Agricultural Law and CAP Subsidies

Agricultural law in Germany: an overview for businesses

Agricultural law in Germany covers far more than farming itself. It governs how public money flows to agricultural businesses under the EU's Common Agricultural Policy (CAP), which conditions apply to that money, how farmland may be bought, sold and leased, which plant protection products may be used, and how environmental, animal welfare and food safety rules shape production. For investors in farmland and agribusiness, food processors, renewable energy developers seeking land, and agricultural cooperatives, agricultural law determines both the opportunities and the constraints of a project. Much of it is EU law, implemented and supplemented by federal and state legislation.

Three areas account for most legal questions in practice: eligibility for and compliance with CAP payments; the approval regime for transactions in agricultural land; and the authorisation and use of plant protection products. Each is examined below, followed by points on transactions and disputes. Questions of energy use of farmland, such as agri-photovoltaics and wind power on agricultural land, connect agricultural law with planning and energy law.

CAP payments: the strategic plan and direct payments

Since 2023, the CAP has been implemented through national strategic plans under the CAP Strategic Plans Regulation (EU) 2021/2115. Germany's plan combines direct payments (first pillar) with rural development measures (second pillar) administered largely by the federal states. The Act Implementing Direct Payments Financed under the CAP (GAP-Direktzahlungen-Gesetz, GAPDZG) sets out the national design of direct payments: basic income support for sustainability, redistributive income support for the first hectares of a holding, complementary income support for young farmers, eco-schemes for voluntary environmental and climate practices, and coupled support for certain livestock such as suckler cows and sheep and goats.

To receive payments, applicants must be "active farmers" and must hold eligible land at their disposal on the relevant dates. Payments are applied for annually through the states' integrated administration and control systems, with geospatial applications and area monitoring based on satellite data. The rules on who may claim payments for which land are a frequent source of disputes, particularly where land is leased, subleased or used by several parties. In land transactions, the transfer of payment entitlements no longer plays the role it did before 2023, but the allocation of the year's payments between seller and buyer, or landlord and tenant, still needs to be agreed.

Conditionality, controls and sanctions

CAP payments are subject to conditionality: recipients must comply with statutory management requirements drawn from EU environmental, climate, public health, plant health and animal welfare law, and with standards for good agricultural and environmental condition of land (GAEC), such as protection of permanent grassland, wetlands and peatlands, crop rotation, buffer strips along watercourses and minimum soil cover. In Germany, these requirements are set out in the GAP Conditionality Act and its implementing ordinance. Breaches lead to reductions of payments depending on severity, extent, duration and intentionality, and since 2025 a social conditionality element has linked payments to certain employment and occupational safety rules.

The EU simplified some GAEC standards in 2024 after farmer protests, giving Member States more flexibility, and further simplification packages have followed. Agricultural businesses should therefore check each year which version of the standards applies. Administrative decisions on payments and reductions can be challenged by objection and in the administrative courts; deadlines are short, and documentation, such as field records and photographs, is often decisive.

Agricultural land transactions and approvals

The sale of agricultural and forestry land in Germany requires approval under the Land Transactions Act (Grundstückverkehrsgesetz, GrdstVG). Under § 2 GrdstVG, both the sale contract and the transfer of ownership need approval from the competent authority, and states may exempt small plots below a size threshold they set. Under § 9 GrdstVG, approval may only be refused or restricted if the sale would lead to an unhealthy distribution of land, would uneconomically reduce or divide a holding, or if the price is grossly disproportionate to the value of the land.

In practice, the first ground is invoked where a non-farmer buys land that a farmer needing land is willing to acquire on similar terms.

Where approval would have to be refused for that reason, the non-profit settlement company of the state has a statutory pre-emption right for farmland of two hectares or more under § 4 of the Reich Settlement Act (Reichssiedlungsgesetz), which it typically exercises to pass the land on to a farmer. For investors, this means that direct purchases of farmland can be blocked or redirected.

Share deals in companies owning farmland are not covered by the federal approval regime, which has prompted debate in several states about extending control to such transactions. Agricultural leases must be notified to the authority under the Agricultural Leases Act, which allows the authority to object in certain cases.

Plant protection products: authorisation and use

Plant protection products are regulated by Regulation (EC) No 1107/2009 and the German Plant Protection Act. Active substances are approved at EU level; products containing them are authorised by Member States, in Germany by the Federal Office of Consumer Protection and Food Safety (BVL) in consultation with other federal authorities. Use is subject to the conditions of authorisation, good professional practice and further restrictions in the Plant Protection Application Ordinance, for example in water protection areas and nature reserves. The renewal of glyphosate at EU level in 2023 illustrates the political sensitivity of these decisions and the litigation they generate.

For manufacturers and distributors, authorisation procedures are lengthy and frequently contested. Courts review decisions of the authorities, and EU-level disputes about active substances and maximum residue levels are common. For users, breaches of application rules can lead to fines, conditionality reductions and civil liability, for example for drift damage to neighbouring organic crops or beekeepers. Insurance cover and documentation of applications are important protections.

Livestock farming, permits and environmental law

Larger livestock facilities need permits under the Federal Immission Control Act (BImSchG) and, depending on size, an environmental impact assessment. Permit procedures examine odour, ammonia and nitrogen deposition on protected habitats, which has become a major constraint on new barns and expansions near Natura 2000 sites. Fertiliser law, based on the EU Nitrates Directive and the German Fertiliser Ordinance, limits nitrogen application and requires documentation, with stricter rules in nitrate-polluted areas designated by the states. The EU Industrial Emissions Directive, revised in 2024, will extend to more pig and poultry farms over the coming years, although cattle farming was excluded during the legislative process.

Animal welfare law adds further requirements, including the national animal husbandry labelling scheme for pork introduced by federal legislation, which obliges producers and retailers to label the type of husbandry. Water law matters for irrigation, which increasingly requires permits as summers become drier. For investors, these regimes affect the value of farms because they determine whether existing operations can continue at their current scale and whether growth is possible.

Supply chains, unfair trading practices and cooperatives

Agricultural law also regulates the relationships between farmers and buyers. Germany implemented the EU Unfair Trading Practices Directive through the Agricultural Organisations and Supply Chains Act, which prohibits certain practices by larger buyers of agricultural and food products towards smaller suppliers, such as late payment beyond fixed deadlines, short-notice cancellations of perishable orders and unilateral contract changes. The Federal Office for Agriculture and Food enforces these rules and can impose fines. Processors and retailers should review supply terms accordingly.

Agricultural cooperatives play a central role in Germany in purchasing, marketing and processing. They are governed by the Cooperatives Act, and their member supply obligations, delivery rules and pricing are subject to competition law, with specific exemptions for agriculture under EU law on the common organisation of markets. Producer organisations recognised under that framework may negotiate collectively on behalf of members within limits, which creates opportunities for joint marketing but also requires careful structuring to avoid antitrust risk.

Agricultural law in M&A and investment

Acquisitions of agricultural businesses raise specific agricultural law questions alongside ordinary due diligence. Buyers should examine the land portfolio and its legal status, leases and their notification, approvals for past land purchases, CAP payment history and pending reductions, livestock permits under immission control law, water rights, organic certification and supply contracts with processors. Agricultural businesses often operate as partnerships, cooperatives or successor companies of former collective farms in eastern Germany, which can complicate ownership and governance.

Tax aspects also matter. Agricultural and forestry businesses benefit from special rules in income, inheritance and real estate transfer tax, and the structure of an acquisition, for example asset deal versus share deal, has different consequences. In the energy transition, farmland is increasingly used for solar and wind projects, which requires coordination of lease agreements, planning law and the effects on CAP eligibility and agricultural land status.

Disputes in agricultural law

Agricultural law disputes take place in several fora. CAP payment and conditionality decisions are challenged before administrative courts. Approval decisions under the GrdstVG and the exercise of pre-emption rights are reviewed by special agricultural courts (Landwirtschaftsgerichte) at the local and higher regional courts, which also hear agricultural lease disputes. Civil courts deal with contractual disputes, for example between producers and processors, where unfair trading practices legislation now restricts certain practices by large buyers, and with liability claims. Choosing the right forum and observing short deadlines are essential, and early legal advice often avoids procedural mistakes that cannot be corrected later.

How TRW & Co helps

We advise agricultural businesses, investors, cooperatives, food processors and energy developers on agricultural law in Germany. We support land acquisitions and leases, including approvals under the GrdstVG and pre-emption issues, review CAP payment and conditionality matters and represent clients in administrative and agricultural court proceedings. We also advise on plant protection, supply contracts and transactions in the agricultural sector. Our work connects with our real estate transactions, planning and environmental and renewable energy practices; see also our briefing on solar and agri-PV projects. Please contact us to discuss your project. This briefing is general information, not legal advice.