The tremendous influence of actual cases. The political forces were awakened from their indifference concerning the scope of the proposed European Directive on public takeover bids because of several actual cases of resounding influence. Without these cases, the technical appearance of the dossier would probably have resulted in prolonging their almost complete indifference until the final vote. Such indifference has surrounded the Community debate over the past twelve years now (see this heading in yesterday's EUROPE).
In Germany, the alarm was raised by the way in which one of the flagship national industries, the Mannesmann group, had been swallowed up by a group smaller than itself, namely the British firm, Vodafone. Industrial circles first of all, followed by the authorities, then noted that German enterprise was vulnerable as national legislation did not provide for the safeguards that existed in other Member States regarding takeover bids (in 1998, Germany abolished obstacles to takeover bids such as golden shares, multiple voting rights, etc.). Scrutiny by the European Commission's services of Volkswagen's legal regime had given rise to even more serious concern, as it brought into question not only the rule whereby shareholders cannot individually hold over 20% of a company's share capital, but also the privileged preferential share granted to the Land of Lower Saxony. Ferdinand Piëch, VW President (for another few months yet), had stressed that his company was "very attractive for investors" because of its financial success. He felt that the European Commission could not hope for the major European automobile companies to become the property of American manufacturers. These concerns had, at the end of the day, been shared by almost all Germany's political forces (as the unanimous vote within the European Parliament proves). Chancellor Schröder had openly taken position in favour of "strengthened defence measures" and, on 27 April, the government had gone back on its attitude in Brussels by withdrawing its support for the Council's "common position", that it had earlier approved. In the final act, after the EP's "no" which eliminated the European project, the German government adopted a national law on takeover bids, to take effect early next year. The law takes up the principles and the terms and conditions of the European text but differs on the essential issue of "defence measures". It in fact authorises the management of a company under attack from a hostile takeover bid to take such measures (increased capital, sale of assets, counter-bidding) on the basis of an overall five-year mandate, without having to receive fresh, specific approval from the Shareholders' Assembly.
Role of the energy sector. In Italy and Spain, political reaction has been caused by all sorts of incidents in the electricity sector. The change of direction concerning the takeover Directive came at the very last moment, too late to have an effect on the Council's "common position" but just in time to influence a certain number of votes at the EP. Italian Minister for European Affairs Rocco Buttiglione declared that the vote on 3 July in Strasbourg had been Rome's response to EDF's "aggressive" behaviour (although it was not really a takeover bid) and that the Italian government would be finalising national instruments (instead of emergency measures introduced by the previous government, whose legitimacy is being examined in the Commission services) national instruments to prevent all possibility of expansion by a foreign monopoly on the energy market under liberalisation, in the name of reciprocity. Mr Buttiglione added that the Italian MEPs who, in Strasbourg, voted in favour of the takeover Directive, had been influenced by lobbying from companies quoted on the Stock Exchange, and that the French authorities themselves, that they had contacted, were "embarrassed" by EDF's excessive drive.
Spain was the first to react to EDF's thrust forward (it had tried to take control of the Spanish electricity company, Hidrocantabrico, through the German company EnBW, of which EDF holds a considerable stake) by a decree on "anti-escalation", which is still being looked at by the Commission services. On 3 July in Strasbourg, Spanish Socialist Medina Ortega had enlarged the debate saying: "at the present time, the danger that our companies will be gobbled up by the major financial operators and emptied of content, condemning the workers to unemployment, seems to me far more serious that the danger of a few difficulties that could occur in the working of the internal market".
The Commission hesitates. Quite logically, the European Commission, for its part, had the priority obligation to respect the Treaty. One should not, however, imagine that the Commissioners responsible for the sectors concerned were not familiar with the problems involved and that they had not reflected on these matters over the past years, or that their services had not studied and analysed the situation. What had been missing for far too long was comprehensive reflection at the level of the College, involving all the Commissioners. The different aspects of the issue were tackled one by one as required by topical events: company law, privatisation, free movement of capital, the "golden share", and services of general economic interest. To these aspects must be gradually added specific issues mainly resulting from developments linked to progress towards the single energy market. Vice-President Loyola de Palacio did not conceal her concern about the possibility that a public electricity company in a position of monopoly in her country could go and buy up a privatised rival company in another Member State. Ms de Palacio's reasoning was based on political arguments: if a government gives up direct control in certain sectors of the economy, it is not so that control will fall into the hands of another government, through a foreign public company! Privatisation of important sectors aim to reduce the State's hold on the national economy, and certainly not to transfer this hold to another country. The attempts by the Commission to define a general doctrine has encountered many difficulties. According to the Directorate General on Energy, the question of the "golden share" and other "special rights" cannot be exclusively looked at from the point of view of the free movement of capital, but in the light of all the provisions of the Treaty as well as the case law of the Court of Justice. At the end of June, the Commission finally carried out a comprehensive debate, prepared by documents on the consequences of asymmetrical opening of energy markets, on limits to investment, on the free movement of capital, on the right of establishment, etc. On this occasion, it approved a certain number of "conclusions" that clarify its attitude, mainly concerning the "special rights" that authorities give themselves in some sectors. It does not rule out the possibility of itself taking decisions to liberalise the energy market, in accordance with the powers attributed to it under Article 86 of the Treaty (see our bulletin of 21 June, pp.8/9). It is not, however, yet possible to speak of a coherent and all-embracing doctrine.
The Advocate General's outburst. In particular, the "golden share" issue remains hung in the balance pending a ruling from the Court of First Instance (CFI) to come during the next few months on the legality of the "special rights" maintained by France (for Elf Aquitaine), Belgium (for the "Société nationale de transport par canalisations") and Portugal (for privatisation in general). With their "special rights", the authorities of these countries can restrict or control the purchase of shares by the companies concerned. The Commission considers it is a matter of unlawful restrictions to the free movement of capital. To everyone's general astonishment, Advocate General Dámaso Ruiz-Jarabo invited the Court of First Instance to rule that the provisions under attack were unlawful. The ruling by the Court of First Instance will have a direct influence on other cases concerning Spain, the United Kingdom and, later, Italy. According to certain legal circles at the Commission, the thesis of the Advocate General is without legal foundation. They consider that the CFI's ruling will not confirm it. Mr Ruiz-Jarabo admitted (in an interview) that the Commission's stance is "a classic stance and very sound from the legal point of view", while its reasoning represents a "new interpretation of an economic kind". In his opinion, the "extreme" application of the freedoms provided for in the Treaty may sometimes have an "adverse effect" in that a monopoly could take advantage of a situation to gain a foothold in other Member States, thus causing in practice a "renationalisation " of privatised companies. He considers that, although the Treaty does acknowledge the existence of public monopolies that subtract a whole economic sector from competition, it should acknowledge all the more that the States may intervene in the management of a privatised enterprise (on condition not to practice any discrimination founded on nationality), according to the old principle whereby "who can most (subtract a whole economic sector from competition) can the least (maintain controls or restrictions)".
Mr Bolkestein sticks to his position. He believes its is unacceptable for a government to be able to protect national enterprises against bids from other Member States' companies, even if they are public.
The role of political factors. It is of course impossible to predict the CFI's ruling. The extreme positions taken by the Advocate General may not be approved by the judges. However, generally speaking, the political factors will play a role, alongside legal elements. It is no mystery that Laurent Fabius was not pleased with the EDF's excessive display of vigour on the markets of other Member States, and that Lionel Jospin had given the Spanish and Italian governments certain assurances of moderation, outside any legal obligation. In addition, the "brief remarks" of the conclusions of the Stockholm Summit on States monopolies are well known (although it is difficult for the Commission to give them any legal content). The Commission will no doubt think twice before using paragraph 3 of Article 86 in order to make its own decision about opening up energy markets to a Member State. Furthermore, the existence of the German law (see above) cannot be ignored. The new European directive on takeover bids, that everyone hopes will be rapid, will necessarily take the political context into account, without neglecting, as European Parliament President Nicole Fontaine so clearly said, "the controversy between industrial capitalism and financial capitalism". The essential aspects of the European model of society that are at stake. (F.R.)