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Brussels, 28 July 1999

Free movement of capital: infringement proceeding against Spain

The European Commission has decided to send a reasoned opinion (the second stage of infringement proceedings under Article 226 of the Treaty of the European Union - EU) to Spain. The Commission considers that certain elements of Spanish provisions concerning investment in privatised companies constitute unjustified restrictions on the free movement of capital and the right of establishment in violation of EU Treaty rules (Articles 56 and 43). In the absence of a satisfactory reply from Spain within two months of receiving the reasoned opinion, the Commission may decide to refer the matter to the European Court of Justice. The Commission has also pursued infringement procedures in similar cases against Portugal, Italy, France, Belgium and the United Kingdom.

Spanish Law 5/1995 of 23.3.1995 requires prior authorisation for certain decisions of the board of directors (dissolution, merger, break up, change of company's mission, etc) and the acquisition by any investor of more than 10% of the capital of companies in which the State owns, directly or indirectly, more than 25% of the shares and which:

  • provide essential or public services, or

  • develop activities subject to a specific administrative regime of control ("regulated activities"), or

  • are fully or partially exempted from competition rules (Article 86 of the Treaty).

Since 1996 the regime of authorisation has been applied, through the issue of specific government decrees, to Repsol (oil/energy), Telefónica de España, Argentaria (banking), Tabacalera (tobacco) and Endesa (electricity).

In its "Communication on certain legal aspects concerning intra-EU investments" (see IP/97/477; OJ C220 - 19.7.1997) the Commission made clear that, according to Community law, restrictions on the free movement of capital and the right of establishment must be applied in a non-discriminatory manner; justified by imperative requirements in the general interest; suitable for securing the attainment of the objective that they pursue; and finally they must not go beyond what is necessary in order to attain the defined objective.

In their response to the letter of formal notice (the first stage of the infringement procedure) the Spanish authorities affirmed that a direct intervention of the government in the ownership rights of certain privatised companies is necessary to protect business continuity and stability.

The Commission considers that, while the goal of protecting certain economic activities can be acceptable in specific cases (the Treaty allows exceptions for reasons of public order, public security, public health and defence), the use of special powers provided for by the Spanish law, such as the authorisation required for certain corporate decisions and for investments above a certain threshold, is excessive for achieving these objectives and, therefore, unduly restricts the freedoms of capital movements and establishment, as enshrined in Articles 56 and 43 of the Treaty.

The Commission recalls that the introduction of restrictions like authorisation procedures in the above mentioned companies cannot be justified with the Treaty exceptions, and the public interest concerns (i.e. assuring the supply of certain services of general interest) could have better been pursued by other arrangements without imposing limits on acquisition rights, and so less restrictive for the freedoms involved. Moreover, as the contested provisions do not envisage stable and objective criteria for the grant of the authorisation to limit the discretion of national authorities, they do not guarantee non-discriminatory treatment of foreigners.

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