Brussels, 13/05/2003 (Agence Europe) - The Court of Justice has reached two rulings on Spain and the United Kingdom, condemning the systems these countries use for managing specific shares ("Golden Shares"). These decisions are in response to two appeals made by the European Commission which regarded the said systems as contrary to free movement of capital.
With regard to Spain, the No.5/1995 law on "the legal system for sales of public assets in certain companies" governs privatisation of several Spanish companies in the public sector. This law and its royal decrees for execution are applicable to companies such as Repsol (oil and energy), Telefonica (telecommunications), Argentaria (banking), Tabaclera (tobacco) and Endesa (electricity). It subjects these firms to a preliminary authorisation system, which includes important decisions such as liquidation, mergers, splits in a company, modification of social objectives, sales of shares or take-overs of stakes in the social capital of certain companies. In the British case, due to the statutes of the privatised British Airports Authority (BAA), which controls international airports in the United Kingdom, a specific share ("golden share") enables the government to grant authorisation for certain operations by the company, such as liquidation or the sale of an airport. In the same way, the BAA statues prevent the acquisition of assorted shares by voting rights that are over 15% of the social capital.
The Court points out that investment in the form of holdings constitute capital movements and that the treaty bans all restrictions of capital movements between Member States and between them and third countries. It highlights that the Spanish and British systems are clearly restrictive with regard to capital movements between Member States.
The Court admits that a certain influence of Member States can be justified in companies that were initially public and then privatised if this is done in the general interest services or if strategic imperatives justify it. These restrictions must, nevertheless, respond to the proportionality principle, namely that they can not go beyond what is necessary for guaranteeing the attaining of the objective that these restrictions seek to facilitate.
With regard to the Spanish system, the Court is of the opinion that Tabacalera and Argentaria cannot benefit from the specific regulation as these companies do not provide public services. It indicates that in connection with Repsol, Endesa and Telefonica, the proportionality principle has not been respected. The court rejected the arguments of the British government that in the case of BAA, there was no restriction to free movement of capital insofar as market access would not be affected and that the BAA statues were part of civil law on companies and not public law.
The Commission welcomed the decisions of the ECJ confirming the validity of its own analysis. Jonathan Todd, spokesman for Commissioner Bolkestein sated that these two current decisions complemented the rulings made in June 2002 regarding Italy, France, Belgium and Portugal and involved companies active in several economic sectors, in the same way that restrictions came in different varieties. He also declared that in light of these decisions, the Commission was now in a better position to pursue other cases involving unjustified restrictions to investments set up by public authorities in Member States. The Commission is currently waiting for the two Member States to inform it whether they intended to comply with the Court decisions.