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Brussels, 16th December 2003

Free movement of capital: Commission takes Italy to the Court of Justice for restrictions on investment in energy companies

The European Commission has decided to take Italy to the European Court of Justice with respect to certain provisions of Italian legislation that limits the voting rights of investments by state companies in the energy sector. The Commission considers that these provisions constitute unjustified restrictions on the free movement of capital in violation of EC Treaty rules (Article 56).

The Italian law in question is Decree-Law No 192 of 25 May 2001 converted into Law No 301 of 20 July 2001 introducing measures in the electricity and gas sectors. This law provides that in cases of direct or indirect acquisition by state companies of more than 2% of the capital of companies operating in the Italian electricity and gas sector, voting rights attached to shares above the limit are automatically suspended until a fully competitive market in these sectors is achieved at EU level.

The Commission considers that the provisions of this Italian law are incompatible with the Treaty establishing the European Community. According to the Treaty (Article 56), restrictions on the free movement of capital, such as authorisation procedures for investment in privatised companies, should:

    apply without discrimination;

    be justified on the basis of imperative requirements in the general interest;

    be suitable for securing the attainment of the objective they pursue and;

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

This position has been upheld by the European Court of Justice in its ruling of 4 June 2002 in cases C-367/98 Commission v Portugal, C-483/99 Commission v France and C-503/99 Commission v Belgium as well as in its ruling of 13 May 2003 in case C-463/00 Commission v Spain and C-98/01 Commission v UK.

The Commission is of the view that the provisions in question cannot be justified in the light of EC Treaty rules on the free movement of capital.

In the case of Italy, the Commission notes that the objective of protecting the processes of liberalisation and privatisation would not appear to constitute imperative requirements in the general interest. The Court has consistently maintained that economic grounds can never serve as justification for obstacles prohibited by the Treaty. It has also found that Treaty rules, whereby Member States are free to establish their own rules on property ownership (Article 295), do not have the effect of exempting the Member States' system of property ownership from the fundamental rules of the Treaty.

As regards the principle of reciprocity referred to in the Italian law, the Commission recalls that the rights conferred by the EC Treaty are unconditional. Although reciprocity requirements are provided for in certain Community Directives concerning common rules for the Internal Market in the energy sector, they relate exclusively to the supply of the specific service involved and do not cover the ownership of companies or the exercise of rights ensuing from that ownership.

In conclusion, the Commission considers that the fact that the EU market for electricity and gas is not yet fully liberalised should not lead Member States to adopt unilateral measures aimed at defending national interests by restricting fundamental Treaty freedoms (see IP/01/872). It therefore takes the view that the special powers provided for by the Italian law unduly restrict the freedom of capital movement as enshrined in Article 56 of the Treaty.

Although invited to take the necessary measures to comply with the reasoned opinion adopted on 9 July 2003 (IP/03/964), the Commission has not as yet received any reply from the Italian Government.

For the latest information on proceedings concerning all Member States, consult the following site:

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