Spanish Law 5/1995 on "the legal arrangements for disposal of public shareholdings in
certain undertakings" governs the conditions on which several Spanish public-sector undertakings were privatised.
Law 5/1995 and the Royal Decrees implementing it apply to undertakings such as
Repsol (petroleum and energy), Telefónica (telecommunications), Argentaria (banking), Tabacalera (tobacco) and Endesa (electricity).
The system of prior administrative approval introduced by the Spanish legislation extends to
major decisions relating to the winding-up, demerger, merger or change of corporate object
of certain undertakings or to the disposal of certain assets of, or shareholdings
in, those undertakings.
The Articles of Association of BAA plc (BAA), a privatised undertaking which owns
certain international airports in the United Kingdom, create a special share held by
the United Kingdom Government which empowers it to give consent to certain of
the company's operations (winding-up, disposal of an airport). BAA's Articles of Association also
prevent the acquisition of more than 15% of the voting shares in the
company.
The Court of Justice points out, first, that the EC Treaty prohibits all
restrictions on the movement of capital between Member States and between Member States
and third countries. Investments in the form of participation constitute movements of capital
under the Community legislation. The Court thus draws attention to the fact that
both the Spanish and United Kingdom rules entail restrictions on the movement of
capital between Member States.
However, it observes that there is justification for Member States having a degree
of influence within undertakings that were initially public and subsequently privatised, where those
undertakings are active in fields involving the provision of services in the public
interest or strategic services. Such restrictions, when they apply without distinction to nationals
of the Member State concerned and to other Community nationals, may be justified
by overriding requirements of the general interest. To be justified in that way,
the restrictions must accord with the principle of proportionality, i.e. they may not
go beyond what is necessary in order to attain the objective which they
pursue.
As the Court has previously held, a system of prior administrative approval is
consonant with the principle of proportionality if:
- it is based on objective, non-discriminatory criteria which are known in advance to
the undertakings concerned; and
- all persons affected by a restrictive measure of that type have a legal
remedy available to them.
The Spanish rules
The Court does not accept that, in the case of Tabacalera (tobacco) and
Argentaria (commercial banking group operating in the traditional banking sector), the legislation may
be justified by general-interest reasons linked to strategic requirements and the need to
ensure continuity in public services. Those undertakings are not undertakings whose objective is
to provide public services.
As regards Repsol (petroleum), Endesa (electricity) and Telefónica (telecommunications), the Court acknowledges that
obstacles to the free movement of capital may be justified by a public-security
reason. The Court endorses the objective of safeguarding supplies of such products or
the provision of such services in the event of a crisis where there
is a genuine and sufficiently serious threat to a fundamental interest of society.
However, there has been a failure to observe the principle of proportionality because:
- the administration has a very broad discretion, exercise of which is not subject
to any condition;
- investors are not apprised of the specific, objective circumstances in which prior approval
will be granted or withheld;
- the system incorporates a requirement of prior approval;
- the operations contemplated are decisions fundamental to the life of an undertaking; and
- although it appears possible to bring legal proceedings, the Spanish legislation does not
provide the national courts with sufficiently precise criteria to review the way in
which the administrative authority exercises its discretion.
Likewise, the Court points out that the fact that the regime was to
last for a limited period of time (10 years) does not mean that
it ceases to constitute an infringement.
The United Kingdom rules
The United Kingdom Government argued that its case does not entail a restriction
on the free movement of capital, since access to the market is not
affected and BAA's Articles of Association are governed by private company law and
not by public law. It thus specifically stated that it did not wish
to rely on any overriding requirements of the general interest to justify its
rules. The Court rejects the United Kingdom Government's arguments and does not examine
the issue of justification.
In those circumstances, the Court declares that the Spanish and United Kingdom rules
are contrary to the free movement of capital.
N.B.: The Court delivered three judgments on 4 June 2002: Commission v Portugal (C367/98),
Commission v France (C-483/99) and Commission v Belgium (C503/99) which relate to "Golden
Shares". See Press Release No 49/02.
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Languages available: : French, English, German, Italian, Spanish, Danish and Dutch. For the full text of the judgment, please consult our Internet page www.curia.eu.int at approximately 3pm today. For further information please contact Christopher Fretwell: Tel: (00 352) 4303 3355; Fax: (00 352) 4303 2731 Pictures of the hearing are available on "Europe by Satellite" European Commission, Press and Information Service, L-2920 Luxembourg Tel: (00 352) 4301 35177; Fax: (00 352) 4301 35249, or B-1049 Brussels, Tel: (00 32) 2 2964106, Fax: (00 32) 2 2965956, or (00 32) 2 301280 |