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Brussels, 3 December 1998

Freedom of capital movements: Infringement procedure against France

The European Commission decided to send a reasoned opinion to France (second step in the infringement procedure foreseen in Article 169 EC Treaty). It considers that certain provisions of French law concerning investment in the firm Elf Aquitaine are incompatible with Community law on the free movement of capital (Article 73b) and the right of establishment (Article 52). In the absence of a satisfactory response within two months following the receipt of the reasoned opinion, the Commission could decide to refer the matter to the European Court of Justice.

By virtue of Privatization Law No. 93-923 of 19.7.1993, the provisions of Decree No. 93-1298 of 13.12.1993 transformed an ordinary share of the French State in the firm Elf Aquitaine into a 'special share' to which special powers were attached. Among these powers are:

  • - the prior agreement of the Minster for the Economy is required for all increases in holdings which exceed thresholds of one tenth, one fifth or one third of the capital or voting rights.

    - the right to nominate two representatives who sit on governing board of the firm

  • - the right to veto decisions on the disposal or the assignment as a guarantee of the majority of the capital of four daughter companies.

    In its Communication on certain legal aspects concerning intra-EU investment (OJ C220 of 19.7.1997), the Commission specified that, by virtue of Community law, all restrictions on the free movement of capital and the right of establishment should apply without discrimination, that they should be justified on imperative requirements in the general interest, that they should be appropriate to the achievement of the objective followed and should not go beyond what is necessary to achieve that objective.

    The Commission considers that the use by the French State of the special powers referred to with the objective of protecting national interest creates an uncertainty for investors concerning the acquisition of shares in this firm. As explained in the interpretative Communication already cited, Community law requires that the authorization procedure in effect not only be justified on imperative requirements in the general interest, but also be based on a set of objective criteria, stable over time and made public. The present terms of these special powers do not respond to these requirements.

    France (Minister for the Economy, Finance and Industry) replied on 31 July 1998 to the letter of formal notice of the Commission, but the arguments contained in this response did not bring additional elements to those already presented in a previous exchange of letters. The suitability and proportionality of the authorization procedure has never been clearly established in a legislative text, or a draft, and proposals made by France to amend the legal framework for the specific share in Elf, in particular as far as the criteria for its use are concerned, have not been sufficiently clarified, nor made more concrete in terms of a draft legislative text to modify existing rules which could make the restrictions compatible with Community law.

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