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Brussels, 8 October 2009

Free movement of capital: Commission contests Greek Decree stipulating a 5% voting cap in electricity company PPC

The European Commission has sent Greece a formal request with regard to Presidential Decree 333/2000 which limits voting rights of PPC's (Public Power Corporation) non-state shareholders to 5%. The infringement procedure was initiated by a letter of formal notice in April 2008. Having analysed the Greek government's reply, the Commission considers that the restrictions represent unjustified obstacles to EC Treaty rules on free movement of capital. The Commission's request takes now the form of a 'reasoned opinion', the second stage of infringement procedures under Article 226 of the EC Treaty. If there is no satisfactory reply within two months, the Commission may decide to refer the case to the European Court of Justice.

Voting rights of non-state shareholders limited to 5%

Presidential Decree 333/2000 lays down the Articles of Association (“AoA”) of the electricity company PPC. According to Article 1 of the Presidential Decree, Article 8 of PPC's AoA limits the voting rights of non-state shareholders to 5%.

Even though, according to the same decree, a majority of 51% has to remain in public ownership, the voting rights cap appears to be a restriction on the free movement of capital within the meaning of Article 56 of the EC Treaty. Direct investors are hindered from effectively participating in the management and control of PPC. Moreover, portfolio investors, who invest for reasons other than active participation in management or control, are deprived of the full protection of minority shareholders provided by general company law.

While Greece took the view that the Commission did not sufficiently prove that there is an infringement, the Member State must show, and has not so far, that its measure is appropriate and necessary to attain a legitimate objective.

Greece neither explained sufficiently why the voting cap should be justified on grounds of public interest and security, nor as to why either of those would be put at risk without the voting cap which applies to all company decisions. Further objectives of general interest are however not sufficiently specified either. Also economic policy objectives or the – not substantiated – transitional character of the voting cap would not provide a valid justification. Certain minority rights invoked by Greece are not suitable to improve the voting position of minority shareholders affected by the voting cap.

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