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Brussels, 16 February 2011

Free movement of capital: Commission refers Greece to Court over investment restrictions

The European Commission has decided to refer Greece to the EU Court of Justice for maintaining investment restrictions on in breach of EU rules on the free movement of capital. The Commission considers that investment restrictions in so-called 'strategic companies' impose disproportionate caps on a person's ability to acquire shares above a certain threshold. The Commission sent a "reasoned opinion" to Greece in November 2008 asking it to comply with EU law. However, the Greek authorities have failed to either repeal or amend the contested law.

What is the aim of the EU rules in question?

Free movement of capital is at the heart of the Single Market and constitutes one of its "four freedoms". It allows for more open, integrated, competitive and efficient markets and services in Europe. For citizens it means the ability to undertake a range of operations abroad, such as opening a bank account, buying shares in non-domestic companies, or purchasing real estate. For companies it means the ability to invest in and own companies in other European countries, and play an active role in their management.

How is Greece not respecting this rule?

In 2009, Greek law introduced two authorisation schemes which unjustifiably restrict a person's ability to acquire voting shares above a 20% threshold and take decisions in so-called "strategic companies". The law's provisions stipulate that only the State may exceed this threshold, unless prior approval has been granted by the Inter-ministerial Privatization Committee. They also state that certain important corporate decisions, as well as certain decisions concerning specific management matters, require the Minister of Finance's approval in order to be validated.

The Commission considers that both authorisation schemes impose disproportionate restrictions on potential investors. Moreover, anyone seeking prior approval by the Inter-ministerial Privatisation Committee must meet a set of vaguely defined criteria. The law omits criteria for situations regarding ex-post approval by the Minister of Finance. This situation gives the administrative authorities an excessive margin of discretion, which, in the Commission's view, breaches EU law on the free movement of capital.

In addition, the Greek law fails to clearly define which companies and sectors are bound by these mechanisms, or could be in the future. Ambiguity about the scope of the law means that it could potentially be applied to a wide range of currently non-specified companies. This creates legal uncertainty and contravenes the rules on the freedom of capital movement.

How are EU citizens and/or businesses suffering as a result?

As a result of this legislation investors lack legal certainty and so may be hindered and dissuaded from investing in Greek companies that could later be labelled to be of strategic importance by the Greek authorities. Furthermore, the Greek authorities may also prevent 'strategic companies' from enacting important decisions made by their shareholders. Since there are no clearly defined criteria for how to apply the schemes or to which companies they apply, the law leads to a great deal of legal uncertainty and too much discretionary power for the Greek authorities.

More information

Free movement of capital:

Latest information on infringement proceedings concerning all Member States:

For more information on EU infringement procedures, see MEMO/11/86

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