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Brussels, 20 October 1999

Financial services: Commission to send reasoned opinion to Portugal over veto against BSCH participation in Champalimaud group

The European Commission has decided to send Portugal a reasoned opinion concerning measures taken by the Portuguese authorities to veto the acquisition of a controlling interest in the Champalimaud group by Banco Santander Central Hispano (BSCH) of Spain. The Commission considers that the Portuguese authorities have violated EU rules on financial services as well as EC Treaty rules on the freedom of establishment and free movement of capital (Articles 43 and 56). This infringement procedure complements the separate action taken by the Commission on this case based on Portugal's failure to respect the EU Merger Regulation (see IP/99/774). The reasoned opinion is the second stage in infringement proceedings. If the Commission does not receive a satisfactory reply from the Portuguese authorities within one month, it may refer the matter to the Court of Justice.

"The Commission cannot allow defence of national interests by Member States to stand in the way of restructuring the EU's financial services sector", insisted Single Market Commissioner Frits Bolkestein. "The Action Plan for Financial Services, endorsed by the Cologne European Council, underlined the key role of such restructuring in ensuring an efficient allocation of resources throughout the EU economy and explicitly states that supervisory authorities must respect the principles of transparency and non-discrimination when considering restructuring operations".

The Champalimaud Group of Portugal reached agreement with BSCH to exchange 40% of the holding companies which control the insurance company Mundial Confiança against 1.6% of the capital of BSCH. The agreements were notified to the Portuguese authorities between 11 and 17 June. The Portuguese Minister of Finance responded by the administrative decision of 18 June which vetoed the deal (Despacho n° 233/99-XIII) and by subsequently suspending all but 10% of voting rights on shares in the Champalimaud group and shares owned by Antonio Champalimaud himself. 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. No opportunity was given to the parties concerned to supply additional information, to discuss the operation with supervisors or to amend the operation to meet possible prudential concerns.

In the Commission's view, the administrative decision adopted by the Portuguese Finance Minister to veto the transaction, and the suspension of voting rights on shares in the Champalimaud group and Mr Champalimaud's shares, violate Community law because the measures are not justified on prudential grounds. Moreover, the Commission considers that the measures taken by the Portuguese authorities are disproportionate to any prudential objectives, given that more adequate and more suitable measures could have been taken in this particular case in order to examine the operation in question and in order to eliminate possible problems in terms of sound management and transparency of the group to which the operation could give rise. EU Insurance Directives (especially the Third Non-Life and Life Insurance Directives - 92/49/EEC and 92/96/EEC) require interventions by supervisory authorities to be based on prudential principles ("the need to ensure sound and prudent management") rather than national and/or economic interests..

The Commission has carefully studied the Portuguese authorities' reply to its 'letter of formal notice' sent in July 1999 (see IP/99/551), but considers that Portugal has violated Community law because:

  • the administrative decision to veto the deal was adopted just 24 hours after the last of the agreements was notified to the Portuguese Minister

  • the parties concerned had no opportunity to provide supplementary information or discuss the matter further

  • the full prudential reasons for vetoing the deal were not notified to the parties concerned.

  • the Portuguese authorities' intervention is based on defence of national economic interests

  • the suspension of voting rights on shares in the Champalimaud group and Mr Champalimaud's shares is a disproportionate measure and cannot be subject to judicial review.

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