can be asserted that the US concept of the Wall of Separation is applicable at the EU level to the extent that the Treaties protect the sovereignty of the Member States over religious matters and the autonomy of churches. Given the aforementioned purpose of Article 17(1) TFEU, the concept of the Wall of Separation can be applied to this provision.

In recent years the Court has had the opportunity to test the limits of this European Wall of Separation in several cases that deal with the interaction between EU law and religious issues, ¹⁰ with the latest one being the Freikirche case. This landmark case focuses on subsidies to denominational schools, which are contingent upon the system of recognition of churches – the cornerstone of the national framework governing the relationship between the state and the church. Previous cases preceding the Freikirche judgment also had religious implications, however, they addressed specific areas such as non-discrimination, employment and tax exemptions. ¹¹ This Case Note will provide an analysis of how the Court assessed Article 17 of the TFEU as the Wall of Separation between the EU and the churches in the Freikirche case in comparison with previous case law. Subsequently, it will draw implications for future trends in case law related to potential disputes concerning national systems of church recognition.

2. The facts of the case and the Advocate General Opinion

The dispute at the national level was initiated by the German Adventist Church, which is a legal entity under German law, but is not recognized as a church under Austrian law. This church provided support to a denominational school located in Austria through various means, including teaching materials and training for teaching staff. However, the school was not established and operated by the church itself, but by an association recognized by the competent higher authority of a church. The church applied for a subsidy to cover educational costs, but the application was rejected by the Austrian national authority. The authority justified the rejection by referring to the provision of the Austrian Law on Private Schools, which states that the entitlement to claim the subsidy only applies to churches and religious groups recognized by Austrian law. To be recognized, the Austrian law on the legal status of registered religious communities imposes several conditions. Specifically, the religious community must have a presence for a certain period in various forms both in Austria and internationally, and must have a membership equal to at least two per thousand of the Austrian population. ¹²

The German Adventist Church subsequently appealed the administrative decision at the judicial level, and the case reached the Supreme Administrative Court, which referred two preliminary questions to the Court of Justice regarding the interpretation of EU primary law. The first question sought clarification on whether Article 17 TFEU excludes from the scope of EU law a situation where a church recognized by the law in one Member State, and supporting a private school in another Member State, applies for a subsidy that is reserved for religious groups recognized by the law of that other Member State. By the second question the referring court asked whether Article 56 TFEU precludes a national rule that reserves the granting of subsidies to denominational private schools of religious groups recognized by national law.

Regarding the first question the Advocate General Emiliou concluded that Article 17(1) TFEU does not preclude the application of the EU free movement provisions. He argued that while this provision safeguards the competence of EU Member States to regulate matters concerning the functioning of churches and religious groups and their relations with state, it does not exempt these organizations from complying with EU law when it applies to their activities. ¹³

Regarding the second question, the Advocate General explains from the outset that Article 56 TFEU (freedom to provide services) is not relevant to the case, but rather Article 49 TFEU (freedom of establishment). This arises from the fact that the school for which the German Adventist Church seeks a subsidy is located in Austria and is administered by an organization registered and present in Austria. Freedom of establishment implies that the operator provides its services on a stable and continuous basis from an establishment in the host Member State, whereas the concept of freedom to provide services assumes that these are not offered on a stable and continuous basis from an establishment in the host Member State. ¹⁴ Subsequently, he emphasizes that the Austrian system of denominational schools does not engage in economic activities, hence Article 49 TFEU does not prevent the Austrian legislation at issue. ¹⁵ In his view, if the public subsidies were granted, the Austrian denominational school would meet the two conditions established by case law – namely, integration into the public education system and financing mainly or entirely by public funds. ¹⁶ However, should the Court of Justice or the national court arrive at a different conclusion, the Advocate General also provides an analysis of the compatibility of the Austrian legislation with Article 49 TFEU. In this analysis, he considers the Austrian legislation to be indirectly discriminatory, as the conditions for the recognition of churches or religious groups are more easily fulfilled by organizations established in Austria. ¹⁷ Nevertheless, he argues that this restriction on the freedom of establishment is permissible, as it follows legitimate objectives such as respecting the right to education, ensuring reasonable use of public resources and the protecting public safety. ¹⁸ He concludes that the measure is proportionate to attaining the objective pursued by the legislation at stake. As part of the proportionality analysis, the Advocate General supports the protective effect of Article 17 TFEU in relation to national rules on the recognition of churches and religious groups. Specifically, he finds that EU law does not establish a mechanism of mutual recognition of churches, as such a system would undermine the effectiveness of Article 17 TFEU by limiting the freedom of the Member States to regulate in this area. ¹⁹ He also argues that the Member States enjoy a broad margin of appreciation with respect to national systems of recognition of churches and the associated financial rules. ²⁰

3. The judgment of the Court

Regarding the first question, the Court affirmed its established case law on Article 17(1) TFEU, stating that this provision cannot be invoked to exempt the economic activities of churches and religious societies from the scope of EU law. ²¹ In this regard, the Court diverged from the Opinion of the Advocate General, who argued that the denominational schools pursue non-economic activities. The Court determined that the activities of the private school, specifically the provision of courses for remuneration, may be considered as economic. This conclusion was the reaction to the observations presented by the Commission and Austria, which argued that once the public subsidy is granted, the educational activity carried out by the school may be not regarded as economic. ²² The Court emphasized that the mere entitlement to a public subsidy at the time of application is not sufficient to qualify the educational activities as non-economic. ²³ According to the Court the decisive factor is that the economic activity, namely the provision of educational courses for remuneration, was being conducted at the time of application by which the subsidy is sought. ²⁴ The judicial confirmation of economic nature of the school's activities implies that EU rules related to the freedom of establishment are applicable in this case. Consequently, the Court concluded that Article 17(1) TFEU does not exclude the situation at hand from the scope of EU law. ²⁵

Regarding the second question the Court agreed with the Advocate General's Opinion that Article 49 TFEU, not Article 56 TFEU, is applicable to the case. ²⁶ The Court largely aligned itself with the compatibility analysis provided by the Advocate General. Firstly, it concluded that the Austrian legislation in question represents a restriction on the freedom of establishment, as the conditions for registering churches and religious groups are more easily satisfied by those already established in Austria. ²⁷ However, in agreement with the Advocate General, the Court confirmed that this restriction pursues the legitimate aim of ensuring the right to education. ²⁸ In the subsequent proportionality analysis, the Court emphasized the inclusive nature of denominational schools’ activities, which extend beyond the members of the religious communities. ²⁹ This inclusiveness means that the activities of the denominational school are not limited to the members of the religious community, but encompass broader scope. Consequently, these activities contribute to achieving the legitimate objective of allowing parents to choose an education for their children in accordance with their religious beliefs. ³⁰

As part of the proportionality analysis the Court revisited the protective effect of Article 17(1) TFEU in relation to the status of churches and religious groups. It specifically focused on the function of Article 17(1) TFEU in safeguarding the national regulatory framework concerning the status of religious communities, as explained in the introduction of this contribution. Drawing on its previous case law, the Court stated that the interpretation of Article 49 TFEU in conjunction with Article 17(1) cannot impose an obligation on a Member State to recognize the status of churches and religious groups. ³¹ It reinforced this argument by referring to the alternative wording of the Austrian conditions for obtaining such status and to the alternative means of demonstrating the required level of representativeness. ³²

4. Comments

Article 17(1) TFEU imposes both a positive obligation on the EU institutions to respect, and a negative obligation not to prejudice, the status of churches under national law. Geiger, Khan and Kotzur argue that as part of the negative obligation, this provision prevents the EU institutions from harmonizing the status of churches and religious communities by legislative acts that impact religion and religious communities. ³³ The scope and the limits of this provision are clarified gradually, and the approach of the EU co-legislators in this regard has been cautious. While not directly intervening into the religious domain reserved for the Member States, the EU secondary law in the area like employment or single market may affect religious issues. ³⁴ The EU political institutions (Council, European Commission and European Parliament) focused on proper implementation of Article 17(3) TFEU, which presupposes an open, transparent and regular dialogue with churches and organizations, ³⁵ which these institutions maintain. ³⁶

On the other hand, the Court of Justice is not a political institution that makes policy choices, its role is to address the subject-matter of any submitted application unless it is deemed inadmissible. As demonstrated by the Freikirche case, the application may involve issues related to the status, functioning and activities of churches and religious groups. These are the issues covered by Article 17 TFEU. Despite being relatively new provision introduced by the Lisbon Treaty in 2009, the Court's recent case law, including the case currently under comment, has shed some light on its application. ³⁷

In Congregación de Escuelas Pías Provincia Betania, the Court ruled that the fact that an economic activity is carried out by a religious community does not exempt it from EU competition rules. ³⁸ In Egenberger, the Court further held that Article 17 TFEU, which expresses the EU’s neutrality towards religious organizations, cannot deprive individuals of effective judicial review with respect to derogations from non-discrimination as enshrined in Directive 2000/78/EC of 27 November 2000 establishing a general framework for equal treatment in employment and occupation. ³⁹ Similarly, in case IR v. JQ, the Court confirmed that Article 17 TFEU cannot be interpreted as exempting the Member States and churches from compliance with Article 4 (2) of the Directive 2000/78/EC. ⁴⁰ In essence, this provision allows the Member States to maintain national laws that enable differential treatment in cases involving churches and religious organizations when religion or belief constitutes a genuine, legitimate and justified occupational requirement. In the Cresco Investigation case, the Court rejected the plea of the Polish government, based on Article 17(1) TFEU seeking to exclude the national provisions granting extra holidays to the employees belonging to specific religious denominations from the scope of EU law. ⁴¹ Finally, in the case MIUR and Ufficio Scolastico Regionale per la Campania, the Court ruled that Article 17(1) TFEU does not prevent it from exercising jurisdiction over a dispute concerning the employment contracts Catholic religion teachers in public institutions. ⁴²

The common feature of the case law discussed above is that the Court did not use Article 17(1) TFEU to exempt the activities of churches and religious groups governed by national law from the scope of EU law and its jurisdiction. Instead, as suggested by Tischbirek, when faced with the choice between the two options of interpreting Article 17 as a strict exemption or balancing national peculiarities of state-church relations against EU law, the Court opted for the latter approach. ⁴³ This also supports the view defended by Colombo, according to which the case law of the Court of Justice on Article 17(1) TFEU implies that the EU is not prevented from affecting any religiously connoted issue. ⁴⁴ In his view the only exemption from EU regulatory activity should apply to issues with a high degree of denominational specificity. ⁴⁵ According to the travaux préparatoires of Article 17 TFEU, the concept of denominational specificity should encompass the right to self-determination of churches and religious communities in their teachings and organization, as well as religiously motivated activities, especially worship, charitable and cultural activities, and pastoral care. ⁴⁶

The Freikirche case shares a common feature with the previously mentioned case law, but it also introduces an important new element regarding Article 17(1) TFEU. As in the previous case law, the Court did not use Article 17(1) to exempt the dispute in the main proceedings from the scope of EU law. The case does not differ from the traditional case law on free movement, as no field is entirely outside the scope of EU law. This includes issues related to the religious dimension, as confirmed in disputes related to non-discrimination, employment, data protection and taxes. However, the new additional element, which goes beyond the previous case law, is the conclusion regarding the lack of mutual recognition of churches and religious groups. Indeed, in the case under discussion, the Court used Article 17(1) TFEU to exclude any obligation stemming from EU law that would require a Member State to recognize the status enjoyed by churches under the law of another Member State. As part of its proportionality test, the Court invoked Article 17(1) TFEU and concluded that the Austrian legislation complies with EU law.

The Court analysed the status of churches and religious groups under Austrian law in two parts of the judgment. First, in paras 30–32 of the judgment, the Court assessed the recognition of churches and religious groups under Austrian law from the perspective of their entitlement to subsidies in the context of the freedom of establishment. The Court concluded that the national rule, which limits the subsidy applications to the churches recognized in Austria, constitutes a restriction on this freedom. ⁴⁷ The fact that the economic activities of churches are not exempted from EU rules is unproblematic and is in line with the case law discussed above.

However, the inevitable result of this approach is that the Court creates potential to review different national recognition systems in its future case law, albeit only from a cross-border perspective. Many Member States have their own national systems for recognizing churches and religious groups, which grants them specific benefits upon successful registration. ⁴⁸ Obviously, this support is limited to churches and religious groups that are part of the national system in the respective Member State. ⁴⁹ As a consequence, the Court’s analysis may result in a restriction on the freedom of movement concerning the entitlement to certain subsidies for churches from other Member States. However, the mere existence of this restriction does not automatically constitute a violation of free movement provisions, provided it pursues legitimate objective and observes the principle of proportionality.

The proportionality test forms the essence of the second part of the Court’s analysis. The Court examines the alternative wording of the Austrian conditions for obtaining the status of church or religious group and the options for providing the evidence of reaching the necessary level of representativeness. ⁵⁰ Contrary to the analysis regarding to the provision of educational courses for remuneration, this part primarily focuses on the non-economic activities in the first place, specifically the requirements for the recognition of a church under the national law. First, the Court acknowledges the alternative nature of the conditions for obtaining the status of a church or religious group under Austrian law. In practical terms, this means that a church must have existed in Austria for at least 20 years, or as part of an internationally active religious society for at least 200 years, or if internationally active for at least 100 years, it must have been active in Austria for at least ten years. ⁵¹ Second, the Court’s analysis recognizes that churches may demonstrate the compliance with the representativeness requirement through alternative instruments. Specifically, churches that are unable to prove that they represent at least two per thousand of Austria’s population based on the data from the last census can do so using any other appropriate method. ⁵² As a result, the core of the judicial analysis lies the alternative nature of these criteria. The Court emphasizes this by pointing out that the methods of proving the required threshold are not confined to a single option, and thus aligning with the principle of proportionality. ⁵³

However, this gives rise to a necessary consequence for future case law concerning the recognition systems in Member States other than Austria, which are confined to only one method of obtaining the status of church or religious group, or for proving the attainment of required threshold. In this respect, it is essential to take into consideration that the recognition systems of churches vary among the EU Member States. The number of signatures required for registration scales from ten to several thousand, and the duration requirements also vary from ten to thirty years. ⁵⁴ Following the Court’s logic, in cases where a connection with EU law is established, national legislations that do not provide for alternative conditions for obtaining the status of a church or alternative means of proving the required thresholds may be declared incompatible with the principle of proportionality.

However, as argued by De Witte, the proportionality test based on values is highly prescriptive when it comes to national choices and should not be applied in cases where free movement provisions clash with national measures involving moral, ethical or related redistributive issues. ⁵⁵ Indeed, any potential judgment declaring the national recognition system of the churches as violating EU law carries the risk of limiting the policy options available to the Member States in this area. As pointed out by Flere, national recognition systems represent a sensitive issue due to associated status, entitlement, privileges and general esteem. ⁵⁶ Consequently, any intervention from the Court of Justice would not only impact these systems directly, but also implicitly affect issues related to denominational specificity as outlined in the travaux préparatoires of Article 17(1) TFEU, such as charitable and cultural activities, and pastoral care. Restricting the policy choices of the Member States may result in a limitations to options that exceed their budgetary capacities. This could be a consequence of the need to implement less stringent recognition rules, which would allow for inclusion of more subjects. If support from the concerned Member States diminishes due to EU intervention in national recognition systems, churches recognized prior to the judgment may be forced to reduce their charitable and cultural activities, as well as pastoral care.

Accordingly, the question arises as to what extent the Court may afford protective effect to Article 17(1) TFEU for national systems that could potentially be more restrictive than the Austrian system, while focusing on safeguarding the policy choices of the Member States in their relations with churches. In the author’s view, this provision should play a prominent role in any potential proportionality analysis concerning national recognition systems. Considering Article 17(1) TFEU, the Court should carefully balance the restrictions arising from national recognition systems against the potential impact on the policy choices of the Member States in their organization of relations with churches. Additionally, as part of the analysis of Article 17(1) TFEU, the Court should take into account the implications of its potential judgment on the core activities of churches. The greater the impact the judgment has on national systems and the core activities of churches, the more significant role should be attributed to Article 17(1) TFEU. Indeed, the neutrality of the EU towards the status of churches under national law and their autonomy should prevent the Court from excessively impacting these two elements protected by this provision.

Accordingly, the possibility of further judicial examination of national recognition systems exists. In this regard, the question arises as to what extent Article 17(1) TFEU should be used to ensure the compatibility of recognition systems of churches that are more restrictive than the Austrian with EU law. An interpretation to the contrary would further undermine the effectiveness of Article 17(1) TFEU, which aims to guarantee the neutrality of the EU towards the organization of relations between the Member States and churches. ⁵⁷ Indeed, as pointed out by Oliver and Watson, no provision should be interpreted in a way that renders it meaningless, and this holds true for Article 17 TFEU as well. ⁵⁸ As already mentioned, the recognition of churches represents a crucial aspect of their national status, as envisaged by Article 17(1) TFEU. Changes in their status resulting from potential Court judgments may impact their core activities, such as charitable and cultural involvement, and pastoral care. These activities should be protected from extensive judicial interference in line with the concept of the Wall of Separation enshrined in Article 17(1) TFEU. Only future case law will reveal to what extent the Court of Justice will consider these factors when evaluating recognition systems for churches in the other Member States.

5. Conclusion

The case law of the Court of Justice prior to the Freikirche case did not exempt various activities of employers, schools and other social enterprises from the scope of EU law based on Article 17(1) TFEU. The Freikirche case represents a continuation of this line of case law by not exempting the Austrian recognition system of churches from the scope of EU law. The Court used Article 17(1) TFEU as part of the proportionality test and deemed the Austrian recognition system to be proportionate. A deeper analysis of the case reveals that the Court’s consideration of the conditions for recognizing churches and religious groups creates an implicit potential for further scrutiny of national systems governing relations with churches. In such cases, the judicial examination should carefully balance the restrictions arising from national recognition systems against the potential consequences of the judgment on the policy choices of the Member States in their organization of relations with churches, as well as the impact on the core activities of the churches. It remains to be seen how this provision will be applied when the Court reviews those national recognition systems that lack the alternative flexibility of the Austrian model. A limited consideration of Article 17(1) TFEU could erode the Wall of Separation, potentially leading to a destabilization of its integrity. The necessary consequence could be a need to revise some national recognition systems, which poses a highly sensitive political question, as recently observed in certain Member States. ⁵⁹