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Brussels, 16 October 1998

Free movement of capital: Commission decides to send reasoned opinion to Spain

The European Commission has decided to send a reasoned opinion to Spain concerning the restrictions on foreign investment introduced by the Decrees regulating foreign investment in Spain and Spanish investment abroad . The Commission considers that provisions of Spanish legislation imposing prior verification and authorisation on certain foreign investment in Spain and Spanish investment abroad constitute unjustified restrictions on the free movement of capital and freedom of establishment in violation of EC Treaty rules (Articles 73b and 52). Should Spain fail to give a satisfactory reply within two months of receipt of the reasoned opinion (the second stage of formal infringement procedures under Article 169 of the EC Treaty), the Commission may decide to refer the matter to the Court of Justice.

Royal Decree n° 671/92, regulating foreign investment in Spain, and Royal Decree n° 672/92, regulating Spanish investment abroad, impose a 30-day prior verification procedure for several types of foreign investment from other Member States and of investment undertaken abroad by Spanish residents. The types of investment concerned are:

  • direct investment, real estate investment and some other types of investment exceeding 500 million PTAs (above 250 mio PTAs for Spanish investment abroad) or carried out in tax havens
  • Spanish companies' shares issued on foreign capital markets
  • all forms of investment abroad by Spanish residents paid with either real estate assets situated in Spain or Spanish companies' shares.

Furthermore, Royal Decree n° 671/92 imposes an authorisation procedure on several types of investment originated in non-EU countries which:

  • are carried out in such sectors as gambling, television, radio, air transport, strategic minerals, telecommunications and defence
  • are carried out by governments or entities linked to them, and
  • could have negative consequences for the interests of the Spanish State.

Investment undertaken in Spain by EU companies controlled by non-EU residents is considered as non-EU investment and, thus subject to the same authorisation procedure.

In the Commission's view, the application of prior verification and authorisation procedures to direct investment and real estate investment linked to the right of establishment carried out by EU nationals in Spain, constitutes an unjustified restriction on the free movement of capital and the right of establishment and is contrary to Articles 73b and 52 of the Treaty. The application of the same procedures to transactions (other than direct investment or real estate investment linked to the right of establishment in Spain) either between Spain and EU countries or between Spain and non-EU countries, constitutes a restriction on the free movement of capital in violation of Article 73b of the Treaty.

These restrictions can be considered as compatible with EU legislation only in those cases where they are justified on grounds of public security, health or defence, which are exceptions allowed by the EC Treaty.

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