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Brussels, 17 December 1998

Free movement of capital: Italy referred to the Court of Justice

The European Commission has decided to refer Italy to the European Court of Justice. It considers that certain provisions of Italian law concerning investment in privatised companies constitute unjustified restrictions on the free movement of capital, the right of establishment and the freedom to provide services in contravention of European Union (EU) Treaty rules (Articles 73b, 52 and 59). Also on similar cases in Portugal, France, Spain and Belgium infringement procedures have been initiated by the Commission.

Article 2 of Italy's Law 474 of 30.7.1994 concerning the privatisation of state-owned enterprises grants special powers to the Treasury Minister as regards companies operating in the defence and public utilities sectors (e.g. transport, telecommunications and energy). These "special powers" include the following:

  • prior authorisation ("gradimento") is required for the acquisition by any investor of a significant stake (5% of voting rights) as well as for agreements between shareholders representing at least 5% of voting rights

  • the right to veto decisions concerning the dissolution, transfer, merger, change of business and modification of the company's statutes which implies the suppression or modification of these special powers

  • the right to appoint at least one or several members in the company's Board of Directors and one auditor.

These "special powers" were introduced in the statutes of ENI (energy) and Telecom Italia (telecommunications) before the privatisation by means of government Decrees issued on 5.10.1995 and 21.3.1997 respectively.

In its "Communication on certain legal aspects concerning intra-EU investment" (IP/97/477; OJ C220 of 19.7.1997) the Commission specified that, according to EU law, restrictions on the free movement of capital and the right of establishment, such as authorisation procedures for investment in privatised companies, should apply without discrimination, be justified on imperative requirements in the general interest, be suitable for securing the attainment of the objective that they pursue and, finally, must not go beyond what is necessary to achieve the defined objective. The Commission intends to pursue infringement proceedings in all cases where Member States fail to respect the criteria laid down in the Communication. The Commission has already opened infringement proceedings in the case of Portugal (IP/97/1111), France (IP/98/1058), Spain (IP/98/909) and Belgium (IP/98/1135),.and is currently examining the situation in other Member States. The United Kingdom, following action from the Commission, has accepted to modify the 1975 Industry Act in accordance with the Communication's requirements.

In the Italian case, the Commission considers that the special rights enshrined in Law 474 are not justified on the basis of the above requirements and, therefore, are incompatible with EU Treaty rules on the free movement of capital and the right of establishment. The Italian authorities replies to the letter of formal notice and the reasoned opinion were not satisfactory. In particular, in their reply to the reasoned opinion of 13 October 1998, the Italian authorities, while expressing their intention to conform to the Commission's observations, did not specify when the legislation would be amended or provide any text of draft legislation.

Moreover, by virtue of Article 1 paragraph 5 of Law 474, the Italian authorities can entrust certain tasks (studies, consulting, assessment, etc.) only to professionals listed in the official Italian registers for at least five years. This provision is considered as incompatible with EU Treaty rules on freedom to provide services and right of establishment (Articles 59 and 52) because it requires operators to be chosen from those listed on the official Italian registers for at least five years, thereby excluding all professionals legally registered in other Member States or recently established in Italy.

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