Brussels, 7 July 2005
Free movement of capital: Commission calls on Spain to apply Court of Justice ruling on privatisation law and to comply with law on investment in companies
The European Commission has decided to send Spain a formal request to comply with a European 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 Commission’s request is in the form of a reasoned opinion, the second stage of the procedure under EC Treaty infringement procedures related to compliance with Court of Justice rulings (Article 228). The Commission has also decided to send Spain a formal request to comply with Community law on the limitation of voting rights on investment in the energy sector by state-owned companies. The Commission is concerned that certain provisions of the Spanish law in question constitute an unjustified restriction on the free movement of capital, in violation of Treaty rules (Article 56). The Commission request is in the form of a reasoned opinion, the second stage in the infringement procedure laid down in Art 226 of the EC Treaty. In both cases, should the Spanish authorities not take satisfactory steps to comply within two months of receiving the reasoned opinion, the Commission may decide to refer the matter to the Court of Justice.
Formal request to comply with Court of Justice ruling on privatisation law
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 considered a direct consequence of the obstacles to the free movement of capital, 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. 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. 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 amended the law (25th Additional Provision of Law No. 62/2003) on 30 December 2003, but the Commission considered that the amendments introduced did not fully implement the ruling of the Court and consequently, on 7 July 2004, sent Spain a letter of formal notice requesting further information. The Commission found the reply from the Spanish authorities to be unsatisfactory because in its view the proposed amendments would not fully implement the Court’s ruling.
Formal request to comply with law on investment in companies
The Spanish law 55/1999 of 29 December 1999 in its 27th Additional Provision included provisions that required the exercise of voting rights by public entities or undertakings of any kind owned or controlled by public entities, which directly or indirectly took control or acquired at least 3% of the equity or voting rights in Spanish energy companies to be subject to the prior authorisation of Spain’s Council of Ministers.
The Commission considered these provisions incompatible with the Treaty and on 7 July 2003 sent Spain a reasoned opinion (see IP/03/964) following which Spain amended the law (Article 94 of Law No. 62/2003) on 30 December 2003.
However, the Commission considered that the amendments introduced did not justify the restriction on the exercise of voting rights by public entities and consequently, on 7 July 2004, sent Spain a letter of formal notice requesting further information. The Commission found the Spanish authorities’ reply unsatisfactory.
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
 Special rights in Argentaria and Tabacalera were phased out in 1999 and 2000 respectively.