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Brussels, 9th July 2004

Free movement of capital: Commission closes case against Portugal over privatisation law

The European Commission has decided to close infringement procedures against Portugal for its failure to comply with a Court of Justice ruling of 4 June 2002. The ruling had found the procedure for authorising foreign investment in privatised companies to be incompatible with the provisions of the EC Treaty on the free movement of capital (Article 56). This decision follows the notification by Portugal of additional measures taken on 4 February 2004 to ensure compliance with the Court ruling.

In its ruling of 4 June 2002 in Case C-367/98, the Court of Justice found that the Portuguese Republic had failed to comply with its obligations under Article 56 of the EC Treaty by maintaining in force Law No 11/90, the decree-laws on the privatisation of undertakings subsequently adopted pursuant to that Law and also Decree-Laws Nos 380/93 of 15 November 1993 and 65/94 of 28 February 1994.

This legislation restricted the movement of capital by prohibiting the acquisition by investors from other Member States of more than a given number of shares in certain national undertakings and by requiring prior authorisation by the State for the acquisition of a holding in certain national undertakings in excess of a specified level.

In the absence of notification from the Portuguese Republic that it had taken the measures necessary to implement the ruling of the Court, the Commission decided (see IP/03/692) to initiate new infringement proceedings under Article 228 of the EC Treaty.

While Portugal repealed most of the contested measures in October 2003, the Commission considered that, in the absence of modification of Decree Law No. 380/93, which provided for prior authorisation for the acquisition of shares representing more than 10% of voting capital, compliance was incomplete. Accordingly a reasoned opinion under Article 228 of the EC Treaty was sent to Portugal on 21 January 2004. The Portuguese Council of Ministers subsequently approved a Decree Law (No. 49/2004, Diário da República, 10 March 2004, No. 59, pps. 1294-5) on 4 February 2004 repealing Decree-Law No. 380/93.

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