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Brussels, 9th July 2003

Free movement of capital: Commission requests Spain and Italy to change laws on investment in energy companies

The European Commission has decided to send Spain and Italy formal requests to comply with Community law with regard to the legislation that limits the voting rights on investment in the energy sector by state-owned companies. The Commission is concerned that certain provisions of the Spanish and the Italian laws in question constitute unjustified restriction on the free movement of capital in violation of EU Treaty rules (Article 56). The Commission's requests are in the form of reasoned opinions, the second stage in the infringement procedure laid down in Article 226 of the EC Treaty. Should the authorities of the Member States concerned not take satisfactory steps to comply within two months of receiving the reasoned opinion, the Commission may decide to refer the cases to the EU's Court of Justice.


Spanish Law 55/1999 of 29 December 1999 includes provisions that require the exercise of voting rights by public entities or undertakings of any kind owned or controlled by public entities, which directly or indirectly take control or acquire at least 3% of the equity or the voting rights in Spanish energy companies to be subject to the prior authorisation of Spain's Council of Ministers. Furthermore, the authorities are required to have due regard to the principle of reciprocity.


In the case of Italy, the law in question is Decree-Law No 192 of 25 May 2001, converted into Law No 301 of 20 July 2001, concerning measures in the electricity and gas sectors. This law provides that in cases of direct or indirect acquisition by state companies of more then 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. In this case too, the law refers to the principle of reciprocity.

Commission position

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

  • apply without discrimination

  • be justified by an imperative requirement 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 was confirmed by the Commission in June 2001 (see IP/01/872) and has been upheld by the European Court of Justice in its rulings of 4th 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 13th May 2003 in case C-463/00 Commission v Spain and C-98/01 Commission v UK.

The Commission considers that the provisions of the Spanish and Italian laws are not in line with EU Treaty rules on the free movement of capital.

In the particular case of Spain, the Commission notes that, while the goal of protecting energy supplies is a legitimate public interest requirement (the Treaty allows exceptions for reasons of public order, public security, public health and defence), the provisions of the Spanish legislation appear to lack specific and precise criteria for the granting of the authorisation and, as a result, grants wide discretionary powers to the national authorities in their control of certain companies' capital ownership. Without such precise criteria, potential investors would appear to have no indication as to the specific circumstances in which prior authorisation would be granted or refused.

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 and that the 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 both the Spanish and the Italian laws, 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. It therefore takes the view that the special powers provided for by the Spanish and the Italian laws may unduly restrict the freedom of capital movement as enshrined in Article 56 of the Treaty.

The Spanish and Italian Governments are invited to take the necessary measures to comply with the reasoned opinion within two months of receipt. Should these Governments fail to take the necessary measures within this time limit, the Commission may bring these cases before the Court of Justice.

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