In this case the Court of Justice of the European Union (Second Chamber) ruled that in granting residence permits to third-country nationals, and to their family members, who were long-term residents, the Kingdom of the Netherlands was not entitled to charge excessive and disproportionate fees.
The European Commission brought this action because it thought that by charging “high and unfair fees”, the Netherlands failed to live up to its obligations pursuant to Directive 2003/109 and under Article 258 of the Treaty on the Functioning of the European Union. The Hellenic Republic, or Greece, intervened in the proceedings.
Directive 2003/109, which does not apply to the UK, Denmark and Ireland, obliges Member States to grant long-term resident status to third-country nationals who have lawfully and continuously resided within their territory for five years: such third-country nationals must provide for their dependants without recourse to public funds; they must comply with national integration provisions and provide all the necessary documentary evidence to satisfy national authorities of their status upon which long-term residence permits should be granted.
Directive 2003/109, moreover, requires Member States to grant residence permits to third-country nationals who have already acquired that status in another Member State and to members of their families.
Imperatively, Directive 2004/38/EC on the rights of Union citizens and their family members to move freely within the territory of Member States requires that the documents in question “shall be issued free of charge or for a charge not exceeding that imposed on nationals for the issuing of similar documents” – Article 25(2).
National legislation in the Netherlands allowed the authorities to charge foreign nationals not only for applications but also for documents evidencing lawful residence. Therefore, save Turkish nationals and waivers providing comfort to beneficiaries of Article 8 ECHR or those without funds, third-country nationals who applied for residence permits pursuant to Directive 2003/109 became liable to pay charges varying from €188 to €830 (there’s an interesting chart in the judgment at para 18).
The Netherlands argued that the action by the Commission was inadmissible because it was not founded upon a specific provision of Directive 2003/109: the action was based on the preamble which did not have binding legal force. It was argued that no mandatory principle of EU had been infringed and that proceedings were limited to Chapter II (“long-term resident status in a member state”) of the Directive and did not include Chapter III (“residence in the other member states”).
However, following Case C-202/99 Commission v Italy  ECR I-9319, the CJEU preferred the Commission’s “well founded” argument that the action was admissible because national legislation in the Netherlands was “contrary to the system, scheme or spirit of the directive” (at para 29). The Commission took the view that the charges levied were disproportionate because the directive exacted that they must be reasonable and fair and should not discourage third-country nationals from exercising their right of residence. Therefore, any/the charges imposed must not constitute an obstacle to the exercise of the rights conferred by European Union law.
The CJEU noted that no provision of the directive fixed the amount of the charges which Member States can charge in order to issue residence permits (at para 62). Moreover, although it was undisputed that Member States enjoyed a margin of discretion that allowed them to set out the charges, such discretion was not unlimited (paras 64 & 65).
Therefore, while it is/was open to Member States to impose charges for the issue of residence permits under Directive 2003/109, the level of those charges “must not have either the object or the effect of creating an obstacle to the obtaining of the rights conferred by that directive, otherwise both the objective of integration and the spirit of that directive would be undermined” (para 69).
The CJEU said that the charges levied by the Netherlands revealed that the lowest charge for producing residence permits for the purposes of Directive 2003/109 was seven times higher than the sum required to acquire a Dutch national identity card. This observation, in turn, illustrated that the charges claimed by the Netherlands were of a “disproportionate nature” (para 77).
The Court concluded that:
78 Since the charges levied by the Kingdom of the Netherlands pursuant to national legislation implementing Directive 2003/109 are per se disproportionate and liable to create an obstacle to the exercise of the rights conferred by that directive, it is not necessary to examine the Commission’s additional argument that the charges levied on third-country nationals and their family members under that directive and those levied on Union citizens for the issue of similar documents pursuant to Directive 2004/38 should be compared.
79 Consequently, it must be held that, by applying (i) to third-country nationals seeking long-term resident status in the Netherlands, (ii) to those who, having acquired that status in a Member State other than the Kingdom of the Netherlands, are seeking to exercise the right to reside in that Member State, and (iii) to members of their families seeking authorisation to accompany or join them, excessive and disproportionate charges which are liable to create an obstacle to the exercise of the rights conferred by Directive 2003/109, the Kingdom of the Netherlands has failed to fulfil its obligations under that directive.