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Brussels, 20th June 2001

Commission confirms need to tackle cross-border investment restrictions and energy market distortions

The need to ensure that measures taken by public authorities in the Member States do not restrict, directly or indirectly, investment between Member States in violation of EC Treaty rules on the free movement of capital and the right of establishment, as outlined in its 1997 Communication, was confirmed by the European Commission at its 20th June meeting in Brussels. The Commission also reiterated the need for rapid adoption by the EU's Council of Ministers and the European Parliament of the March 2001 proposals to liberalise fully EU energy markets. The Commission underlined that it will continue to apply vigorously competition and state aid rules. In the event of delay in the adoption of the energy liberalisation Directives creating distortions of competition, the Commission agreed to consider adopting itself Directives or Decisions, on the basis of Article 86 of the EC Treaty, notably its third paragraph. Article 86 also guarantees that the application of competition rules does not prevent operators from fulfilling their public service obligations.

The Commission clarified that when a Member State is privatising a company, and when that Member State acts in its capacity as a controlling shareholder, it may apply certain conditions concerning the sale (including possible limits on the participation of public sector companies in privatised company) as long as such conditions:

  • are based on specific economic policy objectives and are clearly defined beforehand

  • are applied without discrimination

  • are limited to the time necessary to achieve the specific objectives and

  • leave no margin for interpretation by the administration responsible.

The Commission also confirmed that, once the sale has taken place and public authorities no longer control the company, public authorities must desist from intervening further in privatised companies unless:

  • such interventions are justified by an interest defined by the EC Treaty (such as defence, public health or public order)

  • or such interventions are justified by another overriding public interest

  • and do not discriminate between nationals of the Member State in question and nationals of other Member States

  • and are proportionate to that interest.

As regards differences in the current extent of liberalisation in the energy sector, the Commission confirmed that these should be addressed by the rapid adoption by the EU's Council of Ministers and the European Parliament of the Commission's March 2001 proposals to further liberalise energy markets (all non-domestic electricity open to competition by 1 January 2003, non domestic gas open to competition by 1 January 2004 and all customers (including domestic) open to competition by 1 January 2005 - see IP/01/356).

The Commission agreed that to address distortions of competition and inequalities in the short term before adoption of the further liberalisation proposals it would:

  • monitor Member States to ensure timely and proper implementation of the existing electricity and gas liberalisation Directives

  • and ensure that the Treaty's competition rules are applied fully in the energy sector. In particular, the Commission will continue to apply the rules of the Treaties on restrictive business practices and abuse of a dominant market position against restrictions and distortions in supply competition and against discrimination in network access, to scrutinise any state aid granted to electricity and gas companies (including state aid in the nuclear sector) and to apply competition rules against limitations on consumers' right to choose a supplier. Examples of such cases treated by the Commission in the last two years are the interventions against joint selling (e.g. GFU and EDF/CNR), reinforcements of dominant positions through mergers (e.g. VEBA/VIAG, EDF/EnBW), privileged network access (e.g. Danish/German and French/UK interconnectors), stranded costs schemes and locking-in of key customers (Gasnatural/Endesa).

The Commission also agreed that if adoption of the proposals to further liberalise energy markets were delayed, it would consider adopting itself Decisions or Directives, on the basis of Article 86of the Treaty, and notably its third paragraph, to address possible distortions of competition resulting from different levels of liberalisation. Such an approach, whereby the Commission adopted Directives addressed to the Member States based on Article 86(3) of the Treaty was previously used in the telecommunications sector.

In response to the European Parliament's March 2001 request for a proposal for a Directive on cross-border investment restrictions, the Commission undertook to explain to the Parliament that the Commission, when acting as guardian of the EC Treaty, was not entitled to derogate such powers to secondary legislation. The Commission also agreed to explain fully its position to the EU's Council of Ministers.

The Commission's discussions underlined the importance of a united European market and of ensuring respect for the fundamental principles of the Internal Market. The Commission also confirmed its determination to create a true Internal Market for energy that contributes to greater security of supply and high quality services of general interest.

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