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IP/00/715

Brussels, 5 July 2000

Free movement of capital: Spain referred to Court of Justice

The European Commission has decided to refer Spain to the European Court of Justice because it considers that certain provisions of Spanish law concerning investment in privatised companies constitute unjustified restrictions on the free movement of capital and the right of establishment in violation of EU Treaty rules (Articles 56 and 43). The Commission has already opened infringement proceedings concerning potential investment restrictions in the case of Portugal, Italy, France, Belgium and the UK and is currently examining the situation in other Member States.

Spanish Law 5/1995 of 23.3.1995 requires prior authorisation for certain decisions of the board of directors (dissolution, break up or merger, the sale or pledge of those assets or holdings considered as necessary to carry out the company's business aims, and the change of the business aims change of company's mission, etc) and the acquisition by any investor of more than 10% of the capital of companies in which the State owns, directly or indirectly, more than 25% of the shares and which:

  • Provide essential or public services, or

  • Develop activities subject to a specific administrative regime of control ("regulated activities"), or

  • Are fully or partially exempted from competition rules (Article 86 of the Treaty).

Since 1996 the regime of prior authorisation has been applied, through the issue of specific government decrees, to Repsol (oil/energy), Telefónica de España, Argentaria (banking), Tabacalera (tobacco) and Endesa (electricity).

In its "Communication on certain legal aspects concerning intra-EU investments" (EC Official Journal C220 of 19.7.1997 see IP/97/477) the Commission specified that, according to Community law, restrictions on the free movement of capital and the right of establishment, such as authorisation procedures for investment in privatised companies, should:

  • apply without discrimination

  • be justified on imperative requirements in the general interest

  • be suitable for securing the attainment of the objective that they pursue and, finally,

  • must not go beyond what is necessary in order to achieve the defined objective.

The Commission intends to pursue infringement proceedings in all cases where Member States fail to respect the criteria laid down in the Communication.

The Commission has already opened infringement proceedings in the case of Portugal, Italy, France, Belgium and the UK and is currently examining the situation in other Member States.

In the Spanish case, the Commission considers that the special rights enshrined in Law No 5/1995 are not justified on the basis of the above requirements and, therefore, are incompatible with EU Treaty rules on the free movement of capital and the right of establishment. The Spanish authorities' replies to the letter of formal notice and to the reasoned opinion were not satisfactory.

The Commission considers that, while the goal of protecting certain economic activities can be acceptable in specific cases (the Treaty allows exceptions for reasons of public order, public security, public health and defence), the use of special powers provided for by the Spanish law is excessive for achieving these objectives and that public interest concerns (i.e. assuring the supply of certain services of general interest) could have been better pursued by less restrictive alternative arrangements. The Commission therefore takes the view that the special powers provided for by the Spanish Law unduly restrict the freedoms of capital movements and establishment, as enshrined in Articles 56 and 43 of the Treaty.


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