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Brussels, 20 July 1999

Commission decides to open infringement procedure against Portugal over veto against BSCH participation in Grupo Mundial Confiança

Following complaints, the European Commission has decided to open a formal infringement procedure against Portugal concerning measures adopted by the Portuguese authorities to block the acquisition of a stake in Grupo Mundial Confiança (part of the Champalimaud group) by Banco Santander Central Hispano (BSCH) of Spain. The Commission is concerned that the administrative decision ('despacho') adopted by the Portuguese Finance Minister on 18 June 1999 to block the deal, and the suspension of all voting rights on shares in the Champalimaud group, may violate Community law. These concerns persist despite information received in response to an informal request from the Commission. In particular, the Commission considers that the Portuguese measures may be incompatible with the requirement in the Insurance Directives (especially the Third Non-Life Insurance Directive - 92/49/EEC) for interventions by supervisory authorities to be based on prudential principles rather than public interest considerations, as well as violating EC Treaty rules on the free movement of capital and freedom of establishment (Articles 56 and 43). The Portuguese authorities will be sent a letter of formal notice, the first stage of infringement proceedings under Article 226 of the EC Treaty, asking for clarifications concerning the case within one month of receipt.

The Champalimaud Group of Portugal reached agreement with BSCH on 7 June 1999 to exchange 40% of the holding companies which control Grupo Mundial Confiança against 1.6% of the capital of BSCH. The agreement was notified to the Portuguese authorities on 17 June. The Portuguese Minister of Finance responded by the administrative decision of 18 June blocking the deal and by subsequently suspending all voting rights on shares in the Champalimaud group. The grounds for opposing the deal cited by the Portuguese authorities' administrative decision included not only "late and incomplete notification" and the "absence of a transparent structure" in the new group, but also the necessity to protect the national interest. However, the deal was not due to enter into effect until it had been authorised by the Portuguese supervisory authorities. Moreover, no opportunity was given to the parties concerned to supply additional information, challenge the decision or seek redress (access to redress is a fundamental principle of Community law).

According to Article 15 of Directive 92/49/EEC, concerning acquisition of a qualifying holding in an insurance company (i.e. a direct or indirect holding which represents 10% or more of the capital or of the voting rights, or which makes it possible to exercise significant influence over management of the undertaking), interventions by Member States' supervisory authorities affecting the pursuit of business by a non-life insurance company must be based on "the need to ensure sound and prudent management of the insurance undertaking in question".

The Commission is concerned that Community law may have been violated because:

  • the Portuguese authorities intervention may be based on defence of national interests rather than prudential grounds;

  • the suspension of all voting rights on shares in the Champalimaud group may be a disproportionate measure;

  • the administrative decision to block the deal was adopted just 24 hours after the Minister was notified of the deal (in the absence of full details);

  • the parties concerned had no opportunity to provide supplementary information;

  • the full reasons for blocking the deal were not notified to the parties concerned;

The Action Plan for Financial Services (see IP/99/327), which was endorsed by the June 3-4 Cologne European Council, emphasised the key role of restructuring in the financial services sector in ensuring an efficient allocation of resources throughout the EU economy. In particular, the Action Plan states that "supervisory authorities, while taking prudential considerations fully into account when dealing with the restructuring process (mergers, acquisitions, take-over bids etc.), should do so in full respect of the principles of transparency and non-discrimination. (…) In order to avoid that prudential considerations - left unspecified - could result in unjustified actual or potential obtacles to restructuring operations, it would be appropriate that any required authorisation process be based on a set of objective and publicly disclosed criteria, stable over time".

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