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Brussels, 18 September 2008

Free movement of capital: Commission requests Poland to remove investment restrictions on open pension funds

The European Commission has formally requested Poland to remove restrictions on investment by Polish Open Pension Funds (OPFs) in other Member States. The infringement procedure was initiated by a letter of formal notice in October 2007. Having analysed the reply from the Polish authorities, the Commission still considers that the investment limits in foreign assets imposed on OPFs act as restrictions to the free movement of capital in violation of EC Treaty rules. The Commission's request takes the form of a reasoned opinion, the second stage of infringement procedures under Article 226 of the EC Treaty. Should the Polish authorities not take satisfactory steps to remedy the infringement of EU law within two months of receiving the reasoned opinion, the Commission may decide to refer the case to the European Court of Justice.

The Commission considers that limits on investment of Polish Open Pension Funds (OPFs) constitute an unjustified restriction on the free movement of capital (Article 56 EC), in so far as they are liable to dissuade or prohibit OPFs from obtaining loans or making investments in other Member States.

The Law on the Organisation and Operation of Pension Funds of 28 August 1997, as amended, together with its implementing ordinances, set a rule that a maximum of 5% of fund assets may be invested abroad and that asset categories should be more restricted for foreign investment. Moreover, foreign investment is discriminated against with regard to the calculation of management fees and transaction costs. These provisions limit directly investment by OPFs in other Member States and make such investment less attractive compared to investment in Poland. Those restrictions do not appear to be justified by reasons of prudential supervision or other reasons.

While recognising the specific, social function of contributions transferred to OPFs, the Commission maintains its position that Article 56 EC is applicable to funds managed by OPFs. The OPFs cannot be classified as public entities since they do not replace the State in the performance of the obligation to set the social security system in Poland. Although they are part of the pension system in Poland, they remain economic actors and compete with each other on that market. In the Commission's view, OPFs are economic undertakings and thus cannot be treated as public entities, as they are engaged in an economic activity of investing money of insured persons, regardless of their legal status and role in the pension system, and regardless of the fact that the contributions have a public character.

Furthermore, by imposing restrictions on the investment activity of OPFs, the State has limited the possibility for OPFs to compete and diversify their portfolio and thus obtain better risk-adjusted financial results. The Commission therefore concludes that investment limits imposed by law on OPFs are contrary to the principle of free movement of capital and that there is no justification for this violation.

The latest information on infringement proceedings concerning all Member States can be found at:

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