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IP/05/1270

Brussels, 13 October 2005

Free movement of capital: Commission calls on Italy to modify law on privatised companies and to apply Court ruling on investment in energy companies

The European Commission has decided to ask Italy formally to modify its legislation that provides for the exercise of special powers in privatised companies. The Commission is concerned that the criteria for the exercise of special powers provided in the Decree of 10 June 2004 do not justify the control of the ownership and management structure of the privatised companies concerned and therefore could constitute unjustified restrictions on the free movement of capital and the right of establishment in violation of the EU Treaty rules (Article 56 and 43 respectively). The Commission’s request is in the form of a reasoned opinion, the second stage of the infringement procedures laid down in Article 226 of the EC Treaty. In the absence of a satisfactory reply from Italy within two months of receiving the reasoned opinion, the Commission may decide to refer the matter to the European Court of Justice. The Commission has also decided to remind Italy of its obligation to comply with a Court of Justice ruling of 2 June 2005 regarding the law on investment in energy companies. The Court found that the automatic suspension of voting rights for shareholdings in excess of 2% in Italian electricity and gas companies, where such holdings are acquired by public companies not quoted on the stock exchange and holding a dominant position in their own domestic markets, breaches the EC Treaty rules on the free movement of capital (Article 56). The request for information on Italy’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).

Formal request to modify legislation providing for exercise of special powers in privatised companies

On 23 May 2000 the European Court of Justice ruled (Case C-58/99) that certain provisions of Italy’s privatisation law No 474 of 30 July 1994 were in violation of the EC Treaty rules on the free movement of capital and right of establishment (Art 56 and 43). The measures regarding special powers that Italy adopted before the ruling were not taken into account by the Court for procedural reasons. For its part, the Commission considered that these measures granted the authorities wide discretionary powers and informed Italy accordingly (IP/03/177). The provision in question was again modified by law No 350 of 24 December 2003. The amended law replaces the prior authorisation regime by the less restrictive right of opposition and provides for a Prime Ministerial decree to identify the criteria for exercising the special powers and limit their use solely to cases in which the vital interest of the State would be prejudiced. The implementing Decree was adopted on 10 June 2004. The Decree covers effectively privatised companies, such as TELECOM ITALIA, ENI and ENEL.

Despite the improvement compared to the 1994 law the Commission however considers that remaining controls on the ownership structure and management decisions of privatised companies are unjustified. In the Commission’s view the concerns of the Italian state, as spelled out in the implementing Decree, can be covered by appropriate regulation. The current restrictions are disproportionate to the objectives and therefore amount to restrictions to the free movement of capital.

EU secondary legislation already transposed in Italy clearly covers the concerns of the Italian state regarding the provision of public services, such as minimum levels of telecommunication and transport services and minimum supplies of oil and energy.

The Commission takes the view that the criteria introduced by the authorities are vague and indeterminate and that the wide discretionary powers given to the authorities to judge the risks to the vital interest of the State involved prevent any effective judicial review of the decision-making process.

Request for information on Italy’s compliance with Court ruling on investment in energy companies

In its ruling of 2 June 2005 in Case C-174/04, the Court of Justice found that, by maintaining in force Decree-Law No 192 of 25 May 2001, converted into Law No 301, entitled “Urgent provisions to ensure the liberalisation and privatisation of specific public service sectors” of 20 July 2001, Italy had failed to fulfil its obligations under EC Treaty rules on the free movement of capital (Article 56). The Law in question provides for the automatic suspension of voting rights attaching to holdings in excess of 2% of the capital of undertakings operating in the electricity and gas sectors, where those holdings are acquired by public undertakings not quoted on regulated financial markets and enjoying a dominant position in their own domestic markets.

The Court ruled that the suspension of voting rights prevents effective participation by investors in the management and control of Italian undertakings operating in the electricity and gas markets and therefore constitutes a restriction on the free movement of capital. It also added that the fact that the provision only affects public undertakings holding a dominant position in their domestic markets does not detract from that finding.

The Court did not accept that general strengthening of the competitive structure of the market in question constitutes valid justification for restricting the free movement of capital.

Italy adopted a new Decree-Law No 81 on 14 May 2005, but the Commission does not consider that the amendments introduced fully implement the ruling of the Court.
The latest information on infringement proceedings concerning all Member States is available at:

http://ec.europa.eu/secretariat_general/sgb/droit_com/index_en.htm


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