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Brussels, 29 October 2009

Free movement of capital: Commission calls on Spain to apply Court of Justice ruling on law amending functions of Spanish electricity and gas regulator

The European Commission has decided to remind Spain of its obligation to comply with a Court of Justice ruling of 17 July 2008, which found that regarding certain provisions of the legislation that extends the powers of the Comisión Nacional de Energía (CNE), 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) and the right of establishment. The request for information on Spain’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).

In its ruling of 17 July 2008 in the case C-207/07, the Court of Justice found that, by adopting the provisions of point 1, second paragraph, of Función 14 of the Comisión Nacional de Energía stipulated in the Additional Provision 11(3)(1) of Law 34/1998 of 7 October on the Hydrocarbons sector, modified by the Real Decreto-ley 4/2006 of 24 February 2006, Spain had failed to fulfil its obligations under EC Treaty rules on the free movement of capital and the right of establishment. Under these provisions, the following are subjected to an authorisation procedure: i) the acquisition of over 10% of share capital (or any other percentage giving significant influence) in a company that engages, directly or indirectly, in regulated activities or activities subject to special administrative control; and ii) the direct acquisition of assets to carry out these activities. The Decree-law (Real Decreto-ley 4/2006) also includes the reasons on the basis of which the CNE may grant or refuse such acquisitions: the existence of risks in relation to the above activities; the inability to perform them as a consequence of other activities carried out by the acquiring or acquired company; and the protection of the general interest and reasons of public security.

The Court acknowledged that obstacles to the fundamental freedoms could be justified by public-security considerations (e.g. security of supply). However, it considered the prior authorisation inadequate and disproportionate for achieving the objective of securing energy supplies, because the mere acquisition of shareholdings and/or assets cannot, in principle, be considered as a serious threat to the security of supply, and the prior authorisation cannot ensure, in all cases, that the security of supply will be guaranteed should a real and serious threat occur after the authorisation has been granted. The Court also considered that the modified Function 14 grants the CNE excessively wide discretion.

Following the ruling, the Spanish authorities met the Commission services on a number of occasions to discuss the text of draft proposals for the modification of the Decree-law 4/2006 in question. However, in the view of the Commission services, the draft amendments submitted were not sufficient to comply with the ruling of the Court, in view of which the Commission has decided to send the authorities a letter of formal notice requesting further information on the measures to be taken in order to comply with the judgement.

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

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