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Brussels, 14 April 2009

Free movement of capital: Commission refers Poland to Court of Justice over investment restrictions for open pension funds

The European Commission has decided to refer Poland to the European Court of Justice as it considers that restrictions on investment by Polish Open Pension Funds (OPFs) in other Member States infringe free movement of capital rules in violation of the EC Treaty (Article 56).

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), insofar 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 certain funds assets may be invested abroad. 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. The Commission considers that because OPFs are engaged in an economic activity of investing money of insured persons, regardless of their legal status and role in the pension system, and the fact that the contributions have a public character, they are economic undertakings and thus cannot be treated as public entities. 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 also considers that the foreign investment limits cannot be justified by the current crisis on the financial markets, and has never denied the need to apply the prudential investment rules and to limit aggressive investment strategies. However, the limit of 5% of total value of investments in certain assets outside the territory of Poland does not seem to be proportionate and suitable to protect the interest of OPF members.

The Commission consequently takes the view that investment limits imposed by the 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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