Brussels, 08/03/2006 (Agence Europe) - On 8 March, the Commission decided to issue a warning to Poland for its attitude during the transaction between UniCredit and Bayerische Hypo und Vereinsbank (HVB). Poland's blocking of the merger for fear of its effect on the Polish subsidiaries of the two banks (BPH belongs to HVB and Pekao to UniCredit) brings it a double warning. On the one hand, as it had already announced, the Commission decided to open proceedings against Poland for violation of Article 21 of the EU's Merger Regulation (see EUROPE 9144) and, on the other, it opened an infringement procedure for violation of internal market rules on the free movement of capital.
By requiring UniCredit to sell its shares in BPH, the Polish authorities encroached on the Commission's exclusive competence on mergers, as set out in Article 21. The takeover had already been authorised, unconditionally, by the Commission on 18 October 2005 (see EUROPE 9052); Warsaw, however, invoked a non-competition clause of the Pekao privatisation agreement. This clause, which Polish authorities claimed was to “ensure the protection of competition on the Polish market of financial and banking services”, prevented UniCredit from investing in any other company active in the Polish banking sector for a ten-year period (see EUROPE 9117). Following the acquisition of HVB, UniCredit indirectly gained control of another Polish bank. Using the above clause, the Polish authorities requested that UniCredit sell its BPH shares, failing which the whole Pekao privatisation agreement would be revoked.
After a first flurry of letters, the Commission reached a preliminary conclusion that the decision to invoke and express the intent to enforce the non-competition clause constituted a measure by the Polish authorities which could de facto prevent the UniCredit/HVB concentration and that it unduly aimed to protect competition. As this clause was in any case incompatible with internal market rules, the Commission took the next step. The Polish authorities, therefore, have 15 working days to justify their actions and, if it is not convinced by the arguments, the Commission could require the Polish Government to refrain from invoking the non-competition clause to prevent the UniCredit/HVB takeover. Such a decision would be directly applicable in national law. In the past, the Commission has applied pressure and won the case against the Portuguese government for violation of Article 21 by using prudential rules to block the merger between the Champalaud Group and BSCH in Spain.
Analysis of the affair from the point of view of Community rules on freedom of establishment (Article 43) and the free movement of capital (Article 56) would lead to identical sanctions because the Commission decided to send a formal notice to Poland, which has two months to give its response and avoid the next stage of the infringement procedure, a reasoned opinion.
Having also been involved in exchanges with Polish authorities, Internal Market Commissioner Charlie McCreevy reached the conclusion that the non-competition clause invoked by the Polish authorities could be against Community law. According to Court of Justice jurisprudence, State measures likely to dissuade investors from other Member States from capital investments can make the free movement of capital illusory and thus constitute a restriction on movement of capital, the Commission points out in a press release. States may apply conditions to shares that they give up during the privatisation of public sector companies, but the Polish clause does not appear meet the requirements. According to the Commission, the authorities failed to justify the measure by clear and specific policy objectives; additionally, Community law providing sufficient protection to the Polish banking services market, such a justification is not valid. The time limit for the clause (10 years), exceeds the time considered necessary and the application by the Polish authorities leaves a margin of discretion.