Gibraltar row threatens corporate mergers deal

Date: 17/06/1999

By Tim Jones

AN ANGLO-SPANISH dispute over the status of Gibraltar is threatening to derail a hard-won compromise deal to harmonise member states' rules on corporate mergers.

Hopes of securing an agreement on the ten-year-old proposal for a takeovers directive at a meeting of Union internal market ministers next Monday (21 June) are fading after Madrid questioned Gibraltar's authority to ratify the deal.

If Spain joins Sweden, Finland and the Netherlands in opposing the law, the EU's German presidency is expected to pull back from forcing the issue to a vote. Even though the 20 votes held by the four countries would fall six short of the number needed to block the legislation, a 'no' camp diplomat predicted that Bonn would "not want to go against the Spanish on this".

The draft law would establish shareholding thresholds above which companies would be forced to bid for the remaining stock in a target company. This is aimed at closing the loophole through which French luxury-goods maker LVMH acquired a third of Italian fashion house Gucci by surreptitiously buying shares on the Amsterdam exchange.

"The Spanish have never had a problem with this," said a Commission official. "It was the Dutch, the British and, to some extent, the Swedes and Finns who objected. This Gibraltar issue has come out of the blue."

Although the British government is responsible for Gibraltar's relations with the EU, the rock's financial services commission has to ensure that its supervision complies with its obligations under Union law.

Madrid's move is just the latest in a series of Spanish legislative roadblocks which are causing mounting frustration inside the European Commission and among other governments.

At a meeting of EU social affairs ministers last month, Spain was isolated in rejecting plans for a European Company Statute, which would enable firms operating in several EU countries to set themselves up as pan-European companies.

Opposition to the proposal from various member states has been gradually overcome in the two years since a task force led by Belgian industrialist and former European Commissioner Etienne Davignon came up with a compromise formula aimed at breaking a 30-year deadlock over the plan.

But the statute is still vehemently opposed by Spanish Premier José María Aznar, in particular because it allows workers' representatives to sit on the boards of Union-wide companies. German Labour Minister Walter Riester's pleas to his Spanish counterpart to call Aznar to seek more room to negotiate at last month's meeting were refused, and when the issue was discussed at the Cologne summit earlier this month, there was "absolutely no change in the Spanish position at all", according to Commission officials. "If anything, Aznar toughened his position and made it clear that this proposal is dead," said one diplomat.

The Spanish premier took an equally hard line on the latest compromise plan to introduce a common system for taxing energy use. Early summit draft conclusions binding governments to reach a deal by the end of this year were scuppered as Aznar refused to countenance the introduction of such a tax.

"We are not talking about tinkering with the proposal," said one diplomat. "The Spanish have fundamental objections to this legislation and it is impossible to see how these can be met."