Luxembourg, 04/06/2002 (Agence Europe) - Meeting in plenum (11 judges), the Court of Justice has ruled against France and Portugal for keeping legislation giving the state golden shares in the management of privatised industry in strategic sectors (see EUROPE of 27/28 May, p.16) but rejected the Commission's appeal against Belgium.
The Court reasoned as follows: The Treaty foresees freedom of movement for capital. Under Article 73D, any restriction of this principle can only be justified for security or for pressing reasons of general interest, and legislation cannot go beyond what is necessary in order to attain those ends, in accordance with the principle of proportionality. Such measures have to be based on specific criteria subject to judicial review.
Case of Commission vs France. The Commission challenged the Golden Share scheme of a 1993 law that awarded the French state (in order to protect national interest) with the power to intervene in the company Elf Aquitaine (renamed TotalFinaElf). The Court struck down the French law, ruling that it went beyond what was necessary to meet the government's aim, namely safeguarding the supplies of petroleum products in the event of crisis.
Case of Commission vs Portugal. The Court found that the Portuguese legislation in question was liable to impede the acquisition of shares in privatised companies and dissuade investors in other Member States from investing in the capital of those undertakings and has to be regarded as a restriction on the movement of capital. Portugal's arguments do not hold water since protecting Portugal's interests on economic grounds cannot justify restricting capital's freedom of movement.
Case of Commission vs Belgium. Belgium, defended by three lawyers, has its golden share legislation upheld by the Court. On the basis of objective criteria that are subject to judicial review, the Belgian system makes it possible to guarantee the effective availability of the lines and conduits providing the main infrastructure for the domestic conveyance and storage of gas, explains the Court, enabling Belgium to intervene with a view to ensuring compliance with the public service obligations incumbent on SNTC (Société nationale de transport par canalisation) and Distrigaz. The Commission failed to show that less restrictive measures could have been taken to attain the pursued objective (Belgium's energy policy), ruled the Court.
In May 2000 the Court ruled against Italy for granting golden shares in ENI and Telecom Italia, which experts saw as an unusual ruling. Advocate General Ruiz Jarabo Colomer found it disturbing in that the Court in effect said to Italy that the Commission has accused you of preventing the free movement of capital, you haven't replied so the Commission is right.
The justification for today's rulings has been set out in detail, clarifying the criteria that the Commission already used for assessing cases of golden shares that have led to similar problems.
Two further cases remain to be judged (see EUROPE of 27/28 May, p.16): in one, the Commission has challenged the special powers of the Spanish state in the companies Repsol, Telefonica de Espana, Tabaclera and Endesa; in the other, it challenges the powers of the British government in BAA, an airport management company.
As far as Advocate General Ruiz Jarabo Colomer is concerned, since the state can nationalise and privatise, it can create a mixed system whereby a private company with "special powers" (golden shares) for the state. The Court did not agree with this and issued a "traditional" ruling on the freedom of movement of capital. In special, duly justified cases, derogations to this principle are possible.