| Author (Person) | Bower, Helen |
|---|---|
| Publisher | ProQuest Information and Learning |
| Series Title | In Focus |
| Series Details | 6.6.02 |
| Publication Date | 06/06/2002 |
| Content Type | News, Overview, Topic Guide | In Focus |
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The European Court of Justice (ECJ) gave different rulings on 4 June 2002 to three cases concerning 'golden shares' in Portugal, France and Belgium. The ECJ judged the French and Portuguese provisions to be unlawful but ruled that the Belgian rules are valid. 'Golden shares' is the term used to describe the special voting rights given to governments that effectively hand them veto power over who controls a privatised company and help them to warn off foreign takeovers of previously state-owned companies. The European Commission brought Treaty infringement proceedings against France, Portugal and Belgium over the course of 1998 and 1999 because the legislation of these Member States was seen to be imposing restrictions on participation in the context of privatisation thereby infringing the right to the free movement of capital, which is enshrined in Community law. In July 2001 the Advocate General Damaso Ruiz-Jarabo Colomer stated, in his opinion on the case of 'golden shares', that,
The Advocate General therefore recommended that the European Court of Justice should validate the three national regulations in question. However, the European Court of Justice has not upheld the Advocate General's opinion in its subsequent ruling. According to the ECJ, 'the national rules in question constitute exceptions to the principles of freedom of movement and establishment and can only be justified if the objective pursued falls within the ambit of a general or strategic interest and the measures prescribed are based on precise criteria which are known in advance, are open to review by the courts and cannot be attained by less restrictive measures'. In the case of Portugal the ECJ ruled that the prohibition in national law on the acquisition by nationals of another Member State of more than a given number of shares was 'obviously unlawful' because it discriminates investors from other Member States, thereby restricting the free movement of capital. France's 'golden share' in Société Nationale Elf-Aquitaine, which supplies France with petroleum products, was also judged to be unlawful. The ECJ ruled that the objective pursued by France to guarantee such products in the event of a crisis was a legitimate interest but the measures taken by France to achieve this go beyond what is needed. Therefore such 'a lack of precision and such a case of wide discretionary power constitute a serious impairment of the fundamental principle of the free movement of capital'. On the other hand, Belgium used a similar argument - the need to maintain minimum gas supplies in the event of a real and serious threat - in the case of the government's golden shares in the utilities Distrigazx and SNTC and the ECJ ruled that these were valid. In this instance, the interest and the measures prescribed for the attainment of it were compatible with Community law because no prior approval is required, intervention by the Belgian public authorities is subject to strict time limits and the European Commission did not show that less restrictive measures could be used. As a result of the ruling, the European Commission may also challenge a Spanish law restricting Electricité de France's access to the energy sector and Dutch golden shares in KPN, the telecom group and TPG, the logistics company. Cases involving the Spanish government's 'golden shares' in several utilities and the UK government's holdings in Britain's airport authority (BAA) are still pending decisions from the Court. The ruling represents a limited success for the European Commission because the power of governments to veto takeovers will now be severely restricted but it falls short of the Commission's hopes for a more radical attack on golden shares. However, the European Commission is now expected to present controversial proposals on the reform of the EU takeover Directive which have faced stiff opposition throughout the European Union, and which had been delayed until the result of the 'golden shares' cases. Links: European Court of Justice:
European Sources Online: Financial Times:
BBC News Online: European Sources Online:
Helen Bower The European Court of Justice (ECJ) gave different rulings on 4 June 2002 to three cases concerning 'golden shares' in Portugal, France and Belgium. The ECJ judged the French and Portuguese provisions to be unlawful but ruled that the Belgian rules are valid. |
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| Subject Categories | Internal Markets, Law |
