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Brussels, 24 January 2007

Free movement of capital: Commission refers Spain to European Court of Justice over law extending the functions of the Spanish electricity and gas regulator

The European Commission has decided to refer Spain to the European Court of Justice because it considers that certain provisions of Spanish legislation that extends the powers of the Comisión Nacional de Energía (CNE), the Spanish electricity and gas regulator, constitute unjustified restrictions on the free movement of capital and the right of establishment in violation of EC Treaty rules (Articles 56 and 43 respectively).

The Commission's decision concerns the Spanish Royal Decree-Law 4/2006 of 24 February, which amends the functions of the Comisión Nacional de Energía, the Spanish electricity and gas Regulator. This law includes provisions that subject the acquisition of over 10% of share capital, or any other percentage giving significance influence, in a company that engages, directly or indirectly, in regulated activities or activities subject to special administrative control, as well as the direct acquisition of assets to carry out these activities to an authorisation procedure.

Following the reply of the Spanish authorities to the letter of formal notice (IP/06/569), the Commission invited Spain to take the necessary measures to modify the legislation in question (IP/06/1264). The Commission considers Spain's arguments in defence of the Decree-law unsatisfactory in the light of the relevant Court of Justice case law. It considers that the prior authorisation procedure for the above-mentioned acquisition operations goes beyond what is necessary to safeguard the minimum supply of essential energy products and services and may deter investment from other Member States, in violation of the freedom of capital movement and the right of establishment. Moreover, it also considers that the public interest concerns could have been achieved by less restrictive alternative arrangements. EU secondary legislation already transposed – or in the process of being transposed – clearly covers the concerns of Spain in this regard.

In conclusion, the Commission takes the view that the powers provided for by the Spanish law may unduly restrict the freedom of capital movement (Art 56) and the right of establishment (Art 43). It has therefore referred the case to the Court.
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