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IP/04/923

Brussels, 15th July 2004

Free movement of capital: Commission calls on Spain to apply Court of Justice ruling on privatisation law

The European Commission has decided to remind Spain of its obligation to comply with a Court of Justice ruling of 13 May 2003, which found that by maintaining in force certain provisions of its privatisation Law 5/1995, as well as Royal Decrees on Repsol SA, Telefónica de España SA, Telefónica Servicios Móviles SA, Argentaria, Tabacalera SA, and Endesa SA, in so far as they implement a system of prior administrative approval, Spain had failed to fulfil its obligations under EC Treaty rules on the free movement of capital (Article 56). The request for information on Spain’s compliance with the Court ruling takes the form of a ‘letter of formal notice’ under EC Treaty infringement procedures related to compliance with Court of Justice rulings (Article 228).

In its ruling of 13 May 2003 in Case C-463/00, the Court of Justice found that, by maintaining in force the provisions of Article 2 and Article 3(1) and (2) of Law 5/1995 on the legal arrangements for disposal of public shareholdings in certain undertakings of 23 March 1995, as well as Royal Decrees on Repsol SA, Telefónica de España SA, Telefónica Servicios Móviles SA, Argentaria, Tabacalera SA, and Endesa SA, in so far as they implement a system of prior administrative approval, Spain had failed to fulfil its obligations under EC Treaty rules on the free movement of capital (Article 56). The Court pointed out that in so far as the rules in question entailed restrictions on the freedom of establishment (Article 43 EC), such restrictions were a direct consequence of the obstacles to the free movement of capital considered, to which they were inextricably linked.

The Court did not accept that, in the case of Tabacalera (tobacco) and Argentaria (commercial banking group operating in the traditional banking sector), the legislation could be justified by general interest reasons linked to strategic requirements and the need to ensure continuity in public services, since those undertakings were not undertakings whose objective was to provide public services.

As regards Repsol (petroleum), Endesa (electricity) and Telefónica (telecommunications), the Court acknowledged that obstacles to the free movement of capital could be justified by public-security considerations (e.g. security of supplies). However, it considered that there had been a failure to observe the principle of proportionality because:

  • the administration had a very broad discretion, exercise of which was not subject to any condition,
  • investors were not apprised of the specific, objective circumstances in which prior approval would be granted or withheld,
  • the system incorporated a requirement for prior approval,
  • the operations contemplated were decisions fundamental to the life of an undertaking and
  • although it appeared possible to bring legal proceedings, the Spanish legislation did not provide the national courts with sufficiently precise criteria to review the way in which the administrative authority exercised its discretion.

Likewise, the Court pointed out that the fact that the regime was to last for a limited period of time (10 years) did not mean that it ceased to constitute an infringement.

Spain adopted a new law (25th Additional Provision of Law No. 62/2003) on 30 December 2003, but the Commission does not consider that the the amendments introduced fully implement the ruling of the Court.


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