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Brussels, 5 February 2003

Free movement of capital: Commission asks Netherlands to review special powers in KPN and TPG

The European Commission has decided to make a formal request to the Netherlands to review certain provisions of the Articles of Association of KPN and TPG that grant the Dutch State preferential status as well as the special rights accorded to the holder of the special share ("golden share") in the respective company capital, namely the Dutch State. Given the major influence they can have over KPN and TPG's financial decision-making and the right of control they confer over the two firms' management and day-to-day operation, the special rights accorded to the Dutch State deter investors from other Member States from investing in the capital of the two firms.The Commission therefore takes the view that these special rights are contrary to the free movement of capital laid down in Article 56 of the EC Treaty and the right of establishment laid down in Article 4 of that Treaty. For each of the firms concerned, the formal request to the Netherlands will be sent in the form of a reasoned opinion under the infringement procedure provided for in Article 226 of the Treaty. If the Netherlands fails to comply with the requests within two months of receiving them the Commission could decide to bring the matter before the Court of Justice.

Koninklijke KPN N.V. (KPN) and TNT Post Groep N.V. (TPG) are the two firms that emerged from the privatisation in 1998 of Koninklijke PTT Nederland N.V., the public telecommunications and postal services operator in the Netherlands. Back in 1994, at the time of the first stage of the partial privatisation of the latter's capital, the Dutch State decided that special powers were needed to safeguard in particular the provision of a minimum universal service in the telecommunications sector as well as in distribution and logistical services. On the one hand, the articles of association give the State, irrespective of its share in the capital of each firm, the right to appoint three members of the supervisory board, which has a decisive say in the management of the firm. On the other hand, the "golden share" confers special rights to approve certain decisions taken by the firm's competent bodies. The articles of association of KPN and TPG contain those same special powers initially conferred on Koninklijke KPN N.V.

The Commission takes the view that, without being explicitly discriminatory, these special powers are liable to make it more difficult to acquire shares in the firms concerned and therefore deter investors from other Member States from investing in their capital. They are, therefore, likely to render illusory the free movement of capital and soconstitute a restriction on capital movements within the meaning of Article 56 of the Treaty.

Also, in so far as these special powers also allow the Dutch State to exercise control over the management policy and day-to-day operation of the twocompanies, they affect direct investment and could thus also constitute a restriction on the freedom of establishment guaranteed by Article 43 of the Treaty (Court rulings of 4 June 2002 in Commission v France (C-483/99), Commission v Belgium (C-503/99) and Commission v Portugal (C-367-98).

According to the Court's case-law, these restrictions may possibly be justified by the grounds given in Article 45, 46 or 58 of the Treaty or by imperative requirements relating to the general interest, provided that they are applied in a non-discriminatory fashion, are such as to guarantee attainment of the objective pursued and do not go beyond what is necessary for that objective to be met, in order to comply with the criterion of proportionality.


In the case of KPN N.V., the Commission notes that the special powers attached to the special share relate not only to the provision of a universal service in the telecommunications sector, as defined by the Community directives, but also to other services not forming part of the universal service. In the latter case, there do not seem to be any imperative requirements relating to the public interest that would justify restrictions on the fundamental freedoms of the Treaty. The Commission also notes that the Dutch authorities have not availed themselves of all the possibilities afforded by Directives 92/44/EC, 97/33/EC and 98/10/EC to guarantee provision of a minimum universal service in the telecommunications sector; accordingly, KPN's "golden share" is a derogation from the provisions of Community law that is neither appropriate not proportionate. Furthermore, according to the Commission, exercise of the special powers in question is discretionary in nature and thus incompatible with the case law of the Court, which requires that objective, stable and publicly known criteria should be attached to authorisation procedures.

TNT Post Groep N.V.

As regards TNT Post Groep N.V., the Commission has noted that the rights attaching to the "golden share" also relate to the supply of postal services that do not form part of the universal service as defined by Directive 97/67/EC (e.g. express courrier services and logistical services); such services do not, therefore, constitute an imperative requirement relating to the general interest that justifies restrictions on the fundamental principles of the Treaty. Moreover, as in the case of KPN, the Dutch authorities have not availed themselves of all the mechanisms provided for in Directive 97/67/EC for safeguarding the provision of a universal service in the postal sector. It must be pointed out here that Directive 2002/39/EC widened the scope available to Member States for introducing checks and specific procedures to ensure that the reserved services were being provided. In this connection, the use of procedures conferring special powers appears to be disproportionate to the objective to be achieved. Lastly, the discretionary nature of the exercise of these special powers is incompatible with the requirements laid down in the Court's case law.

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